Internal Revenue Code:Sec. 318. Constructive ownership of stock
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter C - Corporate Distributions and Adjustments
PART I - DISTRIBUTIONS BY CORPORATIONS
Subpart C - Definitions; Constructive Ownership of Stock
Statute
Sec. 318. Constructive ownership of stock
(a) General rule
For purposes of those provisions of this subchapter to which the
rules contained in this section are expressly made applicable -
(1) Members of family
(A) In general
An individual shall be considered as owning the stock owned,
directly or indirectly, by or for -
(i) his spouse (other than a spouse who is legally
separated from the individual under a decree of divorce or
separate maintenance), and
(ii) his children, grandchildren, and parents.
(B) Effect of adoption
For purposes of subparagraph (A)(ii), a legally adopted child
of an individual shall be treated as a child of such individual
by blood.
(2) Attribution from partnerships, estates, trusts, and
corporations
(A) From partnerships and estates
Stock owned, directly or indirectly, by or for a partnership
or estate shall be considered as owned proportionately by its
partners or beneficiaries.
(B) From trusts
(i) Stock owned, directly or indirectly, by or for a trust
(other than an employees' trust described in section 401(a)
which is exempt from tax under section 501(a)) shall be
considered as owned by its beneficiaries in proportion to the
actuarial interest of such beneficiaries in such trust.
(ii) Stock owned, directly or indirectly, by or for any
portion of a trust of which a person is considered the owner
under subpart E of part I of subchapter J (relating to
grantors and others treated as substantial owners) shall be
considered as owned by such person.
(C) From corporations
If 50 percent or more in value of the stock in a corporation
is owned, directly or indirectly, by or for any person, such
person shall be considered as owning the stock owned, directly
or indirectly, by or for such corporation, in that proportion
which the value of the stock which such person so owns bears to
the value of all the stock in such corporation.
(3) Attribution to partnerships, estates, trusts, and
corporations
(A) To partnerships and estates
Stock owned, directly or indirectly, by or for a partner or a
beneficiary of an estate shall be considered as owned by the
partnership or estate.
(B) To trusts
(i) Stock owned, directly or indirectly, by or for a
beneficiary of a trust (other than an employees' trust
described in section 401(a) which is exempt from tax under
section 501(a)) shall be considered as owned by the trust,
unless such beneficiary's interest in the trust is a remote
contingent interest. For purposes of this clause, a
contingent interest of a beneficiary in a trust shall be
considered remote if, under the maximum exercise of
discretion by the trustee in favor of such beneficiary, the
value of such interest, computed actuarially, is 5 percent or
less of the value of the trust property.
(ii) Stock owned, directly or indirectly, by or for a
person who is considered the owner of any portion of a trust
under subpart E of part I of subchapter J (relating to
grantors and others treated as substantial owners), shall be
considered as owned by the trust.
(C) To corporations
If 50 percent or more in value of the stock in a corporation
is owned, directly or indirectly, by or for any person, such
corporation shall be considered as owning the stock owned,
directly or indirectly, by or for such person.
(4) Options
If any person has an option to acquire stock, such stock shall
be considered as owned by such person. For purposes of this
paragraph, an option to acquire such an option, and each one of a
series of such options, shall be considered as an option to
acquire such stock.
(5) Operating rules
(A) In general
Except as provided in subparagraphs (B) and (C), stock
constructively owned by a person by reason of the application
of paragraph (1), (2), (3), or (4), shall, for purposes of
applying paragraphs (1), (2), (3), and (4), be considered as
actually owned by such person.
(B) Members of family
Stock constructively owned by an individual by reason of the
application of paragraph (1) shall not be considered as owned
by him for purposes of again applying paragraph (1) in order to
make another the constructive owner of such stock.
(C) Partnerships, estates, trusts, and corporations
Stock constructively owned by a partnership, estate, trust,
or corporation by reason of the application of paragraph (3)
shall not be considered as owned by it for purposes of applying
paragraph (2) in order to make another the constructive owner
of such stock.
(D) Option rule in lieu of family rule
For purposes of this paragraph, if stock may be considered as
owned by an individual under paragraph (1) or (4), it shall be
considered as owned by him under paragraph (4).
(E) S corporation treated as partnership
For purposes of this subsection -
(i) an S corporation shall be treated as a partnership, and
(ii) any shareholder of the S corporation shall be treated
as a partner of such partnership.
The preceding sentence shall not apply for purposes of
determining whether stock in the S corporation is
constructively owned by any person.
(b) Cross references
For provisions to which the rules contained in subsection (a)
apply, see -
(1) section 302 (relating to redemption of stock);
(2) section 304 (relating to redemption by related
corporations);
(3) section 306(b)(1)(A) (relating to disposition of section
306 stock);
(4) section 338(h)(3) (defining purchase);
(5) section 382(l)(3) (relating to special limitations on net
operating loss carryovers);
(6) section 856(d) (relating to definition of rents from real
property in the case of real estate investment trusts);
(7) section 958(b) (relating to constructive ownership rules
with respect to controlled foreign corporations); and
(8) section 6038(e)(2) (relating to information with respect
to certain foreign corporations).
Sources
(Aug. 16, 1954, ch. 736, 68A Stat. 99; Pub. L. 86-779, Sec. 10(h),
Sept. 14, 1960, 74 Stat. 1009; Pub. L. 87-834, Sec. 20(d)(1), Oct.
16, 1962, 76 Stat. 1063; Pub. L. 88-554, Sec. 4(a), (b)(2), Aug.
31, 1964, 78 Stat. 762, 763; Pub. L. 97-248, title II, Sec.
224(c)(3), Sept. 3, 1982, 96 Stat. 489; Pub. L. 98-369, div. A,
title VII, Sec. 712(k)(5)(E), 721(j), July 18, 1984, 98 Stat. 950,
969; Pub. L. 99-514, title VI, Sec. 621(c)(1), Oct. 22, 1986, 100
Stat. 2266; Pub. L. 105-34, title XI, Sec. 1142(e)(3), Aug. 5,
1997, 111 Stat. 983.)
Miscellaneous
AMENDMENTS
1997 - Subsec. (b)(8). Pub. L. 105-34 substituted ''6038(d)(2)''
for ''6038(d)(1)''.
1986 - Subsec. (b)(5). Pub. L. 99-514 substituted ''382(l)(3)''
for ''382(a)(3)''.
1984 - Subsec. (a)(5)(E). Pub. L. 98-369, Sec. 721(j), added
subpar. (E).
Subsec. (b)(4). Pub. L. 98-369, Sec. 712(k)(5)(E), substituted
''section 338(h)(3) (defining purchase)'' for ''section
338(h)(3)(B) (relating to purchase of stock from subsidiaries,
etc.)''.
1982 - Subsec. (b)(4). Pub. L. 97-248 substituted ''section
338(h)(3)(B) (relating to purchase of stock from subsidiaries,
etc.)'' for ''section 334(b)(3)(C) (relating to basis of property
received in certain liquidations of subsidiaries)''.
1964 - Subsec. (a). Pub. L. 88-554, Sec. 4(a), struck out
sidewise attribution by providing that when stock is attributed to
a partnership, estate, trust, or corporation from a partner,
shareholder, or beneficiary, this stock is not to be attributed
again to another partner, beneficiary, or shareholder.
Subsec. (b)(7), (8). Pub. L. 88-554, Sec. 4(b)(2), added par. (7)
and redesignated former par. (7) as (8).
1962 - Subsec. (b)(7). Pub. L. 87-834 added par. (7).
1960 - Subsec. (b)(6). Pub. L. 86-779 added par. (6).
EFFECTIVE DATE OF 1997 AMENDMENT
Section 1142(f) of Pub. L. 105-34 provided that: ''The amendments
made by this section (amending this section and sections 901 and
6038 of this title) shall apply to annual accounting periods
beginning after the date of the enactment of this Act (Aug. 5,
1997).''
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 applicable to any ownership change
after Dec. 31, 1986, except as otherwise provided, see section
621(f) of Pub. L. 99-514, as amended, set out as a note under
section 382 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 712(k)(5)(E) of Pub. L. 98-369 not
applicable to any qualified stock purchase where the acquisition
date is before Sept. 1, 1982, see section 712(k)(9)(A) of Pub. L.
98-369, set out as a note under section 338 of this title.
Amendment by section 712(k)(5)(E) of Pub. L. 98-369 effective as
if included in the provision of the Tax Equity and Fiscal
Responsibility Act of 1982, Pub. L. 97-248, to which such amendment
relates, see section 715 of Pub. L. 98-369, set out as a note under
section 31 of this title.
Amendment by section 721(j) of Pub. L. 98-369 effective as if
included in the Subchapter S Revision Act of 1982, Pub. L. 97-354,
see section 721(y)(1) of Pub. L. 98-369, set out as a note under
section 1361 of this title.
EFFECTIVE DATE OF 1982 AMENDMENT
Amendment by Pub. L. 97-248 applicable to any target corporation
with respect to which the acquisition date occurs after Aug. 31,
1982, with special rules for certain acquisitions before Sept. 1,
1982, and certain acquisitions of financial institutions in which
there was a binding contract on July 22, 1982, to acquire control,
see section 224(d) of Pub. L. 97-248, set out as an Effective Date
note under section 338 of this title.
EFFECTIVE DATE OF 1964 AMENDMENT
Section 4(c) of Pub. L. 88-554, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ''The
amendments made by this section (amending this section and sections
304, 382, 856, 958, and 6038 of this title) shall take effect on
the date of the enactment of this Act, (Aug. 31, 1964), except
that, for purposes of sections 302 and 304 of the Internal Revenue
Code of 1986 (formerly I.R.C. 1954), such amendments shall not
apply with respect to distributions in payment for stock
acquisitions or redemptions, if such acquisitions or redemptions
occurred before the date of the enactment of this Act.''
EFFECTIVE DATE OF 1960 AMENDMENT
Amendment by Pub. L. 86-779 applicable with respect to taxable
years of real estate investment trusts beginning after Dec. 31,
1960, see section 10(k) of Pub. L. 86-779, set out as an Effective
Date note under section 856 of this title.
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 105, 129, 168, 263A,
269A, 269B, 301, 302, 304, 306, 338, 355, 356, 367, 382, 409, 414,
416, 441, 453, 465, 469, 512, 664, 809, 856, 871, 881, 897, 904,
958, 1042, 1059, 1060, 1239, 1246, 1372, 2036, 4975, 6038, 6038A,
7704 of this title; title 29 sections 1108, 1301.
