I.R.C. § 311(a) General Rule —
Except as provided in subsection (b), no gain or loss shall be recognized to a corporation on the distribution (not in
complete liquidation)
with respect to its stock of—
I.R.C. § 311(a)(1) —
its stock (or rights to acquire its stock), or
I.R.C. § 311(a)(2) —
property.
I.R.C. § 311(b) Distributions Of Appreciated Property
I.R.C. § 311(b)(1) In General —
If—
I.R.C. § 311(b)(1)(A) —
a corporation distributes property
(other than an obligation of such corporation) to a shareholder in a distribution
to which subpart A applies, and
I.R.C. § 311(b)(1)(B) —
the fair market value of such property exceeds its adjusted basis (in the hands
of the distributing corporation), then gain shall be recognized to the distributing
corporation as if such property were sold to the distributee at its fair market value.
I.R.C. § 311(b)(2) Treatment Of Liabilities —
Rules similar to the rules of section 336(b) shall apply for purposes of this subsection.
I.R.C. § 311(b)(3) Special Rule For Certain Distributions Of Partnership Or Trust Interests —
If the property distributed consists of an interest in a partnership or trust, the
Secretary may by regulations provide that the amount of the gain recognized under
paragraph (1) shall be computed without regard to any loss attributable to property contributed
to the partnership or trust for the principal purpose of recognizing such loss on
the distribution.
(Aug. 16, 1954, ch. 736, 68A Stat. 94; Dec. 30, 1969,
Pub. L. 91-172, title IX, 905(a),
(b)(1), 83 Stat. 713, 714; Oct. 2, 1976, Pub. L. 94-452, 2(b), 90 Stat. 1511; Oct. 4, 1976, Pub. L. 94-455, title XIX, 1901(a)(42)(A),
(B)(i), (C), 90 Stat. 1771; Nov. 6, 1978, Pub. L. 95-600, title VII, 703(j)(2)(A), (B), 92 Stat. 2941;
Oct. 19, 1980, Pub. L. 96-471, 2(b)(1), 94 Stat. 2253; Sept. 3, 1982, Pub. L. 97-248, title II, 223(a), 96 Stat. 483; July 18, 1984, Pub. L. 98-369, div. A, title I, 54(a), title VII, 712(j), 98 Stat. 568, 948; Oct. 22, 1986, Pub. L. 99-514, title VI, 631(c), 100 Stat. 2272; Nov. 10, 1988, Pub. L. 100-647,
title I, 1006(e)(8)(B), (21)(B), 1018(d)(5)(E), 102 Stat. 3401, 3403,
3580.)
BACKGROUND NOTES
AMENDMENTS
1988--Subsec. (a). Pub. L. 100-647, 1018(d)(5)(E), substituted
“distribution (not in complete liquidation) with respect to its stock"
for “distribution, with respect to its stock,”.
Subsec. (b)(2). Pub. L. 100-647, 1006(e)(21)(B), substituted “liabilities” for
“liabilities in excess of basis” in heading.
Subsec. (b)(3). Pub. L. 100-647, 1006(e)(8)(B), added par. (3).
1986--Pub. L. 99-514 amended section generally, substituting provisions relating to distributions of appreciated
property for provisions relating to LIFO inventory, liability in excess of basis,
and appreciated property used to redeem stock.
1984--Subsec. (d). Pub. L. 98-369, 54(a)(3), substituted “Distributions of appreciated property” for “Appreciated property
used to redeem stock” in heading.
Subsec. (d)(1). Pub. L. 98-369, 54(a)(1), substituted “This subsection shall be applied after the applications of
subsections (b) and (c)” for “Subsections
(b) and (c) shall not apply to any distribution to which this subsection applies”
in provisions following subpar. (B).
Subsec. (d)(1)(A). Pub. L. 98-369, 54(a)(1), struck out “of part or all of his stock in such corporation” before “and”.
Subsec. (d)(2)(A). Pub. L. 98-369, 54(a)(2)(A), substituted provisions relating to a distribution which is made with
respect to qualified stock if section 302(b)(4) applies to such distribution or such
distribution is a qualified distribution for provisions which had related to a distribution
to a corporate shareholder if the basis of the property distributed was determined
under section 301(d)(2).
Subsec. (d)(2)(B) to (F). Pub. L. 98-369, 54(a)(2)(A), (B), redesignated subpars. (C) to
(F) as (B) to (E), respectively, and struck out former subpar. (B)
which related to distributions to which section 302(b)(4) applied and which were made
with respect to qualified stock.
Subsec. (e)(1)(C). Pub. L. 98-369, 712(j), added subpar. (C).
Subsec. (e)(3). Pub. L. 98-369, 54(a)(2)(C), added par. (3).
1982--Subsec. (d)(2)(A). Pub. L. 97-248, 223(a)(1), substituted reference to a distribution to a corporate shareholder if
the basis of the property distributed is determined under section 301(d)(2) for reference
to a distribution in complete redemption of all of the stock of a shareholder who,
at all times within the 12-month period ending on the date of such distribution owned
at least 10 percent in value of the outstanding stock of the distributing corporation,
but only if the redemption qualified under section 302(b)(3) (determined without the
application of section 302(c)(2)(A)(ii)).
Subsec. (d)(2)(B). Pub. L. 97-248, 223(a)(1), substituted reference to a distribution to which section 302(b)(4) applies
and which is made with respect to qualified stock for reference to a distribution
of stock or an obligation of a corporation, which was engaged in at least one trade
or business, which had not received property constituting a substantial part of its
assets from the distributing corporation, in a transaction to which section 351 applied
or as a contribution to capital, within the 5-year period ending on the date of the
distribution, and at least 50 percent in value of the outstanding stock of which was
owned by the distributing corporation at any time within the 9-year period ending
one year before the date of the distribution.
Subsec. (d)(2)(C). Pub. L. 97-248, 223(a)(1), substituted reference to a distribution of stock or an obligation of
a corporation if the requirements of subsec. (e)(2) of this section are met with respect
to the distribution for reference to a distribution of stock or securities pursuant
to the terms of a final judgment rendered by a court with respect to the distributing
corporation in a court proceeding under the Sherman Act (15 U.S.C. 1-7)
or the Clayton Act (15 U.S.C. 12-27), or both, to which the United States was a party, but only if the distribution of
such stock or securities in redemption of the distributing corporation's stock was
in furtherance of the purposes of the judgment.
Subsec. (d)(2)(G). Pub. L. 97-248, 223(a)(3), struck out subpar. (G) which provided that a distribution of stock to
a distributee which is not an organization exempt from tax under section 501(a) of
this title, if with respect to such distributee, subsec. (a)(1) or (b)(1) of section
1101 of this title applied to such distribution.
Subsec. (e). Pub. L. 97-248, 223(a)(2), added subsec. (e).
1980--Subsec. (a). Pub. L. 96-471 substituted “section 453B"
for “Section 453(d)”.
1978--Subsec. (d)(2)(G),
(H). Pub. L. 95-600 redesignated subpar. (H) as (G).
1976--Subsec. (d)(1)(B). Pub. L. 94-455, 1901(a) (42)(A), substituted
“then a gain shall be recognized” for “then again shall be recognized”.
Subsec. (d)(2). Pub. L. 94-452 and Pub. L. 94-455 1901(a)(42)(B)(i),
(C), struck out subpar. (C) relating to certain distributions before Dec. 1, 1974,
struck out “26 Stat. 209;” before “15 U.S.C. 1-7)” and “38 Stat. 730;"
before “15 U.S.C. 12-27)"
in subpar. (D), added subpar. (H), and redesignated subpars. (D) to
(G), as so amended, as subpars. (C) to (F), respectively.
1969--Subsec. (a). Pub. L. 91-172, 905(b)(1), inserted reference to subsec. (d).
Subsec. (d). Pub. L. 91-172, 905(a), added subsec. (d).
EFFECTIVE DATE OF 1988 AMENDMENT
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 1986 AMENDMENT
Amendment by Pub. L. 99-514 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 an Effective Date note under section 336 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Section 54(d) of Pub. L. 98-369, as amended by Pub. L. 99-514, 2, title XVIII, 1804(b)(3), Oct. 22, 1986, 100 Stat. 2095, 2799; Pub. L. 100-647, title I, 1018(d)(1)-(3), Nov. 10, 1988, 102 Stat. 3578, provided that:
“(1) Subsection (a).--Except as otherwise provided in this subsection, the amendments
made by subsection (a) [amending this section] shall apply to distributions declared
on or after June 14, 1984, in taxable years ending after such date.
“(2) Subsection (b).--The amendment made by subsection
(b) [amending section 301 of this title] shall apply to distributions after the date
of the enactment of this Act [July 18, 1984] in taxable years ending after such date.
“(3) Exception for distributions before January 1, 1985, to 80-percent corporate shareholders.--
“(A) In general.--The amendments made by subsection (a) shall not apply to any distribution
before January 1, 1985, to an 80-percent corporate shareholder if the basis of the
property distributed is determined under section 301(d)(2) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954].
“(B) 80-percent corporate shareholder.--The term ‘80-percent corporate shareholder’
means, with respect to any distribution, any corporation which owns--
“(i) stock in the corporation making the distribution possessing at least 80 percent
of the total combined voting power of all classes of stock entitled to vote, and
“(ii) at least 80 percent of the total number of shares of all other classes of stock
of the distributing corporation (except nonvoting stock which is limited and preferred
as to dividends).
“(C) Special rule for affiliated group filing consolidated return.--For purposes of
this paragraph and paragraph (4), all members of the same affiliated group (as defined
in section 1504 of the Internal Revenue Code of 1986) which file a consolidated return for the taxable year which includes the
date of the distribution shall be treated as 1 corporation.
“(D) Special rule for certain distributions before January 1, 1988.--
“(i) In general.--In the case of a transaction to which this subparagraph applies,
subparagraph
(A) shall be applied by substituting ‘1988’ for ‘1985’ and the amendments made by
subtitle D of title VI of the Tax Reform Act of 1986 [sections 631 to 634 of Pub. L. 99-514, enacting sections 336 and 337 of this title, amending 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, repealing sections 333, 336, and 337 of this title,
and enacting provisions set out as a note under section 301 of this title] shall not
apply.
“(ii) Transaction to which subparagraph applies.--This subparagraph appies [applies]
to a transaction in which a Delaware corporation which was incorporated on May 31,
1927, and which was acquired by the transferee on December 10, 1968, transfers to
the transferee stock in a corporation--
“(I) with respect to which such Delaware corporation is a 100-percent corporate shareholder,
and
“(II) which is a Tennessee corporation which was incorporated on March 2, 1978,, [sic]
and which is a successor to an Indiana corporation which was incorporated on June
28, 1946, and acquired by the transferee on December 9 [10], 1968.
“(4) Exception for certain distributions where tender offer commenced on may 23, 1984.--
“(A) In general.--The amendments made by subsection (a) shall not apply to any distribution
made before September 1, 1986, if--
“(i) such distribution consists of qualified stock held (directly or indirectly) on
June 15, 1984, by the distributing corporation,
“(ii) control of the distributing corporation (as defined in section 368(c)
of the Internal Revenue Code of 1986) is acquired other than in a tax-free transaction after January 1, 1984, but
before January 1, 1985,
“(iii) a tender offer for the shares of the distributing corporation was commenced
on May 23, 1984, and was amended on May 24, 1984, and
“(iv) the distributing corporation and the distributee corporation are members of
the same affiliated group (as defined in section 1504 of such Code) which filed a
consolidated return for the taxable year which includes the date of the distribution.
If the common parent of any affiliated group filing a consolidated return meets the
requirements of clauses (ii) and (iii), each other member of such group shall be treated
as meeting such requirements.
“(B) Qualified stock.--For purposes of subparagraph (A), the term ‘qualified stock’
means any stock in a corporation which on June 15, 1984, was a member of the same
affiliated group as the distributing corporation and which filed a consolidated return
with the distributing corporation for the taxable year which included June 15, 1984.
“(5) Exception for certain distributions.--
“(A) In general.--The amendments made by this section [amending this section and sections
301 and 1223 of this title] shall not apply to distributions before February 1, 1986,
if--
“(i) the distribution consists of property held on March 7, 1984 (or property acquired
thereafter in the ordinary course of a trade or business) by--
“(I) the controlled corporation, or
“(II) any subsidiary controlled corporation,
“(ii) a group of 1 or more shareholders
(acting in concert)--
“(I) acquired, during the 1-year period ending on February 1, 1984, at least 10 percent
of the outstanding stock of the controlled corporation,
“(II) held at least 10 percent of the outstanding stock of the common parent on February
1, 1984, and
“(III) submitted a proposal for distributions of interests in a royalty trust from
the common parent or the controlled corporation, and
“(iii) the common parent acquired control of the controlled corporation during the
1-year period ending on February 1, 1984.
“(B) Definitions.--For purposes of this paragraph--
“(i) The term ‘common parent’
has the meaning given such term by section 1504(a) of the Internal Revenue Code of 1986.
“(ii) The term ‘controlled corporation’
means a corporation with respect to which 50 percent or more of the outstanding stock
of its common parent is tendered for pursuant to a tender offer outstanding on March
7, 1984.
“(iii) The term ‘subsidiary controlled corporation’ means any corporation with respect
to which the controlled corporation has control (within the meaning of section 368(c)
of such Code) on March 7, 1984.
“(6) Exception for certain distribution of partnership interests.--The amendments
made by this section shall not apply to any distribution before February 1, 1986,
of an interest in a partnership the interests of which were being traded on a national
securities exchange on March 7, 1984, if--
“(A) such interest was owned by the distributing corporation (or any member of an
affiliated group within the meaning of section 1504(a) of such Code of which the distributing
corporation was a member) on March 7, 1984,
“(B) the distributing corporation
(or any such affiliated member) owned more than 80 percent of the interests in such
partnership on March 7, 1984, and
“(C) more than 10 percent of the interests in such partnership was offered for sale
to the public during the 1-year period ending on March 7, 1984.”
Amendment by section 712(j) of Pub. L. 98-369 effective as if included in the provision of the Tax Equity and Fiscal Responsibility
Act of 1982, Pub. L. 97-248, to which such amendment relates, see section 715 of Pub. L. 98-369, set out as a note under section 31 of this title.
EFFECTIVE DATE OF 1982 AMENDMENTS; EXCEPTIONS
Section 223(b) of Pub. L. 97-248, as amended by Pub. L. 97-448, title III, 306(a)(7), Jan. 12, 1983, 96 Stat. 2402; Pub. L. 99-514, 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
“(1) In general.--Except as otherwise provided in this subsection, the amendments
made by this section [amending this section] shall apply to distributions after August
31, 1982.
“(2) Distributions pursuant to ruling requests before july 23, 1982.--In the case
of a ruling request under section 311(d)(2)(A) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as in effect before the amendments made by this section) made before July 23, 1982,
the amendments made by this section [amending this section] shall not apply to distributions
made--
“(A) pursuant to a ruling granted pursuant to such request, and
“(B) either before October 21, 1982, or within 90 days after the date of such ruling.
“(3) Distributions pursuant to final judgments of court.--In the case of a final judgment
described in section 311(d)(2)(C)
of such Code (as in effect before the amendments made by this section)
rendered before July 23, 1982, the amendments made by this section
[amending this section] shall not apply to distributions made before January 1, 1986,
pursuant to such judgment.
“(4) Certain distributions with respect to stock acquired before may 1982.--The amendments
made by this section [amending this section] shall not apply to distributions--
“(A) which meet the requirements of section 311(d)(2)(A) of such Code (as in effect
on the day before the date of the enactment of this Act [Sept. 3, 1982]),
“(B) which are made on or before August 31, 1983, and
“(C) which are made with respect to stock acquired after 1980 and before May 1982.
“(5) Distributions of timberland with respect to stock of forest products company.--If--
“(A) a forest products company distributes timberland to a shareholder in redemption
of the common and preferred stock in such corporation held by such shareholder,
“(B) section 311(d)(2)(A) of the Internal Revenue Code of 1986 (as in effect before the amendments made by this section) would have applied
to such distributions, and
“(C) such distributions are made pursuant to 1 of 2 options contained in a contract
between such company and such shareholder which is binding on August 31, 1982, and
at all times thereafter, then such distributions of timberland having an aggregate
fair market value on August 31, 1982, not in excess of $10,000,000 shall be treated
as distributions to which section 311(d)(2)(A) of such Code (as in effect before the
date of the enactment of this Act [Sept. 3, 1982] applies.”
EFFECTIVE DATE OF 1980 AMENDMENT
For effective date of amendment by Pub. L. 96-471, see section 6(a)(1) of Pub. L. 96-471, set out as an Effective Date note under section 453 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Section 703(j)(2)(C) of Pub. L. 95-600 provided that: “The amendments made by this paragraph
[amending this section] shall take effect as if included in section 2(b) of the Bank
Holding Company Tax Act of 1976 [amending this section].”
EFFECTIVE DATE OF 1976 AMENDMENTS
Amendment by section 1901(a)(42)(A), (C) of Pub. L. 94-455 effective for 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.
Section 1901(a)(42)(B)(ii) of Pub. L. 94-455 provided that: “The amendments made by clause (i) [amending this section] shall apply
only with respect to distributions after November 30, 1974.”
Section 2(d)(4) of Pub. L. 94-452 provided that: “The amendment made by subsection
(b) [amending this section] shall take effect on October 1, 1977, with respect to
distributions after December 31, 1975, in taxable years ending after December 31,
1975.”
EFFECTIVE DATE OF 1969 AMENDMENT
Section 905(c) of Pub. L. 91-172, as amended by Pub. L. 91-675, Jan. 12, 1971, 84 Stat. 2059, provided that:
“(1) Except as provided in paragraphs (2), (3),
(4), and (5), the amendments made by subsections (a) and (b) [amending sections 301,
311, and 312 of this title] shall apply with respect to distributions after November
30, 1969.
“(2) The amendments made by subsections (a) and
(b) shall not apply to a distribution before April 1, 1970, pursuant to the terms
of--
“(A) a written contract which was binding on the distributing corporation on November
30, 1969, and at all times thereafter before the distribution,
“(B) an offer made by the distributing corporation before December 1, 1969,
“(C) an offer made in accordance with a request for a ruling filed by the distributing
corporation with the Internal Revenue Service before December 1, 1969, or
“(D) an offer made in accordance with a registration statement filed with the Securities
and Exchange Commission before December 1, 1969.
For purposes of subparagraphs (B), (C), and (D), an offer shall be treated as an offer
only if it was in writing and not revocable by its express terms.
“(3) The amendments made by subsections (a) and
(b) shall not apply to a distribution by a corporation of specific property in redemption
of stock outstanding on November 30, 1969, if--
“(A) every holder of such stock on such date had the right to demand redemption of
his stock in such specific property, and
“(B) the corporation had such specific property on hand on such date in a quantity
sufficient to redeem all of such stock.
For purposes of the preceding sentence, stock shall be considered to have been outstanding
on November 30, 1969, if it could have been acquired on such date through the exercise
of an existing right of conversion contained in other stock held on such date.
“(4) The amendments made by subsections (a) and
(b) shall not apply to a distribution by a corporation of property
(held on December 1, 1969, by the distributing corporation or a corporation which
was a wholly owned subsidiary of the distributing corporation on such date) in redemption
of stock outstanding on November 30, 1969, which is redeemed and canceled before July
31, 1971, if--
“(A) such redemption is pursuant to a resolution adopted before November 1, 1969,
by the Board of Directors authorizing the redemption of a specific amount of stock
constituting more than 10 percent of the outstanding stock of the corporation at the
time of the adoption of such resolution; and
“(B) more than 40 percent of the stock authorized to be redeemed pursuant to such
resolution was redeemed before December 30, 1969, and more than one-half of the stock
so redeemed was redeemed with property other than money.
“(5) The amendments made by subsections (a) and
(b) shall not apply to a distribution of stock, by a corporation organized prior to
December 1, 1969, for the principal purpose of providing an equity participation plan
for employees of the corporation whose stock is being distributed (hereinafter referred
to as the ‘employer corporation’) if--
“(A) the stock being distributed was owned by the distributing corporation on November
30, 1969,
“(B) the stock being redeemed was acquired before January 1, 1973, pursuant to such
equity participation plan by the shareholder presenting such stock for redemption
(or by a predecessor of such shareholder),
“(C) the employment of the shareholder presenting the stock for redemption (or the
predecessor of such shareholder)
by the employer corporation commenced before January 1, 1971,
“(D) at least 90 percent in value of the assets of the distributing corporation on
November 30, 1969, consisted of common stock of the employer corporation, and
“(E) at least 50 percent of the outstanding voting stock of the employer corporation
is owned by the distributing corporation at any time within the nine-year period ending
one year before the date of such distribution.”
