Internal Revenue Code:Sec. 356. Receipt of additional consideration
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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. 356. Receipt of additional consideration
(a) Gain on exchanges
(1) Recognition of gain
If -
(A) section 354 or 355 would apply to an exchange but for the
fact that
(B) the property received in the exchange consists not only
of property permitted by section 354 or 355 to be received
without the recognition of gain but also of other property or
money,
then the gain, if any, to the recipient shall be recognized, but
in an amount not in excess of the sum of such money and the fair
market value of such other property.
(2) Treatment as dividend
If an exchange is described in paragraph (1) but has the effect
of the distribution of a dividend (determined with the
application of section 318(a)), then there shall be treated as a
dividend to each distributee such an amount of the gain
recognized under paragraph (1) as is not in excess of his ratable
share of the undistributed earnings and profits of the
corporation accumulated after February 28, 1913. The remainder,
if any, of the gain recognized under paragraph (1) shall be
treated as gain from the exchange of property.
(b) Additional consideration received in certain distributions
If -
(1) section 355 would apply to a distribution but for the fact
that
(2) the property received in the distribution consists not only
of property permitted by section 355 to be received without the
recognition of gain, but also of other property or money,
then an amount equal to the sum of such money and the fair market
value of such other property shall be treated as a distribution of
property to which section 301 applies.
(c) Loss
If -
(1) section 354 would apply to an exchange or section 355 would
apply to an exchange or distribution, but for the fact that
(2) the property received in the exchange or distribution
consists not only of property permitted by section 354 or 355 to
be received without the recognition of gain or loss, but also of
other property or money,
then no loss from the exchange or distribution shall be recognized.
(d) Securities as other property
For purposes of this section -
(1) In general
Except as provided in paragraph (2), the term ''other
property'' includes securities.
(2) Exceptions
(A) Securities with respect to which nonrecognition of gain
would be permitted
The term ''other property'' does not include securities to
the extent that, under section 354 or 355, such securities
would be permitted to be received without the recognition of
gain.
(B) Greater principal amount in section 354 exchange
If -
(i) in an exchange described in section 354 (other than
subsection (c) thereof), securities of a corporation a party
to the reorganization are surrendered and securities of any
corporation a party to the reorganization are received, and
(ii) the principal amount of such securities received
exceeds the principal amount of such securities surrendered,
then, with respect to such securities received, the term
''other property'' means only the fair market value of such
excess. For purposes of this subparagraph and subparagraph (C)
if no securities are surrendered, the excess shall be the
entire principal amount of the securities received.
(C) Greater principal amount in section 355 transaction
If, in an exchange or distribution described in section 355,
the principal amount of the securities in the controlled
corporation which are received exceeds the principal amount of
the securities in the distributing corporation which are
surrendered, then, with respect to such securities received,
the term ''other property'' means only the fair market value of
such excess.
(e) Nonqualified preferred stock treated as other property
For purposes of this section -
(1) In general
Except as provided in paragraph (2), the term ''other
property'' includes nonqualified preferred stock (as defined in
section 351(g)(2)).
(2) Exception
The term ''other property'' does not include nonqualified
preferred stock (as so defined) to the extent that, under section
354 or 355, such preferred stock would be permitted to be
received without the recognition of gain.
(f) Exchanges for section 306 stock
Notwithstanding any other provision of this section, to the
extent that any of the other property (or money) is received in
exchange for section 306 stock, an amount equal to the fair market
value of such other property (or the amount of such money) shall be
treated as a distribution of property to which section 301 applies.
(g) Transactions involving gift or compensation
For special rules for a transaction described in section 354,
355, or this section, but which -
(1) results in a gift, see section 2501 and following, or
(2) has the effect of the payment of compensation, see
section 61(a)(1).
Sources
(Aug. 16, 1954, ch. 736, 68A Stat. 115; Pub. L. 94-253, Sec. 1(c),
Mar. 31, 1976, 90 Stat. 296; Pub. L. 97-248, title II, Sec. 227(b),
Sept. 3, 1982, 96 Stat. 492; Pub. L. 101-508, title XI, Sec.
11801(c)(8)(E), Nov. 5, 1990, 104 Stat. 1388-524; Pub. L. 105-34,
title X, Sec. 1014(d), Aug. 5, 1997, 111 Stat. 921.)
Miscellaneous
AMENDMENTS
1997 - Subsecs. (e) to (g). Pub. L. 105-34 added subsec. (e) and
redesignated former subsecs. (e) and (f) as (f) and (g),
respectively.
1990 - Subsec. (d)(2)(B)(i). Pub. L. 101-508 struck out ''or
(d)'' after ''subsection (c)''.
1982 - Subsec. (a)(2). Pub. L. 97-248 inserted ''(determined with
the application of section 318(a))'' after ''distribution of a
dividend''.
1976 - Subsec. (d)(2)(B)(i). Pub. L. 94-253 substituted
''subsection (c) or (d) thereof'' for ''subsection (c) thereof''.
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 1982 AMENDMENT
Section 227(c)(2) of Pub. L. 97-248 provided that: ''The
amendment made by subsection (b) (amending this section) shall
apply to distributions after August 31, 1982, in taxable years
ending after such date.''
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by Pub. L. 94-253 applicable to taxable years ending
after Mar. 31, 1976, see section 2 of Pub. L. 94-253, set out as a
note under section 354 of this title.
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.
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 83, 108, 306, 312, 338,
351, 354, 355, 358, 367, 368, 424, 453, 1059, 1223, 1276, 6038B,
6166 of this title.
