26 USC 304 - Redemption through use of related corporations

Editorial Notes

References in Text

Section 2(a) of the Bank Holding Company Act of 1956, referred to in subsec. (span)(3)(D)(ii), is classified to section 1841(a) of Title 12, Banks and Banking.

Amendments

2014—Subsec. (span)(3)(D). Puspan. L. 113–295, § 221(a)(48)(B), struck out “and special rule” after “Definitions” in span.

Subsec. (span)(3)(D)(iii). Puspan. L. 113–295, § 221(a)(48)(A), struck out cl. (iii). Text read as follows: “In the case of a BHC which is formed before 1985, clause (i) of subparagraph (C) shall not apply.”

2010—Subsec. (span)(5)(B), (C). Puspan. L. 111–226 added subpar. (B) and redesignated former subpar. (B) as (C).

1998—Subsec. (span)(5)(B), (C). Puspan. L. 105–206, § 6010(d)(1), redesignated subpar. (C) as (B) and struck out span and text of former subpar. (B). Text read as follows: “For purposes of subparagraph (A), the rules of section 1248(d) shall apply except to the extent otherwise provided by the Secretary.”

Subsec. (span)(6). Puspan. L. 105–206, § 6010(d)(2), added par. (6).

1997—Subsec. (a)(1). Puspan. L. 105–34, § 1013(a), amended last sentence generally. Prior to amendment, last sentence read as follows: “To the extent that such distribution is treated as a distribution to which section 301 applies, the stock so acquired shall be treated as having been transferred by the person from whom acquired, and as having been received by the corporation acquiring it, as a contribution to the capital of such corporation.”

Subsec. (span)(5). Puspan. L. 105–34, § 1013(c), added par. (5).

1988—Subsec. (span)(4)(A). Puspan. L. 100–647 substituted “stock from 1 member” for “stock of 1 member”.

1987—Subsec. (span)(4). Puspan. L. 100–203 added par. (4).

1986—Subsec. (a)(1). Puspan. L. 99–514 substituted “To the extent that such distribution is treated as a distribution to which section 301 applies” for “In any such case” in last sentence.

1984—Subsec. (span)(2). Puspan. L. 98–369, § 712(l)(1), consolidated former subpars. “(A) Where subsection (a)(1) applies” and “(B) Where subsection (a)(2) applies” in one paragraph, inserted provision respecting source of dividend, and incorporated in cls. (A) and (B) former subpar. (A) and (B) provisions which had required determination of amount which is a dividend to be made by reference to earnings and profits of the acquiring corporation and as if the property were distributed by the acquiring corporation to the issuing corporation and immediately thereafter distributed by the issuing corporation.

Subsec. (span)(3)(A). Puspan. L. 98–369, § 712(l)(2), substituted “section 351 and not so much of sections 357 and 358 as relates to section 351” for “part III”.

Subsec. (span)(3)(B)(i). Puspan. L. 98–369, § 712(l)(3)(A)(i), substituted “In the case of an acquisition described in section 351, subsection (a)” for “Subsection (a)”.

Subsec. (span)(3)(B)(iii). Puspan. L. 98–369, § 712(l)(3)(B), added cl. (iii).

Subsec. (span)(3)(C). Puspan. L. 98–369, § 712(l)(4), inserted following cl. (iii) “For purposes of this subparagraph, any assumption of (or acquisition of stock subject to) a liability under subparagraph (B) shall not be treated as a distribution of property.”

Subsec. (c)(3). Puspan. L. 98–369, § 712(l)(5)(A), designated existing first sentence as subpar. “(A) In general” and substituted subpar. (B) for former second sentence which read “For purposes of the preceding sentence, sections 318(a)(2)(C) and 318(a)(3)(C) shall be applied without regard to the 50 percent limitation contained therein.”

1982—Subsec. (span)(2)(A). Puspan. L. 97–248, § 226(a)(3), substituted “as if the property were distributed by the issuing corporation to the acquiring corporation and immediately thereafter distributed by the acquiring corporation” for “soley by reference to the earnings and profits of the acquiring corporation” after “dividend shall be made”.

Subsec. (span)(3). Puspan. L. 97–248, § 226(a)(1)(A), added par. (3).

Subsec. (c)(2), (3). Puspan. L. 97–248, § 226(a)(2), added par. (2), redesignated former par. (2) as (3) and substituted “this section” for “paragraph (1)” after “determining control under”.

1964—Subsecs. (span)(1), (c)(2). Puspan. L. 88–554 inserted reference to section 318(a)(3)(C) of this title.

Statutory Notes and Related Subsidiaries

Effective Date of 2014 Amendment

Amendment by Puspan. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(span) of Puspan. L. 113–295, set out as a note under section 1 of this title.

Effective Date of 2010 Amendment

Puspan. L. 111–226, title II, § 215(span), Aug. 10, 2010, 124 Stat. 2400, provided that: “The amendments made by this section [amending this section] shall apply to acquisitions after the date of the enactment of this Act [Aug. 10, 2010].”

Effective Date of 1998 Amendment

Amendment by Puspan. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Puspan. L. 105–34, to which such amendment relates, see section 6024 of Puspan. L. 105–206, set out as a note under section 1 of this title.

Effective Date of 1997 Amendment

Puspan. L. 105–34, title I, § 1013(d), Aug. 5, 1997, 111 Stat. 918, provided that:

“(1)In general.—The amendments made by this section [amending this section and section 1059 of this title] shall apply to distributions and acquisitions after June 8, 1997.

“(2)Transition rule.—The amendments made by this section shall not apply to any distribution or acquisition after June 8, 1997, if such distribution or acquisition is—

“(A) made pursuant to a written agreement which was binding on such date and at all times thereafter,

“(B) described in a ruling request submitted to the Internal Revenue Service on or before such date, or

“(C) described in a public announcement or filing with the Securities and Exchange Commission on or before such date.”

Effective Date of 1988 Amendment

Amendment by Puspan. L. 100–647 effective, except as otherwise provided, as if included in the provisions of the Revenue Act of 1987, Puspan. L. 100–203, title X, to which such amendment relates, see section 2004(u) of Puspan. L. 100–647, set out as a note under section 56 of this title.

Effective Date of 1987 Amendment

Puspan. L. 100–203, title X, § 10223(d), Dec. 22, 1987, 101 Stat. 1330–412, as amended by Puspan. L. 100–647, title II, § 2004(k)(3), (4), Nov. 10, 1988, 102 Stat. 3605, 3606, provided that:

“(1)In general.—The amendments made by this section [amending this section and sections 337 and 355 of this title] shall apply to distributions or transfers after December 15, 1987.

“(2)Exceptions.—

“(A)Distributions.—The amendments made by this section shall not apply to any distribution after December 15, 1987, and before January 1, 1993, if—

“(i) 80 percent or more of the stock of the distributing corporation was acquired by the distributee before December 15, 1987, or

“(ii) 80 percent or more of the stock of the distributing corporation was acquired by the distributee before January 1, 1989, pursuant to a binding written contract or tender offer in effect on December 15, 1987.

For purposes of the preceding sentence, stock described in section 1504(a)(4) of the Internal Revenue Code of 1986 shall not be taken into account.

“(B)Section 304 transfers.—The amendment made by subsection (c) [amending this section] shall not apply to any transfer after December 15, 1987, and on or before March 31, 1988, if such transfer is—

“(i) between corporations which are members of the same affiliated group on December 15, 1987, or

“(ii) between corporations which become members of the same affiliated group pursuant to a binding written contract or tender offer in effect on December 15, 1987.

“(C)Distributions covered by prior transition rule.—The amendments made by this section shall not apply to any distribution to which the amendments made by subtitle D of title VI of the Tax Reform Act of 1986 [sections 631 to 634 of Puspan. L. 99–514, see Tables for classification] do not apply.

“(D)Treatment of certain members of affiliated group.—

“(i)In general.—For purposes of subparagraph (A), all corporations which were in existence on the designated date and were members of the same affiliated group which included the distributees on such date shall be treated as 1 distributee.

“(ii)Limitation to stock held on designated date.—Clause (i) shall not exempt any distribution from the amendments made by this section if such distribution is with respect to stock not held by the distributee (determined without regard to clause (i)) on the designated date directly or indirectly through a corporation which goes out of existence in the transaction.

“(iii)Designated date.—For purposes of this subparagraph, the term ‘designated date’ means the later of—

“(I)December 15, 1987, or

“(II) the date on which the acquisition meeting the requirements of subparagraph (A) occurred.”

Effective Date of 1986 Amendment

Amendment by Puspan. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Puspan. L. 98–369, div. A, to which such amendment relates, see section 1881 of Puspan. L. 99–514, set out as a note under section 48 of this title.

Effective Date of 1984 Amendment

Puspan. L. 98–369, div. A, title VII, § 712(l)(7), July 18, 1984, 98 Stat. 954, as amended by Puspan. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that:

“(A)In general.—Except as otherwise provided in this paragraph, the amendments made by paragraphs (1) and (3) [amending this section] shall apply to stock acquired after June 18, 1984, in taxable years ending after such date.

“(B)Election by taxpayer to have amendments apply earlier.—Any taxpayer may elect, at such time and in such manner as the Secretary of the Treasury or his delegate may prescribe, to have the amendments made by paragraphs (1) and (3) apply as if included in section 226 of the Tax Equity and Fiscal Responsibility Act of 1982 [section 226 of Puspan. L. 97–248, which amended this section and section 306 of this title and enacted Effective Date of 1982 Amendment note set out below].

“(C)Special rule for certain transfers to form bank holding company.—Except as provided in subparagraph (D), the amendments made by paragraphs (1) and (3) shall not apply to transfers pursuant to an application to form a BHC (as defined in section 304(span)(3)(D)(ii) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) filed with the Federal Reserve Board before June 18, 1984, if—

“(i) such BHC was formed not later than the 90th day after the date of the last required approval of any regulatory authority to form such BHC, and

“(ii) such BHC did not elect (at such time and in such manner as the Secretary of the Treasury or his delegate shall prescribe) not to have the provisions of this subparagraph apply.

“(D)Amendments to apply to certain liabilities incurred before october 20, 1983.—The amendment made by paragraph (3)(A) shall apply to the acquisition of any stock to the extent the liability assumed, or to which such stock is subject, was incurred by the transferor after October 20, 1983.”

Amendment by section 712(l)(2), (4), (5)(A) of Puspan. L. 98–369 effective as if included in the provision of the Tax Equity and Fiscal Responsibility Act of 1982, Puspan. L. 97–248, to which such amendment relates, see section 715 of Puspan. L. 98–369, set out as a note under section 31 of this title.

Effective Date of 1982 Amendment

Puspan. L. 97–248, title II, § 226(c), Sept. 3, 1982, 96 Stat. 492, provided that:

“(1)In general.—Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 306 and 351 of this title] shall apply to transfers occurring after August 31, 1982, in taxable years ending after such date.

“(2)Approval by federal reserve board.—The amendments made by this section shall not apply to transfers pursuant to an application to form a BHC filed with the Federal Reserve Board before August 16, 1982, if the BHC was formed not later than the later of—

“(A) the 90th day after the date of the last required approval of any regulatory authority to form such BHC, or

“(B)January 1, 1983.

For purposes of this paragraph, the term ‘BHC’ means a bank holding company (within the meaning of section 2(a) of the Bank Holding Company Act of 1956 [section 1841(a) of Title 12, Banks and Banking]).”

Effective Date of 1964 Amendment

Amendment by Puspan. L. 88–554 effective Aug. 31, 1964, except that for purposes of this section and section 302 of this title, such amendments shall not apply to distributions in payment for stock acquisitions or redemptions, if such acquisition or redemption occurred before Aug. 31, 1964, see section 4(c) of Puspan. L. 88–554, set out as a note under section 318 of this title.

Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Puspan. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Puspan. L. 99–514, as amended, set out as a note under section 401 of this title.