26 USC 336 - Gain or loss recognized on property distributed in complete liquidation

U.S Code last checked for updates: May 17, 2024

§ 336.

Gain or loss recognized on property distributed in complete liquidation

(a)

General rule

(b)

Treatment of liabilities

(c)

Exception for liquidations which are part of a reorganization

(d)

Limitations on recognition of loss

(1)

No loss recognized in certain distributions to related persons

(A)

In general

No loss shall be recognized to a liquidating corporation on the distribution of any property to a related person (within the meaning of section 267) if—

(i)

such distribution is not pro rata, or

(ii)

such property is disqualified property.

(B)

Disqualified property

(2)

Special rule for certain property acquired in certain carryover basis transactions

(A)

In general

For purposes of determining the amount of loss recognized by any liquidating corporation on any sale, exchange, or distribution of property described in subparagraph (B), the adjusted basis of such property shall be reduced (but not below zero) by the excess (if any) of—

(i)

the adjusted basis of such property immediately after its acquisition by such corporation, over

(ii)

the fair market value of such property as of such time.

(B)

Description of property

(i)

In general

For purposes of subparagraph (A), property is described in this subparagraph if—

(I)

such property is acquired by the liquidating corporation in a transaction to which section 351 applied or as a contribution to capital, and

(II)

the acquisition of such property by the liquidating corporation was part of a plan a principal purpose of which was to recognize loss by the liquidating corporation with respect to such property in connection with the liquidation.

Other property shall be treated as so described if the adjusted basis of such other property is determined (in whole or in part) by reference to the adjusted basis of property described in the preceding sentence.

(ii)

Certain acquisitions treated as part of plan

(C)

Recapture in lieu of disallowance

(3)

Special rule in case of liquidation to which section 332 applies

(e)

Certain stock sales and distributions may be treated as asset transfers

Under regulations prescribed by the Secretary, if—

(1)

a corporation owns stock in another corporation meeting the requirements of section 1504(a)(2), and

(2)

such corporation sells, exchanges, or distributes all of such stock,

an election may be made to treat such sale, exchange, or distribution as a disposition of all of the assets of such other corporation, and no gain or loss shall be recognized on the sale, exchange, or distribution of such stock.

(Added Pub. L. 99–514, title VI, § 631(a), Oct. 22, 1986, 100 Stat. 2269; amended Pub. L. 100–647, title I, §§ 1006(e)(1)–(3), (21)(A), 1018(d)(5)(D), Nov. 10, 1988, 102 Stat. 3400, 3403, 3580.)

cite as: 26 USC 336