Editor's Note:
Pub. L. 115-97, Sec. 13001(b)(5)(A), struck Sec. 1551, effective for taxable years beginning after December 31, 2017.
I.R.C. § 1551(a) In General —
If—
I.R.C. § 1551(a)(1) —
any corporation transfers, directly or indirectly, all or part of its property (other
than money) to a
transferee corporation, or
I.R.C. § 1551(a)(2) —
five or fewer individuals who are in control of a corporation transfer, directly
or indirectly, property
(other than money) to a transferee corporation, and the transferee corporation was
created for the purpose of acquiring such property or was not actively engaged in
business at the time of such acquisition, and if after such transfer the transferor
or transferors are in control of such transferee corporation during any part of the
taxable year of such transferee corporation,
then for such taxable year of such
transferee corporation the Secretary may (except as may be otherwise
determined under subsection (c)) disallow the benefits of the rates
contained in section 11(b) which are lower than the highest rate specified in such section, or the accumulated
earnings credit provided in paragraph (2) or (3) of section 535(c), unless such transferee corporation shall establish by the clear preponderance of
the evidence that the securing of such benefits or credit was not a major purpose
of such transfer.
I.R.C. § 1551(b) Control —
For purposes of subsection (a), the term “control"
means—
I.R.C. § 1551(b)(1) —
With respect to a transferee corporation described in subsection (a)(1), the ownership
by the transferor corporation, its shareholders, or both, of stock possessing at
least 80 percent of the total combined voting power of all classes of stock entitled
to vote or at least 80 percent of the total value of shares of all classes of the
stock; or
I.R.C. § 1551(b)(2) —
With respect to each corporation described in subsection (a)(2), the ownership by
the five or fewer individuals described in such subsection of stock possessing—
I.R.C. § 1551(b)(2)(A) —
at least 80 percent of the total combined voting power of all classes of stock entitled
to vote or at least 80 percent of the total value of shares of all classes of the
stock of each corporation, and
I.R.C. § 1551(b)(2)(B) —
more than 50 percent of the total combined voting power of all classes of stock entitled
to vote or more than 50 percent of the total value of shares of all classes of stock
of each corporation, taking into account the stock ownership of each such individual
only to the extent such stock ownership is identical with respect to each such corporation.
For purposes of this subsection, section 1563(e) shall apply in determining the ownership of stock.
I.R.C. § 1551(c) Authority Of The Secretary Under This Section —
The provisions of section 269(c) and the authority of the Secretary under such section, shall, to the extent not
inconsistent with the provisions of this section, be applicable to this section.
(Aug. 16, 1954, ch. 736, 68A Stat. 371; Sept. 2, 1958,
Pub. L. 85-866, title II, 205(a), 72 Stat. 1680; Feb. 26, 1964, Pub. L. 88-272, title II, 235(b), 78 Stat. 125; Mar. 29, 1975, Pub. L. 94-12,
title III, 304(b), 89 Stat. 45; Oct. 4, 1976, Pub. L. 94-455, title XIX, 1901(a)(158), 1906(b)(13)(A), 90 Stat. 1790, 1834; Nov. 6, 1978, Pub. L. 95-600, title III, 301(b)(18)(A),
(B), 92 Stat. 2823; Aug. 13, 1981, Pub.
L. 97-34, title II, 232(b)(2), 95 Stat. 250; Oct. 22, 1986, Pub. L. 99-514, title XVIII, 1899A(36), 100 Stat. 2960; Pub. L. 113-295, Div. A. title II Sec. 221(a)(94), Dec. 19, 2014, 128 Stat. 4010; repealed by Pub. L. 115-97, title I, Sec. 13001(b)(5)(A), Dec. 22, 2017, 131 Stat. 2054.)
BACKGROUND NOTES
Amendments to Subchapter
1978--Pub. L. 95-600, title III, 301(b)(18)(C), Nov. 6, 1978, 92 Stat. 2823, in item 1551 substituted
“the benefits of the graduated corporate rates” for “surtax exemption”.
1964--Pub. L. 88-272, title II, 235(c)(4), Feb. 26, 1964, 78 Stat. 127, inserted table of parts, and heading
for part I.
AMENDMENTS
2017—Sec. 1551. Pub. L. 115-97, Sec. 13001(b)(5)(A), struck Sec. 1551. Before being struck, it read as follows:
“Sec. 1551. Disallowance Of The Benefits Of The Graduated Corporate Rates And Accumulated
Earnings Credit
“(a) In General.—If—
“(1) any corporation transfers, directly or indirectly, all or part of its property
(other than money) to a transferee corporation, or
“(2) five or fewer individuals who are in control of a corporation transfer, directly
or indirectly, property
(other than money) to a transferee corporation, and the transferee corporation was
created for the purpose of acquiring such property or was not actively engaged in
business at the time of such acquisition, and if after such transfer the transferor
or transferors are in control of such transferee corporation during any part of the
taxable year of such transferee corporation,
“then for such taxable year of such transferee corporation the Secretary may (except
as may be otherwise determined under subsection (c)) disallow the benefits of the
rates contained in section 11(b) which are lower than the highest rate specified in
such section, or the accumulated earnings credit provided in paragraph
(2) or (3) of section 535(c), unless such transferee corporation shall establish by
the clear preponderance of the evidence that the securing of such benefits or credit
was not a major purpose of such transfer.
“(b) Control.—For purposes of subsection
(a), the term ‘control' means—
“(1) With respect to a transferee corporation described in subsection (a)(1), the
ownership by the transferor corporation, its shareholders, or both, of stock possessing
at least 80 percent of the total combined voting power of all classes of stock entitled
to vote or at least 80 percent of the total value of shares of all classes of the
stock; or
“(2) With respect to each corporation described in subsection (a)(2), the ownership
by the five or fewer individuals described in such subsection of stock possessing—
“(A) at least 80 percent of the total combined voting power of all classes of stock
entitled to vote or at least 80 percent of the total value of shares of all classes
of the stock of each corporation, and
“(B) more than 50 percent of the total combined voting power of all classes of stock
entitled to vote or more than 50 percent of the total value of shares of all classes
of stock of each corporation, taking into account the stock ownership of each such
individual only to the extent such stock ownership is identical with respect to each
such corporation.
“For purposes of this subsection, section 1563(e) shall apply in determining the ownership
of stock.
“(c) Authority Of The Secretary Under This Section.—The provisions of section 269(c)
and the authority of the Secretary under such section, shall, to the extent not inconsistent
with the provisions of this section, be applicable to this section.”
2014—Subsec. (a). Pub. L. 113-295, Div. A, Sec. 221(a)(94)(A), amended subsec. (a) by striking par. (1) and redesignating
par. (2)
and (3) as par. (1) and (2), respectively, and by striking “after June 12, 1963,”
each place it appears. Before it was struck, par. (1) read as follows:
“(1) any corporation transfers, on or after January 1, 1951, and on or before June
12, 1963, all or part of its property (other than money) to a transferee corporation,”
Subsec. (b). Pub. L. 113-295, Div. A, Sec. 221(a)(94)(B), amended subsec.
(b) by striking “or (2)” in par. (1) and by substituting “(a)(2)”
for “(a)(3)” in par. (2).
1986--Subsec. (c). Pub. L. 99-514 substituted “section 269(c)” for “section 269(b)”.
1981--Subsec. (a). Pub. L. 97-34 struck out “$150,000"
before “accumulated earnings credit”.
1978--Pub. L. 95-600, 301(b)(18)(B), substituted
“the benefits of the graduated corporate rates” for “surtax exemption"
in section catchline.
Subsec. (a). Pub. L. 95-600, 301(b)(18)(A), in provisions following par. (3) substituted “disallow the benefits
of the rates contained in section 11(b) which are lower than the highest rate specified
in such section” for “disallow the surtax exemption (as defined in section 11(d))”
and “such benefits or” for “such exemption or”.
1976--Subsec. (a). Pub. L. 94-455 1901(a)(158), 1906(b)(13)(A), substituted “subsection (c)” for “subsection (d)” after
“determined under” and struck out “or his delegate” after “Secretary”.
1975--Subsec. (a). Pub. L. 94-12 substituted “$150,000"
for “$100,000”.
1964--Pub. L. 88-272 amended section generally, and among other changes, designated provisions as subsecs.
(a) to
(c), included among corporations who are disallowed surtax exemption and accumulated
earnings credit, corporations, and five or fewer individuals in charge of a corporation
who, directly or indirectly, transfer property in contravention of subsec. (a) after
June 12, 1963, substituted provisions permitting the Secretary or his delegate to
disallow the exemption or the earnings credit, for provisions which disallowed the
exemption and the credit except as otherwise determined by the Secretary of his delegate,
provisions that for purposes of determining ownership of stock, section 1563(e) shall
apply, for provisions which determined ownership in accordance with section 544, and
defined control, with respect to corporations described in subsec. (a)(3), to include
the additional test as stated in subsec. (b)(2)(B).
1958--Pub. L. 85-866 substituted “$100,000"
for “$60,000”.
EFFECTIVE DATE OF 2017 REPEAL
Repeal by Pub. L. 115-97, Sec. 13001(b)(5)(A), effective for taxable years beginning after December 31, 2017.
EFFECTIVE DATE OF 2014 AMENDMENTS
Amendments by Pub. L. 113-295, Div. A, Sec. 221(a)(94), effective on the date of the enactment of this Act [Enacted:
Dec. 19. 2014].
Section 221(b)(2) of Pub. L. 113-295, Div. A, provided the following Savings Provision:
“(2)
SAVINGS PROVISION.—If—
“(A)
any provision amended or repealed by the amendments made by this section applied to—
“(i)
any transaction occurring before the date of the enactment of this Act [Enacted: Dec.
19, 2014],
“(ii)
any property acquired before such date of enactment, or
“(iii)
any item of income, loss, deduction, or credit taken into account before such date
of enactment, and
“(B)
the treatment of such transaction, property, or item under such provision would (without
regard to the amendments or repeals made by this section)
affect the liability for tax for periods ending after date of enactment, nothing in
the amendments or repeals made by this section shall be construed to affect the treatment
of such transaction, property, or item for purposes of determining liability for tax
for periods ending after such date of enactment.”
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by Pub. L. 97-34 applicable to taxable years beginning after Dec. 31, 1981, see section 232(c)
of Pub. L. 97-34, set out as a note under section 535 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by Pub. L. 95-600 applicable to taxable years beginning after Dec. 31, 1978, see section 301(c) of
Pub. L. 95-600, set out as a note under section 11 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(158) of Pub. L. 94-455 applicable with respect to taxable years beginning after Dec. 31, 1976, see section
1901(d)
of Pub. L. 94-455, set out as a note under section 2 of this title.
EFFECTIVE DATE OF 1975 AMENDMENT
Amendment by Pub. L. 94-12 applicable to taxable years beginning after Dec. 31, 1974, see section 305(c) of
Pub. L. 94-12, set out as a note under section 535 of this title.
EFFECTIVE DATE OF 1964 AMENDMENT
Section 235(d) of Pub. L. 88-272 provided that: “The amendments made by subsections (a) and (c) [enacting part II
and amending sections 269, 441, and 802 of this title] shall apply with respect to
taxable years ending after December 31, 1963. The amendment made by subsection (b)
[amending this section] shall apply with respect to transfers made after June 12,
1963.”
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by Pub. L. 85-866 applicable with respect to taxable years beginning after Dec. 31, 1957, see section
205(b) of Pub. L. 85-866, set out as a note under section 535 of this title.
