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Internal Revenue Code, § 332. Complete Liquidations Of Subsidiaries

I.R.C. § 332(a) General Rule
No gain or loss shall be recognized on the receipt by a corporation of property distributed in complete liquidation of another corporation.
I.R.C. § 332(b) Liquidations To Which Section Applies
For purposes of this section, a distribution shall be considered to be in complete liquidation only if—
I.R.C. § 332(b)(1)
the corporation receiving such property was, on the date of the adoption of the plan of liquidation, and has continued to be at all times until the receipt of the property, the owner of stock (in such other corporation) meeting the requirements of section 1504(a)(2); and either
I.R.C. § 332(b)(2)
the distribution is by such other corporation in complete cancellation or redemption of all its stock, and the transfer of all the property occurs within the taxable year; in such case the adoption by the shareholders of the resolution under which is authorized the distribution of all the assets of such corporation in complete cancellation or redemption of all its stock shall be considered an adoption of a plan of liquidation, even though no time for the completion of the transfer of the property is specified in such resolution; or
I.R.C. § 332(b)(3)
such distribution is one of a series of distributions by such other corporation in complete cancellation or redemption of all its stock in accordance with a plan of liquidation under which the transfer of all the property under the liquidation is to be completed within 3 years from the close of the taxable year during which is made the first of the series of distributions under the plan, except that if such transfer is not completed within such period, or if the taxpayer does not continue qualified under paragraph (1) until the completion of such transfer, no distribution under the plan shall be considered a distribution in complete liquidation.
If such transfer of all the property does not occur within the taxable year, the Secretary may require of the taxpayer such bond, or waiver of the statute of limitations on assessment and collection, or both, as he may deem necessary to insure, if the transfer of the property is not completed within such 3-year period, or if the taxpayer does not continue qualified under paragraph (1) until the completion of such transfer, the assessment and collection of all income taxes then imposed by law for such taxable year or subsequent taxable years, to the extent attributable to property so received. A distribution otherwise constituting a distribution in complete liquidation within the meaning of this subsection shall not be considered as not constituting such a distribution merely because it does not constitute a distribution or liquidation within the meaning of the corporate law under which the distribution is made; and for purposes of this subsection a transfer of property of such other corporation to the taxpayer shall not be considered as not constituting a distribution (or one of a series of distributions) in complete cancellation or redemption of all the stock of such other corporation, merely because the carrying out of the plan involves (A) the transfer under the plan to the taxpayer by such other corporation of property, not attributable to shares owned by the taxpayer, on an exchange described in section 361, and (B) the complete cancellation or redemption under the plan, as a result of exchanges described in section 354, of the shares not owned by the taxpayer.
I.R.C. § 332(c) Deductible Liquidating Distributions Of Regulated Investment Companies And Real Estate Investment Trusts
If a corporation receives a distribution from a regulated investment company or a real estate investment trust which is considered under subsection (b) as being in complete liquidation of such company or trust, then, notwithstanding any other provision of this chapter, such corporation shall recognize and treat as a dividend from such company or trust an amount equal to the deduction for dividends paid allowable to such company or trust by reason of such distribution.
I.R.C. § 332(d) Recognition Of Gain On Liquidation Of Certain Holding Companies
I.R.C. § 332(d)(1) In General
In the case of any distribution to a foreign corporation in complete liquidation of an applicable holding company—
I.R.C. § 332(d)(1)(A)
subsection (a) and section 331 shall not apply to such distribution, and
I.R.C. § 332(d)(1)(B)
such distribution shall be treated as a distribution of property to which section 301 applies.
I.R.C. § 332(d)(2) Applicable Holding Company
For purposes of this subsection:
I.R.C. § 332(d)(2)(A) In General
The term “applicable holding company” means any domestic corporation—
I.R.C. § 332(d)(2)(A)(i)
which is a common parent of an affiliated group,
I.R.C. § 332(d)(2)(A)(ii)
stock of which is directly owned by the distributee foreign corporation,
I.R.C. § 332(d)(2)(A)(iii)
substantially all of the assets of which consist of stock in other members of such affiliated group, and
I.R.C. § 332(d)(2)(A)(iv)
which has not been in existence at all times during the 5 years immediately preceding the date of the liquidation.
I.R.C. § 332(d)(2)(B) Affiliated Group
For purposes of this subsection, the term “affiliated group” has the meaning given such term by section 1504(a) (without regard to paragraph (2) of section 1504(b)).
I.R.C. § 332(d)(3) Coordination With Subpart F
If the distributee of a distribution described in paragraph (1) is a controlled foreign corporation (as defined in section 957), then notwithstanding paragraph (1) or subsection (a), such distribution shall be treated as a distribution to which section 331 applies.
I.R.C. § 332(d)(4) Regulations
The Secretary shall provide such regulations as appropriate to prevent the abuse of this subsection, including regulations which provide, for the purposes of clause (iv) of paragraph (2)(A), that a corporation is not in existence for any period unless it is engaged in the active conduct of a trade or business or owns a significant ownership interest in another corporation so engaged.
(Aug. 16, 1954, ch. 736, 68A Stat. 102; Oct. 4, 1976, Pub. L. 94-455, title XIX, 1906(b)(13)(A), 90 Stat. 1834; Oct. 22, 1986, Pub. L. 99-514, title VI, 631(e)(2), title XVIII, 1804(e)(6)(A), 100 Stat. 2273, 2803; Pub. L. 105-277, title III, Sec. 3001(a), 3001(b)(1), Oct. 21, 1998, 112 Stat 2681; Pub. L. 108-357, title VIII, Sec. 893(a), Oct. 22, 2004, 118 Stat. 1418; Pub. L. 109-135, title IV, Sec. 412(v), Dec. 21, 2005, 119 Stat. 2577; Pub. L. 115-141, Div. U, title IV, Sec. 401(d)(1)(D)(xvii)(III), Mar. 23, 2018, 132 Stat. 348.)
BACKGROUND NOTES
AMENDMENTS
2018 — Subsec. (d)(2)(B). Pub. L. 115-141, Div. U, Sec. 401(d)(1)(D)(xvii)(III), amended subpar. (B) by substituting “paragraph (2)” for “paragraphs (2) and (4)”.
2005—Subsec. (d)(1)(B). Pub. L. 109-135, Sec. 412(v), amended subpar. (B) by substituting “distribution of property to which section 301 applies” for “distribution to which section 301 applies”.
2004 --Subsec. (d). Pub. L. 108-357, Sec. 893(a), added subsec. (d).
1998--Subsec. (b). Pub. L. 105-277, Sec. 3001(b)(1), amended the material preceding par. (1) by substituting “this section" for “subsection (a)”.
Subsec. (c). Pub. L. 105-277, Sec. 3001(a), added subsec. (c).
1986--Subsec. (b)(1). Pub. L. 99-514, 1804(e)(6)(A), amended par. (1) generally. Prior to amendment, par. (1) read as follows: “the corporation receiving such property was, on the date of the adoption of the plan of liquidation, and has continued to be at all times until the receipt of the property, the owner of stock (in such other corporation) possessing at least 80 percent of the total combined voting power of all classes of stock entitled to vote and the owner of at least 80 percent of the total number of shares of all other classes of stock (except nonvoting stock which is limited and preferred as to dividends); and either”.
Subsec. (c). Pub. L. 99-514, 631(e)(2), struck out subsec. (c) containing special rule for indebtedness of subsidiary to parent in relation to complete liquidations of subsidiaries.
1976--Subsec. (b). Pub. L. 94-455 struck out “or his delegate" after “Secretary”.
EFFECTIVE DATE OF 2018 AMENDMENT
Amendment by section 401(d) of Pub. L. 115-141, Div. U, effective on March 23, 2018.
Sec. 401(e) of Pub. L. 115-141, Div. U, provided the following Savings Provision:
“(e) General Savings Provision With Respect To Deadwood Provisions.—If—
“(1) any provision amended or repealed by the amendments made by subsection (b) or (d) applied to—
“(A) any transaction occurring before the date of the enactment of this Act,
“(B) any property acquired before such date of enactment, or
“(C) any item of income, loss, deduction, or credit taken into account before such date of enactment, and
“(2) the treatment of such transaction, property, or item under such provision would (without regard to the amendments or repeals made by such subsection) affect the liability for tax for periods ending after such 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 2005 AMENDMENT
Amendment by section 412(v) of Pub. L. 109-135 applicable on the date of the enactment of this Act [Enacted: Dec. 21, 2005].
EFFECTIVE DATE OF 2004 AMENDMENTS
Amendment by section 893(a) of Pub. L. 108-357 applicable to distributions in complete liquidation occurring on or after the date of the enactment of this Act [Oct. 22, 2004].
EFFECTIVE DATE OF 1998 AMENDMENTS
Amendments by Section 3001 of Pub. L. 105-277 applicable to distributions after May 21, 1998.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 631(e)(2) of 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.
Section 1804(e)(6)(B) of Pub. L. 99-514 provided that:
“(i) In general.--Except as provided in clause (iii), the amendment made by subparagraph (A) [amending this section] shall apply with respect to plans of complete liquidation adopted after March 28, 1985.
“(ii) Certain distributions made after december 31, 1984.--Except as provided in clause (iii), the amendment made by subparagraph (A) shall also apply with respect to plans of complete liquidations adopted on or before March 28, 1985, pursuant to which any distribution is made in a taxable year beginning after December 31, 1984 (December 31, 1983, in the case of an affiliated group to which an election under section 60(b)(7) of the Tax Reform Act of 1984 [Pub. L. 98-369, set out as a note under section 1504 of this title] applies), but only if the liquidating corporation and any corporation which receives a distribution in complete liquidation of such corporation are members of an affiliated group of corporations filing a consolidated return for the taxable year which includes the date of the distribution.
“(iii) Transitional rule for affiliated groups.--The amendment made by subparagraph (A) shall not apply with respect to plans of complete liquidation if the liquidating corporation is a member of an affiliated group of corporations under section 60(b) (2), (5), (6), or (8) of the Tax Reform Act of 1984 [Pub. L. 98-369, set out as a note under section 1504 of this title], for all taxable years which include the date of any distribution pursuant to such plan.”
[333. Repealed. Pub. L. 99-514, title VI, 631(e)(3), Oct. 22, 1986, 100 Stat. 2273]
Section, acts Aug. 16, 1954, ch. 736, 68A Stat. 103; Feb. 26, 1964, Pub. L. 88-272, title II, 225(g), 78 Stat. 89; Oct. 4, 1976, Pub. L. 94-455, title XIX, 1901(a)(44), 1906(b)(13)(A), 1951(b)(6)(A), 90 Stat. 1772, 1834, 1838, related to election as to recognition of gain in certain liquidations.
Effective Date of Repeal
Repeal 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.