I.R.C. § 5881(a) Imposition Of Tax
There is hereby imposed on any person who receives greenmail a tax equal to 50 percent
of gain or other income of such person by reason of such receipt.
I.R.C. § 5881(b) Greenmail
For purposes of this section, the term “greenmail”
means any consideration transferred by a corporation (or any person acting in concert
with such corporation) to directly or indirectly acquire stock of such corporation
from any shareholder if—
I.R.C. § 5881(b)(1)
such shareholder held such stock
(as determined under section 1223)
for less than 2 years before entering into the agreement to make the transfer,
I.R.C. § 5881(b)(2)
at some time during the 2-year period ending on the date of such acquisition—
I.R.C. § 5881(b)(2)(C)
any person who is related to such shareholder or person described in subparagraph
(B), made or threatened to make a public tender offer for stock of such corporation,
I.R.C. § 5881(b)(3)
such acquisition is pursuant to an offer which was not made on the same terms to
For purposes of the preceding sentence, payments made in connection with, or in transactions
related to, an acquisition shall be treated as paid in such acquisition.
I.R.C. § 5881(c) Other Definitions
For purposes of this section—
I.R.C. § 5881(c)(1) Public Tender Offer
The term “public tender offer” means any offer to purchase or otherwise acquire
stock or assets in a corporation if such offer was or would be required to be filed
or registered with any Federal or State agency regulating securities.
I.R.C. § 5881(c)(2) Related Person
A person is related to another person if the relationship between such persons would
result in the disallowance of losses under section 267 or
I.R.C. § 5881(d) Tax Applies Whether Or Not Amount Recognized
The tax imposed by this section shall apply whether or not the gain or other income
referred to in subsection (a) is recognized.
I.R.C. § 5881(e) Administrative Provisions
For purposes of the deficiency procedures of subtitle F, any tax imposed by this
section shall be treated as a tax imposed by subtitle A.
(Added by Pub. L. 100-203, title X, 10228(a), Dec. 22, 1987, 101 Stat. 1330-417, and amended by Pub. L. 100-647, title II, 2004(o)(1)(A), (B)(i), (C), (2), Nov. 10, 1988, 102 Stat. 3608.)
1988--Subsec. (a). Pub. L. 100-647, 2004(o)(1)(A), substituted “gain or other income of such person by reason of such
receipt” for “gain realized by such person on such receipt”.
Subsec. (b). Pub. L. 100-647, 2004(o)(1)(B)(i), substituted “a corporation
(or any person acting in concert with such corporation) to directly or indirectly
acquire stock of such corporation” for “a corporation to directly or indirectly acquire
Subsec. (d). Pub. L. 100-647, 2004(o)(1)(C), substituted “amount” for
“gain” in heading and inserted “or other income” after “the gain"
Subsec. (e). Pub. L. 100-647, 2004(o)(2), added subsec. (e).
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 2004(o)(1)(A), (C), (2) of Pub. L. 100-647 effective, except as otherwise provided, as if included in the provisions of the
Revenue Act of 1987, Pub. L. 100-203, title X, to which such amendment relates, see section 2004(u) of Pub. L. 100-647, set out as a note under section 56 of this title.
Section 2004(o)(1)(B)(ii) of Pub. L. 100-647 provided that: “The amendment made by clause (i) [amending this section] shall apply
to transactions occurring on or after March 31, 1988.”
Section 10228(d) of Pub. L. 100-203 provided that: “The amendments made by this section [enacting this chapter and amending
section 275 of this title] shall apply to consideration received after the date of
the enactment of this Act [Dec. 22, 1987] in taxable years ending after such date;
except that such amendments shall not apply in the case of any acquisition pursuant
to a written binding contract in effect on December 15, 1987, and at all times thereafter
before the acquisition.”