Internal Revenue Code:Sec. 354. Exchanges of stock and securities in certain reorganizations
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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 III - CORPORATE ORGANIZATIONS AND REORGANIZATIONS
Subpart B - Effects on Shareholders and Security Holders
Statute
Sec. 354. Exchanges of stock and securities in certain
reorganizations
(a) General rule
(1) In general
No gain or loss shall be recognized if stock or securities in a
corporation a party to a reorganization are, in pursuance of the
plan of reorganization, exchanged solely for stock or securities
in such corporation or in another corporation a party to the
reorganization.
(2) Limitation
(A) Excess principal amount
Paragraph (1) shall not apply if -
(i) the principal amount of any such securities received
exceeds the principal amount of any such securities
surrendered, or
(ii) any such securities are received and no such
securities are surrendered.
(B) Property attributable to accrued interest
Neither paragraph (1) nor so much of section 356 as relates
to paragraph (1) shall apply to the extent that any stock
(including nonqualified preferred stock, as defined in section
351(g)(2)), securities, or other property received is
attributable to interest which has accrued on securities on or
after the beginning of the holder's holding period.
(C) Nonqualified preferred stock
(i) In general
Nonqualified preferred stock (as defined in section
351(g)(2)) received in exchange for stock other than
nonqualified preferred stock (as so defined) shall not be
treated as stock or securities.
(ii) Recapitalizations of family-owned corporations
(I) In general
Clause (i) shall not apply in the case of a
recapitalization under section 368(a)(1)(E) of a
family-owned corporation.
(II) Family-owned corporation
For purposes of this clause, except as provided in
regulations, the term ''family-owned corporation'' means
any corporation which is described in clause (i) of section
447(d)(2)(C) throughout the 8-year period beginning on the
date which is 5 years before the date of the
recapitalization. For purposes of the preceding sentence,
stock shall not be treated as owned by a family member
during any period described in section 355(d)(6)(B).
(III) Extension of statute of limitations
The statutory period for the assessment of any deficiency
attributable to a corporation failing to be a family-owned
corporation shall not expire before the expiration of 3
years after the date the Secretary is notified by the
corporation (in such manner as the Secretary may prescribe)
of such failure, and such deficiency may be assessed before
the expiration of such 3-year period notwithstanding the
provisions of any other law or rule of law which would
otherwise prevent such assessment.
(3) Cross references
(A) For treatment of the exchange if any property is received
which is not permitted to be received under this subsection
(including nonqualified preferred stock and an excess principal
amount of securities received over securities surrendered, but
not including property to which paragraph (2)(B) applies), see
section 356.
(B) For treatment of accrued interest in the case of an
exchange described in paragraph (2)(B), see section 61.
(b) Exception
(1) In general
Subsection (a) shall not apply to an exchange in pursuance of a
plan of reorganization within the meaning of subparagraph (D) or
(G) of section 368(a)(1), unless -
(A) the corporation to which the assets are transferred
acquires substantially all of the assets of the transferor of
such assets; and
(B) the stock, securities, and other properties received by
such transferor, as well as the other properties of such
transferor, are distributed in pursuance of the plan of
reorganization.
(2) Cross reference
For special rules for certain exchanges in pursuance of plans
of reorganization within the meaning of subparagraph (D) or (G)
of section 368(a)(1), see section 355.
(c) Certain railroad reorganizations
Notwithstanding any other provision of this subchapter,
subsection (a)(1) (and so much of section 356 as relates to this
section) shall apply with respect to a plan of reorganization
(whether or not a reorganization within the meaning of section
368(a)) for a railroad confirmed under section 1173 of title 11 of
the United States Code, as being in the public interest.
Sources
(Aug. 16, 1954, ch. 736, 68A Stat. 112; Pub. L. 94-253, Sec. 1(c),
Mar. 31, 1976, 90 Stat. 296; Pub. L. 95-473, Sec. 2(a)(2)(F), Oct.
17, 1978, 92 Stat. 1465; Pub. L. 96-589, Sec. 4(e)(1), (h)(1),
6(i)(2), Dec. 24, 1980, 94 Stat. 3403, 3404, 3410; Pub. L. 101-508,
title XI, Sec. 11801(c)(8)(D), Nov. 5, 1990, 104 Stat. 1388-524;
Pub. L. 104-88, title III, Sec. 304(c), Dec. 29, 1995, 109 Stat.
944; Pub. L. 105-34, title X, Sec. 1014(b), (e)(1), (2), Aug. 5,
1997, 111 Stat. 920, 921; Pub. L. 105-206, title VI, Sec.
6010(e)(2), July 22, 1998, 112 Stat. 814.)
Miscellaneous
AMENDMENTS
1998 - Subsec. (a)(2)(C)(ii)(III). Pub. L. 105-206 added subcl.
(III).
1997 - Subsec. (a)(2)(B). Pub. L. 105-34, Sec. 1014(e)(1),
inserted ''(including nonqualified preferred stock, as defined in
section 351(g)(2))'' after ''stock''.
Subsec. (a)(2)(C). Pub. L. 105-34, Sec. 1014(b), added subpar.
(C).
Subsec. (a)(3)(A). Pub. L. 105-34, Sec. 1014(e)(2), inserted
''nonqualified preferred stock and'' after ''subsection
(including''.
1995 - Subsec. (c). Pub. L. 104-88 struck out ''or approved by
the Interstate Commerce Commission under subchapter IV of chapter
113 of title 49,'' after ''Code,''.
1990 - Subsec. (d). Pub. L. 101-508 struck out subsec. (d)
''Exchanges under the final system plan for ConRail'' which read as
follows: ''No gain or loss shall be recognized if stock or
securities in a corporation are, in pursuance of an exchange to
which paragraph (1) or (2) of section 374(c) applies, exchanged
solely for stock of the Consolidated Rail Corporation, securities
of such Corporation, certificates of value of the United States
Railway Association, or any combination thereof.''
1980 - Subsec. (a)(2). Pub. L. 96-589, Sec. 4(e)(1), redesignated
existing pars. (A) and (B) as par. (A)(i), (ii), and added par.
(B).
Subsec. (a)(3). Pub. L. 96-589, Sec. 4(e)(1), designated existing
provisions as subpar. (A), inserted provisions excluding property
to which paragraph (2)(B) applies, and added subpar. (B).
Subsec. (b). Pub. L. 96-589, Sec. 4(h)(1), substituted
''subparagraph (D) or (G) of section 368(a)(1)'' for ''section
368(a)(1)(D)'', wherever appearing.
Subsec. (c). Pub. L. 96-589, Sec. 6(i)(2), substituted
''confirmed under section 1173 of title 11 of the United States
Code, or approved by the Interstate Commerce Commission'' for
''approved by the Interstate Commerce Commission under section 77
of the Bankruptcy Act, or''.
1978 - Subsec. (c). Pub. L. 95-473 substituted ''subchapter IV of
chapter 113 of title 49'' for ''section 20b of the Interstate
Commerce Act''.
1976 - Subsec. (d). Pub. L. 94-253 added subsec. (d).
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by Pub. L. 105-206 effective, except as otherwise
provided, as if included in the provisions of the Taxpayer Relief
Act of 1997, Pub. L. 105-34, to which such amendment relates, see
section 6024 of Pub. L. 105-206, set out as a note under section 1
of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by Pub. L. 105-34 applicable, with certain exceptions,
to transactions after June 8, 1997, see section 1014(f) of Pub. L.
105-34, set out as a note under section 351 of this title.
EFFECTIVE DATE OF 1995 AMENDMENT
Amendment by Pub. L. 104-88 effective Jan. 1, 1996, see section 2
of Pub. L. 104-88, set out as an Effective Date note under section
701 of Title 49, Transportation.
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by section 4(e)(1) of Pub. L. 96-589 applicable to
bankruptcy cases or similar judicial proceedings commencing after
Dec. 31, 1980, and to exchanges which occur after Dec. 31, 1980,
and which do not occur in a bankruptcy case or similar judicial
proceeding or in a proceeding under Title 11, Bankruptcy, commenced
on or before Dec. 31, 1980, with an exception permitting the debtor
to make the amendment applicable to such cases, proceedings or
exchanges commencing after Sept. 30, 1979, see section 7(c), (f) of
Pub. L. 96-589, set out as a note under section 108 of this title.
Amendment by section 4(h)(1) of Pub. L. 96-589 applicable to
bankruptcy cases or similar judicial proceedings commencing after
Dec. 31, 1980, with an exception permitting the debtor to make the
amendment applicable to such cases or proceedings commencing after
Sept. 30, 1979, see section 7(c)(1), (f) of Pub. L. 96-589, set out
as a note under section 108 of this title.
Amendment by section 6(i)(2) of Pub. L. 96-589 effective Oct. 1,
1979, but not applicable to any proceeding under Title 11 commenced
before Oct. 1, 1979, see section 7(e) of Pub. L. 96-589, set out as
a note under section 108 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Section 2 of Pub. L. 94-253 provided that: ''The amendments made
by section 1 (amending this section and sections 356, 358, and 374
of this title) shall apply to taxable years ending after March 31,
1976.''
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
Transfer of Functions.
ABOLITION OF UNITED STATES RAILWAY ASSOCIATION AND TRANSFER OF
FUNCTIONS
United States Railway Association abolished effective Apr. 1,
1987, all powers, duties, rights, and obligations of Association
relating to Consolidated Rail Corporation under Regional Rail
Reorganization Act of 1973 (45 U.S.C. 701 et seq.) transferred to
Secretary of Transportation on Jan. 1, 1987, and any securities of
Corporation held by Association transferred to Secretary of
Transportation on Oct. 21, 1986, see section 1341 of Title 45,
Railroads.
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 83, 108, 332, 338, 351,
355, 356, 358, 367, 368, 381, 382, 424, 943, 953, 1276, 6038B of
this title.
