Internal Revenue Code:Sec. 337. Nonrecognition for property distributed to parent in complete liquidation of subsidiary

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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 II - CORPORATE LIQUIDATIONS
          Subpart B - Effects on Corporation
        

Statute

    Sec. 337. Nonrecognition for property distributed to parent in
        complete liquidation of subsidiary
 
    (a) In general
      No gain or loss shall be recognized to the liquidating
    corporation on the distribution to the 80-percent distributee of
    any property in a complete liquidation to which section 332
    applies.
    (b) Treatment of indebtedness of subsidiary, etc.
      (1) Indebtedness of subsidiary to parent
        If -
          (A) a corporation is liquidated in a liquidation to which
        section 332 applies, and
          (B) on the date of the adoption of the plan of liquidation,
        such corporation was indebted to the 80-percent distributee,
      for purposes of this section and section 336, any transfer of
      property to the 80-percent distributee in satisfaction of such
      indebtedness shall be treated as a distribution to such
      distributee in such liquidation.
      (2) Treatment of tax-exempt distributee
        (A) In general
          Except as provided in subparagraph (B), paragraph (1) and
        subsection (a) shall not apply where the 80-percent distributee
        is an organization (other than a cooperative described in
        section 521) which is exempt from the tax imposed by this
        chapter.
        (B) Exception where property will be used in unrelated business
          (i) In general
            Subparagraph (A) shall not apply to any distribution of
          property to an organization described in section 511(a)(2)
          if, immediately after such distribution, such organization
          uses such property in an activity the income from which is
          subject to tax under section 511(a).
          (ii) Later disposition or change in use
            If any property to which clause (i) applied is disposed of
          by the organization acquiring such property, notwithstanding
          any other provision of law, any gain (not in excess of the
          amount not recognized by reason of clause (i)) shall be
          included in such organization's unrelated business taxable
          income.  For purposes of the preceding sentence, if such
          property ceases to be used in an activity referred to in
          clause (i), such organization shall be treated as having
          disposed of such property on the date of such cessation.
    (c) 80-percent distributee
      For purposes of this section, the term ''80-percent distributee''
    means only the corporation which meets the 80-percent stock
    ownership requirements specified in section 332(b). For purposes of
    this section, the determination of whether any corporation is an
    80-percent distributee shall be made without regard to any
    consolidated return regulation.
    (d) Regulations
      The Secretary shall prescribe such regulations as may be
    necessary or appropriate to carry out the purposes of the
    amendments made by subtitle D of title VI of the Tax Reform Act of
    1986, including -
        (1) regulations to ensure that such purposes may not be
      circumvented through the use of any provision of law or
      regulations (including the consolidated return regulations and
      part III of this subchapter) or through the use of a regulated
      investment company, real estate investment trust, or tax-exempt
      entity, and
        (2) regulations providing for appropriate coordination of the
      provisions of this section with the provisions of this title
      relating to taxation of foreign corporations and their
      shareholders.
 

Sources

    (Added Pub. L. 99-514, title VI, Sec. 631(a), Oct. 22, 1986, 100
    Stat. 2271; amended Pub. L. 100-203, title X, Sec. 10223(a), Dec.
    22, 1987, 101 Stat. 1330-411; Pub. L. 100-647, title I, Sec.
    1006(e)(4), (5)(A), Nov. 10, 1988, 102 Stat. 3400.)
 

References in Text

                             REFERENCES IN TEXT
      The Tax Reform Act of 1986, referred to in subsec. (d), is Pub.
    L. 99-514, Oct. 22, 1986, 100 Stat. 2085, as amended.  Subtitle D
    (Sec. 631-634) of title VI of the Tax Reform Act of 1986 enacted
    sections 336 and 337 of this title, amended sections 26, 311, 312,
    332, 334, 338, 341, 346, 367, 453, 453B, 467, 852, 897, 1056, 1248,
    1255, 1276, 1363, 1366, 1374, and 1375 of this title, and repealed
    former sections 333, 336, and 337 of this title.  For complete
    classification of this Act to the Code, see Tables.
 

Miscellaneous

                              PRIOR PROVISIONS
      A prior section 337, acts Aug. 16, 1954, ch. 736, 68A Stat. 106;
    Sept. 2, 1958, Pub. L. 85-866, title I, Sec. 19, 72 Stat. 1615;
    Oct. 4, 1976, Pub. L. 94-455, title XIX, Sec. 1901(a)(46),
    1906(b)(13)(A), title XXI, Sec. 2118(a), 90 Stat. 1772, 1834, 1912;
    Nov. 6, 1978, Pub. L. 95-600, title VII, Sec. 701(i)(1), 92 Stat.
    2904; Nov. 10, 1978, Pub. L. 95-628, Sec. 4(a), 92 Stat. 3628; Apr.
    2, 1980, Pub. L. 96-223, title IV, Sec. 403(b)(2)(A), 94 Stat. 304;
    Oct. 19, 1980, Pub. L. 96-471, Sec. 2(c)(2), 94 Stat. 2254; Dec.
    24, 1980, Pub. L. 96-589, Sec. 5(c), 94 Stat. 3405; Sept. 3, 1982,
    Pub. L. 97-248, title II, Sec. 224(c)(5), (6), 96 Stat. 489; Oct.
    22, 1986, Pub. L. 99-514, title XVIII, Sec. 1804(e)(7)(A), 100
    Stat. 2803, related to gain or loss on sales or exchanges in
    connection with certain liquidations, prior to repeal by Pub. L.
    99-514, Sec. 631(a).
                                 AMENDMENTS
      1988 - Subsec. (b)(2)(B)(i). Pub. L. 100-647, Sec. 1006(e)(4)(A),
    (B), substituted ''described in section 511(a)(2)'' for ''described
    in section 511(a)(2) or 511(b)(2)'' and ''in an activity the income
    from which is subject to tax under section 511(a)'' for ''in an
    unrelated trade or business (as defined in section 513)''.
      Subsec. (b)(2)(B)(ii). Pub. L. 100-647, Sec. 1006(e)(4)(C),
    substituted ''an activity referred to in clause (i)'' for ''an
    unrelated trade or business of such organization''.
      Subsec. (d). Pub. L. 100-647, Sec. 1006(e)(5)(A), in introductory
    provisions, substituted ''amendments made by subtitle D of title VI
    of the Tax Reform Act of 1986'' for ''amendments made to this
    subpart by the Tax Reform Act of 1986'', and in par. (1),
    substituted ''this subchapter) or through the use of a regulated
    investment company, real estate investment trust, or tax-exempt
    entity'' for ''this subchapter)''.
      1987 - Subsec. (c). Pub. L. 100-203 inserted at end ''For
    purposes of this section, the determination of whether any
    corporation is an 80-percent distributee shall be made without
    regard to any consolidated return regulation.''
                      EFFECTIVE DATE OF 1988 AMENDMENT
      Section 1006(e)(5)(B) of Pub. L. 100-647 provided that: ''The
    amendment made by subparagraph (A)(ii) (amending this section)
    shall not apply to any reorganization if before June 10, 1987 -
        ''(i) the board of directors of a party to the reorganization
      adopted a resolution to solicit shareholder approval for the
      transaction, or
        ''(ii) the shareholders or the board of directors of a party to
      the reorganization approved the transaction.''
      Amendment by Pub. L. 100-647 effective, except as otherwise
    provided, as if included in the provision of the Tax Reform Act of
    1986, Pub. L. 99-514, to which such amendment relates, see section
    1019(a) of Pub. L. 100-647, set out as a note under section 1 of
    this title.
                      EFFECTIVE DATE OF 1987 AMENDMENT
      Amendment by Pub. L. 100-203 applicable to distributions or
    transfers after Dec. 15, 1987, with exceptions for certain
    distributee corporations and distributions covered by prior
    transition rule, see section 10223(d) of Pub. L. 100-203, set out
    as a note under section 304 of this title.
                               EFFECTIVE DATE
      Section applicable to any distribution in complete liquidation,
    and any sale or exchange, made by a corporation after July 31,
    1986, unless such corporation is completely liquidated before Jan.
    1, 1987, any transaction described in section 338 of this title for
    which the acquisition date occurs after Dec. 31, 1986, and any
    distribution, not in complete liquidation, made after Dec. 31,
    1986, with exceptions and special and transitional rules, see
    section 633 of Pub. L. 99-514, set out as a note under section 336
    of this title.
 

References

                   SECTION REFERRED TO IN OTHER SECTIONS
      This section is referred to in sections 334, 336, 341, 367, 453B,
    897, 1248 of this title.