Title 26 — Internal Revenue Code
Part II · Chapter 1 — Normal Taxes and Surtaxes
§ 338. Certain stock purchases treated as asset acquisitions
Statutory text
General rule
For purposes of this subtitle, if a purchasing corporation makes an election under this section (or is treated under subsection (e) as having made such an election), then, in the case of any qualified stock purchase, the target corporation—
shall be treated as having sold all of its assets at the close of the acquisition date at fair market value in a single transaction, and
shall be treated as a new corporation which purchased all of the assets referred to in paragraph (1) as of the beginning of the day after the acquisition date.
Basis of assets after deemed purchase
In general
For purposes of subsection (a), the assets of the target corporation shall be treated as purchased for an amount equal to the sum of—
the grossed-up basis of the purchasing corporation’s recently purchased stock, and
the basis of the purchasing corporation’s nonrecently purchased stock.
Adjustment for liabilities and other relevant items
The amount described in paragraph (1) shall be adjusted under regulations prescribed by the Secretary for liabilities of the target corporation and other relevant items.
Election to step-up the basis of certain target stock
In general
Under regulations prescribed by the Secretary, the basis of the purchasing corporation’s nonrecently purchased stock shall be the basis amount determined under subparagraph (B) of this paragraph if the purchasing corporation makes an election to recognize gain as if such stock were sold on the acquisition date for an amount equal to the basis amount determined under subparagraph (B).
Determination of basis amount
For purposes of subparagraph (A), the basis amount determined under this subparagraph shall be an amount equal to the grossed-up basis determined under subparagraph (A) of paragraph (1) multiplied by a fraction—
the numerator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and
the denominator of which is 100 percent minus the percentage referred to in clause (i).
Grossed-up basis
For purposes of paragraph (1), the grossed-up basis shall be an amount equal to the basis of the corporation’s recently purchased stock, multiplied by a fraction—
the numerator of which is 100 percent, minus the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and
the denominator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s recently purchased stock.
Allocation among assets
The amount determined under paragraphs (1) and (2) shall be allocated among the assets of the target corporation under regulations prescribed by the Secretary.
Definitions of recently purchased stock and nonrecently purchased stock
For purposes of this subsection—
Recently purchased stock
The term “recently purchased stock” means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which was purchased by such corporation during the 12-month acquisition period.
Nonrecently purchased stock
The term “nonrecently purchased stock” means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which is not recently purchased stock.
[(c) Repealed. Pub. L. 99–514, title VI, § 631(b)(2), , 100 Stat. 2272]
Purchasing corporation; target corporation; qualified stock purchase
For purposes of this section—
Purchasing corporation
The term “purchasing corporation” means any corporation which makes a qualified stock purchase of stock of another corporation.
Target corporation
The term “target corporation” means any corporation the stock of which is acquired by another corporation in a qualified stock purchase.
Qualified stock purchase
The term “qualified stock purchase” means any transaction or series of transactions in which stock (meeting the requirements of section 1504(a)(2)) of 1 corporation is acquired by another corporation by purchase during the 12-month acquisition period.
Deemed election where purchasing corporation acquires asset of target corporation
In general
A purchasing corporation shall be treated as having made an election under this section with respect to any target corporation if, at any time during the consistency period, it acquires any asset of the target corporation (or a target affiliate).
Exceptions
Paragraph (1) shall not apply with respect to any acquisition by the purchasing corporation if—
such acquisition is pursuant to a sale by the target corporation (or the target affiliate) in the ordinary course of its trade or business,
the basis of the property acquired is determined wholly by reference to the adjusted basis of such property in the hands of the person from whom acquired,
such acquisition was before , or
such acquisition is described in regulations prescribed by the Secretary and meets such conditions as such regulations may provide.
Anti-avoidance rule
Whenever necessary to carry out the purpose of this subsection and subsection (f), the Secretary may treat stock acquisitions which are pursuant to a plan and which meet the requirements of section 1504(a)(2) as qualified stock purchases.
Consistency required for all stock acquisitions from same affiliated group
If a purchasing corporation makes qualified stock purchases with respect to the target corporation and 1 or more target affiliates during any consistency period, then (except as otherwise provided in subsection (e))—
any election under this section with respect to the first such purchase shall apply to each other such purchase, and
no election may be made under this section with respect to the second or subsequent such purchase if such an election was not made with respect to the first such purchase.
Election
When made
Except as otherwise provided in regulations, an election under this section shall be made not later than the 15th day of the 9th month beginning after the month in which the acquisition date occurs.
Manner
An election by the purchasing corporation under this section shall be made in such manner as the Secretary shall by regulations prescribe.
Election irrevocable
An election by a purchasing corporation under this section, once made, shall be irrevocable.
Definitions and special rules
For purposes of this section—
12-month acquisition period
The term “12-month acquisition period” means the 12-month period beginning with the date of the first acquisition by purchase of stock included in a qualified stock purchase (or, if any of such stock was acquired in an acquisition which is a purchase by reason of subparagraph (C) of paragraph (3), the date on which the acquiring corporation is first considered under section 318(a) (other than paragraph (4) thereof) as owning stock owned by the corporation from which such acquisition was made).
Acquisition date
The term “acquisition date” means, with respect to any corporation, the first day on which there is a qualified stock purchase with respect to the stock of such corporation.
Purchase
In general
The term “purchase” means any acquisition of stock, but only if—
the basis of the stock in the hands of the purchasing corporation is not determined (I) in whole or in part by reference to the adjusted basis of such stock in the hands of the person from whom acquired, or (II) under section 1014(a) (relating to property acquired from a decedent),
the stock is not acquired in an exchange to which section 351, 354, 355, or 356 applies and is not acquired in any other transaction described in regulations in which the transferor does not recognize the entire amount of the gain or loss realized on the transaction, and
the stock is not acquired from a person the ownership of whose stock would, under section 318(a) (other than paragraph (4) thereof), be attributed to the person acquiring such stock.
Deemed purchase under subsection (a)
The term “purchase” includes any deemed purchase under subsection (a)(2). The acquisition date for a corporation which is deemed purchased under subsection (a)(2) shall be determined under regulations prescribed by the Secretary.
Certain stock acquisitions from related corporations
In general
Clause (iii) of subparagraph (A) shall not apply to an acquisition of stock from a related corporation if at least 50 percent in value of the stock of such related corporation was acquired by purchase (within the meaning of subparagraphs (A) and (B)).
Certain distributions
Clause (i) of subparagraph (A) shall not apply to an acquisition of stock described in clause (i) of this subparagraph if the corporation acquiring such stock—
made a qualified stock purchase of stock of the related corporation, and
made an election under this section (or is treated under subsection (e) as having made such an election) with respect to such qualified stock purchase.
Related corporation defined
For purposes of this subparagraph, a corporation is a related corporation if stock owned by such corporation is treated (under section 318(a) other than paragraph (4) thereof) as owned by the corporation acquiring the stock.
Consistency period
In general
Except as provided in subparagraph (B), the term “consistency period” means the period consisting of—
the 1-year period before the beginning of the 12-month acquisition period for the target corporation,
such acquisition period (up to and including the acquisition date), and
the 1-year period beginning on the day after the acquisition date.
Extension where there is plan
The period referred to in subparagraph (A) shall also include any period during which the Secretary determines that there was in effect a plan to make a qualified stock purchase plus 1 or more other qualified stock purchases (or asset acquisitions described in subsection (e)) with respect to the target corporation or any target affiliate.
Affiliated group
The term “affiliated group” has the meaning given to such term by section 1504(a) (determined without regard to the exceptions contained in section 1504(b)).
Target affiliate
In general
A corporation shall be treated as a target affiliate of the target corporation if each of such corporations was, at any time during so much of the consistency period as ends on the acquisition date of the target corporation, a member of an affiliated group which had the same common parent.
Certain foreign corporations, etc.
Except as otherwise provided in regulations (and subject to such conditions as may be provided in regulations)—
the term “target affiliate” does not include a foreign corporation or a DISC, and
stock held by a target affiliate in a foreign corporation or a domestic corporation which is a DISC or described in section 1248(e) shall be excluded from the operation of this section.
[(7) Repealed. Pub. L. 100–647, title I, § 1006(e)(20), , 102 Stat. 3403]
Acquisitions by affiliated group treated as made by 1 corporation
Except as provided in regulations prescribed by the Secretary, stock and asset acquisitions made by members of the same affiliated group shall be treated as made by 1 corporation.
Target not treated as member of affiliated group
Except as otherwise provided in paragraph (10) or in regulations prescribed under this paragraph, the target corporation shall not be treated as a member of an affiliated group with respect to the sale described in subsection (a)(1).
Elective recognition of gain or loss by target corporation, together with nonrecognition of gain or loss on stock sold by selling consolidated group
In general
Under regulations prescribed by the Secretary, an election may be made under which if—
the target corporation was, before the transaction, a member of the selling consolidated group, and
the target corporation recognizes gain or loss with respect to the transaction as if it sold all of its assets in a single transaction,
then the target corporation shall be treated as a member of the selling consolidated group with respect to such sale, and (to the extent provided in regulations) no gain or loss will be recognized on stock sold or exchanged in the transaction by members of the selling consolidated group.
Selling consolidated group
For purposes of subparagraph (A), the term “selling consolidated group” means any group of corporations which (for the taxable period which includes the transaction)—
includes the target corporation, and
files a consolidated return.
To the extent provided in regulations, such term also includes any affiliated group of corporations which includes the target corporation (whether or not such group files a consolidated return).
Information required to be furnished to the Secretary
Under regulations, where an election is made under subparagraph (A), the purchasing corporation and the common parent of the selling consolidated group shall, at such times and in such manner as may be provided in regulations, furnish to the Secretary the following information:
The amount allocated under subsection (b)(5) to goodwill or going concern value.
Any modification of the amount described in clause (i).
Any other information as the Secretary deems necessary to carry out the provisions of this paragraph.
Elective formula for determining fair market value
For purposes of subsection (a)(1), fair market value may be determined on the basis of a formula provided in regulations prescribed by the Secretary which takes into account liabilities and other relevant items.
[(12) Repealed. Pub. L. 99–514, title VI, § 631(e)(5), , 100 Stat. 2273]
Tax on deemed sale not taken into account for estimated tax purposes
For purposes of section 6655, tax attributable to the sale described in subsection (a)(1) shall not be taken into account. The preceding sentence shall not apply with respect to a qualified stock purchase for which an election is made under paragraph (10).
[(14) Repealed. Pub. L. 108–27, title III, § 302(e)(4)(B)(i), , 117 Stat. 763]
Combined deemed sale return
Under regulations prescribed by the Secretary, a combined deemed sale return may be filed by all target corporations acquired by a purchasing corporation on the same acquisition date if such target corporations were members of the same selling consolidated group (as defined in subparagraph (B) of paragraph (10)).
Coordination with foreign tax credit provisions
Except as provided in regulations, this section shall not apply for purposes of determining the source or character of any item for purposes of subpart A of part III of subchapter N of this chapter (relating to foreign tax credit). The preceding sentence shall not apply to any gain to the extent such gain is includible in gross income as a dividend under section 1248 (determined without regard to any deemed sale under this section by a foreign corporation).
Regulations
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including—
regulations to ensure that the purpose of this section to require consistency of treatment of stock and asset sales and purchases may not be circumvented through the use of any provision of law or regulations (including the consolidated return regulations) and
regulations providing for the coordination of the provisions of this section with the provision of this title relating to foreign corporations and their shareholders.
Legislative history
Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.
Pub. L. 97–248 title II § 224(a) · 96 Stat. 324
Enacted · 26 U.S.C. § 338
Added Pub. L. 97–248, title II, § 224(a), Sept. 3, 1982, 96 Stat. 485
Source evidence
Code source credit
Added Pub. L. 97–248, title II, § 224(a), Sept. 3, 1982, 96 Stat. 485Enacted provision · exact public law section
(a) General Rule.— Subpart B of part II of subchapter C of chapter 1 (relating to effects on corporation) is amended by adding at the end thereof the following new section: “SEC. 338. CERTAIN STOCK PURCHASES TREATED AS ASSET ACQUISITIONS. “(a) General Rule.— For purposes of this subtitle, if a purchasing corporation makes an election under this section (or is treated under subsection (e) as having made such an election), then, in the case of any qualified stock purchase, the target corporation— “(1) shall be treated as having sold all of its assets at the close of the acquisition date in a single transaction to which section 337 applies, and “(2) shall be treated as a new corporation which purchased all of the assets referred to in paragraph (1) as of the beginning of the day after the acquisition date. “(b) Price at Which Deemed Sale Made.— “(1) In general.— For purposes of subsection (a), the assets of the target corporation shall be treated as sold (and purchased) at an amount equal to— “(A) the grossed-up basis of the purchasing corporation’s stock in the target corporation on the acquisition date, “(B) properly adjusted under regulations prescribed by the Secretary for liabilities of the target corporation and other relevant items. “(2) Grossed-up basis.— For purposes of paragraph (1), the grossed-up basis shall be an amount equal to the basis of the purchasing corporation’s stock in the target corporation on the acquisition date multiplied by a fraction— “(A) the numerator of which is 100 percent, and “(B) the denominator of which is the percentage of stock (by value) of the target corporation held by the purchasing corporation on the acquisition date. “(3) Allocation among assets.— The amount determined under paragraph (1) shall be allocated among the assets of the target corporation under regulations prescribed by the Secretary “(c) Special Rules.— “(1) Coordination with section 337 where purchasing corporation holds less than 100 percent of stock.— If during the 1-year period beginning on the acquisition date the maximum percentage (by value) of stock in the target corporation held by the purchasing corporation is less than 100 percent, then in applying section 337 for purposes of subsection (a)(1), the non-recognition of gain or loss shall be limited to an amount determined by applying such maximum percentage to such gain or loss. The preceding sentence shall not apply if the target corporation is liquidated during such 1-year period. “(2) Certain redemptions where election made.— If, in connection with a qualified stock purchase with respect to which an election is made under this section, the target corporation makes a distribution in complete redemption of all of the stock of a shareholder which qualifies under section 302(b)(3) (determined 26 USC 302. without regard to the application of section 302(c)(2)(A)(ii)), section 336 shall apply to such distribution as if it were a distribution in complete liquidation. “(d) Purchasing Corporation; Target Corporation; Qualified Stock Purchase.— For purposes of this section— “(1) Purchasing corporation.— The term ‘purchasing corporation’ means any corporation which makes a qualified stock purchase of stock of another corporation. “(2) Target corporation.— The term ‘target corporation’ means any corporation the stock of which is acquired by another corporation in a qualified stock purchase. “(3) Qualified stock purchase.— The term ‘qualified stock purchase’ means any transaction or series of transactions in which stock of 1 corporation possessing— “(A) at least 80 percent of total combined voting power of all classes of stock entitled to vote, and “(B) 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), is acquired by another corporation by purchase during the 12-month acquisition period. “(e) Deemed Election Where Purchasing Corporation Acquires Asset of Target Corporation.— “(1) In general.— A purchasing corporation shall be treated as having made an election under this section with respect to any target corporation if, at any time during the consistency period, it acquires any asset of the target corporation (or a target affiliate). “(2) Exceptions.— Paragraph (1) shall not apply with respect to any acquisition by the purchasing corporation if— “(A) such acquisition is pursuant to a sale by the target corporation (or the target affiliate) in the ordinary course of its trade or business, “(B) the basis of the property acquired is determined (in whole or in part) by reference to the adjusted basis of such property in the hands of the person from whom acquired, “(C) such acquisition was before September, 1, 1982, “(D) to the extent provided in regulations, the property acquired is located outside the United States, or “(E) such acquisition is described in regulations prescribed by the Secretary. “(3) Anti-avoidance rule.— Whenever necessary to carry out the purpose of this subsection and subsection (f), the Secretary may treat stock acquisitions which are pursuant to a plan and which meet the 80 percent requirements of subparagraphs (A) and (B) of subsection (d)(3) as qualified stock purchases. “(f) Consistency Required for All Stock Acquisitions from Same Affiliated Group.— If a purchasing corporation makes qualified stock purchases with respect to the target corporation and 1 or more target affiliates during any consistency period, then (except as otherwise provided in subsection (e))— “(1) any election under this section with respect to the first such purchase shall apply to each other such purchase, and “(2) no election may be made under this section with respect to the second or subsequent such purchase if such an election was not made with respect to the first such purchase. “(g) Election.— “(1) When made.— Except as otherwise provided in regulations, an election under this section shall be made not later than 75 days after the acquisition date. “(2) Manner.— An election by the purchasing corporation under this section shall be made in such manner as the Secretary shall by regulations prescribe. “(3) Election irrevocable.— An election by a purchasing corporation under this section, once made, shall be irrevocable. “(h) Definitions and Special Rules.— For purposes of this section— “(1) 12-month acquisition period.— The term ‘12-month acquisition period’ means the 12-month period beginning with the date of the first acquisition by purchase of stock included in a qualified stock purchase. “(2) Acquisition date.— The term ‘acquisition date’ means, with respect to any corporation, the first day on which there is a qualified stock purchase with respect to the stock of such corporation. “(3) Purchase.— “(A) In general.— The term ‘purchase’ means any acquisition of stock, but only if— “(i) the basis of the stock in the hands of the purchasing corporation is not determined (I) in whole or in part by reference to the adjusted basis of such stock in the hands of the person from whom acquired, or (II) under section 1014(a) (relating to property acquired from a 26 USC 1014. decedent), “(ii) the stock is not acquired in an exchange to which section 351 applies, and “(iii) the stock is not acquired from a person the ownership of whose stock would, under section 318(a) (other than paragaraph (4) thereof), be attributed to the person acquiring such stock. “(B) Deemed purchase of stock of subsidiaries.— If stock in a corporation is acquired by purchase (within the meaning of subparagraph (A)) and, as a result of such acquisition, the corporation making such purchase is treated (by reason of section 318(a)) as owning stock in a 3rd corporation, the corporation making such purchase shall be treated as having purchased such stock in such 3rd corporation. The corporation making such purchase shall be treated as purchasing stock in the 3rd corporation by reason of the preceding sentence on the first day on which the purchasing corporation is considered under section 318(a) as owning such stock. “(4) Consistency period.— “(A) In general.— Except as provided in subparagraph (B), the term ‘consistency period’ means the period consisting of— “(i) the 1-year period before the beginning of the 12-month acquisition period for the target corporation, “(ii) such acquisition period (up to and including the acquisition date), and “(iii) the 1-year period beginning on the day after the acquisition date. “(B) Extension where there is plan.— The period referred to in subparagraph (A) shall also include any period during which the Secretary determines that there was in effect a plan to make a qualified stock purchase plus 1 or more other qualified stock purchases (or asset acquisitions described in subsection (e)) with respect to the target corporation or any target affiliate. “(5) Affiliated group.— The term ‘affiliated group’ has the meaning given to such term by section 1504(a) (determined 26 USC 1504. without regard to the exceptions contained in section 1504(b)). “(6) Target affiliate.— “(A) In general.— A corporation shall be treated as a target affiliate of the target corporation if each of such corporations was, at any time during so much of the consistency period as ends on the acquisition date of the target corporation, a member of an affiliated group which had the same common parent. “(B) Certain foreign corporations, etc.— Except as otherwise provided in regulations (and subject to such conditions as may be provided in regulations)— “(i) the term ‘target affiliate’ does not include a foreign corporation, a DISC, a corporation described in section 934(b), or a corporation to which an election under section 936 applies, and “(ii) stock held by a target affiliate in a foreign corporation or a domestic corporation which is a DISC or described in section 1248(e) shall be excluded from the operation of this section. “(7) Acquisitions by purchasing corporation include acquisitions by corporations affiliated with purchasing corporation.— Except as otherwise provided in regulations, an acquisition of stock or assets by any member of an affiliated group which includes a purchasing corporation shall be treated as made by the purchasing corporation. “(i) Regulations.— The Secretary shall prescribe such regulations as may be necessary to ensure that the purposes of this section to require consistency of treatment of stock and asset purchases with respect to a target corporation and its target affiliates (whether by treating all of them as stock purchases or as asset purchases) may not be circumvented through the use of any provision of law or regulations (including the consolidated return regulations).” (b) Repeal of Section 334(b)(2).— Subsection (b) of section 334 26 USC 334. (relating to limitation of subsidiary) is amended to read as follows: “(b) Liquidation of Subsidiary.— “(1) Distribution in complete liquidation.— If property is received by a corporation in a distribution in a complete liquidation to which section 332(a) applies, the basis of the property in the hands of the distributee shall be the same as it would be in the hands of the transferor. “(2) Transfers to which section 332 (c) applies.— If property is received by a corporation in a transfer to which section 332(c) applies, the basis of the property in the hands of the transferee shall be the same as it would be in the hands of the transferor. “(3) Distributee defined.— For purposes of this subsection, the term ‘distributee’ means only the corporation which meets the 80-percent stock ownership requirements specified in section 332(b).” (c) Technical Amendments.— (1) Subparagraph (E) of section 168(e)(4) (relating to liquidation 95 Stat. 204. of subsidiary, etc.) is amended by adding at the end thereof the following new sentence: “A similar rule shall apply in the case of a deemed liquidation under section 338.” (2) Clause (i) of section 168(f)(10)(B) is amended by striking out “(other than a transaction with respect to which the basis is determined under section 334(b)(2))”. (3) Paragraph (4) of section 318(b) is amended to read as 26 USC 318. follows: “(4) section 338(h)(3)(B) (relating to purchase of stock from subsidiaries, etc.);”. (4) Paragraph (2) of section 336(b) is amended by striking out 26 USC 336. “334(b)(1)” each place it appears and inserting in lieu thereof “334(b)”. (5) Paragraph (2) of section 337(c) (relating to liquidations to 26 USC 337. which section 332 applies) is amended to read as follows: “(2) Liquidations to which section 332 applies.— In the case of any sale or exchange following the adoption of a plan of complete liquidation, if section 332 applies with respect to such liquidation, this section shall not apply.” (6) Subsection (d) of section 337 is amended by striking out “subsection (c)(2)(A)” each place it appears and inserting in lieu thereof “subsection (c)(2)”. (7) Paragraph (1) of section 381(a) is amended by striking out 26 USC 381. “, except in a case in which the basis of the assets distributed is determined under section 334(b)(2)”. (8) Subparagraph (B) of section 617(h)(3) is amended by inserting 26 USC 617. “338,” after “334(b),”. (9) The table of sections for subpart B of part II of subchapter C of chapter 1 is amended by striking out the item relating to section 338 and inserting in lieu thereof the following: “Sec. 338. Certain stock purchases treated as asset acquisitions.” (d) Effective Dates.— (1) In general.— The amendments made by this section shall apply to any target corporation (within the meaning of section 338 of the Internal Revenue Code of 1954 as added by this section) with respect to which the acquisition date (within the meaning of such section) occurs after August 31, 1982. (2) Certain acquisitions before september 1, 1982.— If— (A) an acquisition date under paragraph (1) occurred after August 31, 1980, and before September 1, 1982, (B) the target corporation (within the meaning of section 338 of such Code) is not liquidated before September 1, 1982, and (C) the purchasing corporation (within the meaning of section 338 of such Code) makes, not later than November 15, 1982, an election under section 338 of such Code, then the amendments made by this section shall apply to the acquisition of such target corporation. (3) Certain acquisitions of financial institutions.— In any case in which— (A) there is, on July 22, 1982, a binding contract to acquire control (within the meaning of section 368(c) of such Code) of any financial institution, (B) the approval of one or more regulatory authorities is required in order to complete such acquisition, and (C) within 90 days after the date of the final approval of the last such regulatory authority granting final approval, a plan of complete liquidation of such financial institution is adopted, then the purchasing corporation may elect not to have the amendments made by this section apply to the acquisition pursuant to such contract.Pub. L. 97–448 title III § 306(a)(8)(A)(i) · 96 Stat. 2365
Added · 26 U.S.C. § 338(h)(8); 26 U.S.C. § 338(h)(9)
Pub. L. 97–448 added pars. (8) and (9)
Source evidence
Code amendment note
Subsec. (h)(8), (9). Pub. L. 97–448 added pars. (8) and (9).Enacted provision · exact public law section
(i) Subsection (h) of section 338 (relating to definitions and special rules) is amended by adding at the end thereof the following new paragraphs: “(8) Target not treated as member of affiliated group.— Except as otherwise provided in paragraph (9) or in regulations prescribed under this paragraph, the target corporation shall not be treated as a member of an affiliated group with respect to the sale described in subsection (a)(1). “(9) Elective recognition of gain or loss by target corporation, together with nonrecognition of gain or loss on stock sold by selling consolidated group.— “(A) In general.— Under regulations prescribed by the Secretary, an election may be made under which if— “(i) the target corporation was, before the transaction, a member of the selling consolidated group, and “(ii) the target corporation recognizes gain or loss with respect to the transaction as if it sold all of its assets in a single transaction, then the target corporation shall be treated as a member of the selling consolidated group with respect to such sale, and (to the extent provided in regulations) no gain or loss will be recognized on stock sold or exchanged in the transaction by members of the selling consolidated group. “(B) Selling consolidated group.— For purposes of subparagraph (A), the term ‘selling consolidated group’ means any group of corporations which (for the taxable period which includes the transaction)— “(i) includes the target corporation, and “(ii) files a consolidated return.”Tax Reform Act of 1984
Pub. L. 98–369 § 712(k)(1)(A) · 98 Stat. 494
Inserted · 26 U.S.C. § 338(a)(1)
Pub. L. 98–369, § 712(k)(1)(A), inserted “at fair market value” after “acquisition date”
Source evidence
Code amendment note
Subsec. (a)(1). Pub. L. 98–369, § 712(k)(1)(A), inserted “at fair market value” after “acquisition date”.Enacted provision · exact public law section
(A) In general.— Paragraph (1) of section 338(a) (relating to general rule) is amended by inserting “at fair market value” after “acquisition date”.Tax Reform Act of 1984
Pub. L. 98–369 § 712(k)(1)(B) · 98 Stat. 494
Substituted · 26 U.S.C. § 338(b)
Pub. L. 98–369, § 712(k)(1)(B), substituted “Basis of assets after deemed purchase” for “Price at which deemed sale made” in heading
Source evidence
Code amendment note
Subsec. (b). Pub. L. 98–369, § 712(k)(1)(B), substituted “Basis of assets after deemed purchase” for “Price at which deemed sale made” in heading.Enacted provision · exact public law section
(B) Basis of assets after deemed purchase.— Subsection (b) of section 338 (relating to price at which deemed sale made) is amended to read as follows: “(b) Basis of Assets After Deemed Purchase.— “(1) In general.— For purposes of subsection (a), the assets of the target corporation shall be treated as purchased for an amount equal to the sum of— “(A) the grossed-up basis of the purchasing corporation’s recently purchased stock, and “(B) the basis of the purchasing corporation’s nonrecently purchased stock. “(2) Adjustment for liabilities and other relevant items.— The amount described in paragraph (1) shall be adjusted under regulations prescribed by the Secretary for liabilities of the target corporation and other relevant items. “(3) Election to step-up the basis of certain target stock.— “(A) In general.— Under regulations prescribed by the Secretary, the basis of the purchasing corporation’s nonrecently purchased stock shall be the basis amount determined under subparagraph (B) of this paragraph if the purchasing corporation makes an election to recognize gain as if such stock were sold on the acquisition date for an amount equal to the basis amount determined under subparagraph (B). “(B) Determination of basis amount.— For purposes of subparagraph (A), the basis amount determined under this subparagraph shall be an amount equal to the grossed-up basis determined under subparagraph (A) of paragraph (1) multiplied by a fraction— “(i) the numerator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(ii) the denominator of which is 100 percent minus the percentage referred to in clause (i). “(4) Grossed-up basis.— For purposes of paragraph (1), the grossed-up basis shall be an amount equal to the basis of the corporation’s recently purchased stock, multiplied by a fraction— “(A) the numerator of which is 100 percent, minus the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(B) the denominator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s recently purchased stock. “(5) Allocation among assets.— The amount determined under paragraphs (1) and (2) shall be allocated among the assets of the target corporation under regulations prescribed by the Secretary. “(6) Definitions of recently purchased stock and nonrecently purchased stock.— For purposes of this subsection— “(A) Recently purchased stock.— The term ‘recently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which was purchased by such corporation during the 12-month acquisition period. “(B) Nonrecently purchased stock.— The term ‘nonrecently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which is not recently purchased stock.”Tax Reform Act of 1984
Pub. L. 98–369 § 712(k)(1)(B) · 98 Stat. 494
Amended · 26 U.S.C. § 338(b)(1)
Pub. L. 98–369, § 712(k)(1)(B), amended par. (1) generally
Substituted · 26 U.S.C. § 338(b)(1)
Pub. L. 98–369, § 712(k)(1)(B), substituting “as purchased for an amount equal to the sum of” for “as sold (and purchased) at an amount equal to” in subpar. (A), and “the basis of the purchasing corporation’s nonrecently purchased stock” in subpar. (B) in lieu of provision relating to adjustment for liabilities and other relevant items, now covered in par. (2)
Substituted · 26 U.S.C. § 338(b)(1)
Pub. L. 98–369, § 712(k)(1)(B), substituting “purchasing corporation’s recently purchased stock, and” for “purchasing corporation’s stock in the target corporation on the acquisition date” in subpar. (A), and “the basis of the purchasing corporation’s nonrecently purchased stock” in subpar. (B) in lieu of provision relating to adjustment for liabilities and other relevant items, now covered in par. (2)
Source evidence
Code amendment note
Subsec. (b)(1). Pub. L. 98–369, § 712(k)(1)(B), amended par. (1) generally, substituting “as purchased for an amount equal to the sum of” for “as sold (and purchased) at an amount equal to” in introductory text, “purchasing corporation’s recently purchased stock, and” for “purchasing corporation’s stock in the target corporation on the acquisition date” in subpar. (A), and “the basis of the purchasing corporation’s nonrecently purchased stock” in subpar. (B) in lieu of provision relating to adjustment for liabilities and other relevant items, now covered in par. (2).Enacted provision · exact public law section
(B) Basis of assets after deemed purchase.— Subsection (b) of section 338 (relating to price at which deemed sale made) is amended to read as follows: “(b) Basis of Assets After Deemed Purchase.— “(1) In general.— For purposes of subsection (a), the assets of the target corporation shall be treated as purchased for an amount equal to the sum of— “(A) the grossed-up basis of the purchasing corporation’s recently purchased stock, and “(B) the basis of the purchasing corporation’s nonrecently purchased stock. “(2) Adjustment for liabilities and other relevant items.— The amount described in paragraph (1) shall be adjusted under regulations prescribed by the Secretary for liabilities of the target corporation and other relevant items. “(3) Election to step-up the basis of certain target stock.— “(A) In general.— Under regulations prescribed by the Secretary, the basis of the purchasing corporation’s nonrecently purchased stock shall be the basis amount determined under subparagraph (B) of this paragraph if the purchasing corporation makes an election to recognize gain as if such stock were sold on the acquisition date for an amount equal to the basis amount determined under subparagraph (B). “(B) Determination of basis amount.— For purposes of subparagraph (A), the basis amount determined under this subparagraph shall be an amount equal to the grossed-up basis determined under subparagraph (A) of paragraph (1) multiplied by a fraction— “(i) the numerator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(ii) the denominator of which is 100 percent minus the percentage referred to in clause (i). “(4) Grossed-up basis.— For purposes of paragraph (1), the grossed-up basis shall be an amount equal to the basis of the corporation’s recently purchased stock, multiplied by a fraction— “(A) the numerator of which is 100 percent, minus the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(B) the denominator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s recently purchased stock. “(5) Allocation among assets.— The amount determined under paragraphs (1) and (2) shall be allocated among the assets of the target corporation under regulations prescribed by the Secretary. “(6) Definitions of recently purchased stock and nonrecently purchased stock.— For purposes of this subsection— “(A) Recently purchased stock.— The term ‘recently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which was purchased by such corporation during the 12-month acquisition period. “(B) Nonrecently purchased stock.— The term ‘nonrecently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which is not recently purchased stock.”Tax Reform Act of 1984
Pub. L. 98–369 § 712(k)(1)(B) · 98 Stat. 494
Amended · 26 U.S.C. § 338(b)(2)
Pub. L. 98–369, § 712(k)(1)(B), amended par. (2) generally, incorporating former par. (1)(B) provision
Inserted · 26 U.S.C. § 338(b)(2)
Pub. L. 98–369, § 712(k)(1)(B), inserting heading “Adjustment for liabilities and other relevant items”
Redesignated · 26 U.S.C. § 338(b)(2)
Pub. L. 98–369, § 712(k)(1)(B), substituting “adjusted under regulations” for “properly adjusted under regulations”. Former par. (2) redesignated (4)
Source evidence
Code amendment note
Subsec. (b)(2). Pub. L. 98–369, § 712(k)(1)(B), amended par. (2) generally, incorporating former par. (1)(B) provision, inserting heading “Adjustment for liabilities and other relevant items” and substituting “adjusted under regulations” for “properly adjusted under regulations”. Former par. (2) redesignated (4).Enacted provision · exact public law section
(B) Basis of assets after deemed purchase.— Subsection (b) of section 338 (relating to price at which deemed sale made) is amended to read as follows: “(b) Basis of Assets After Deemed Purchase.— “(1) In general.— For purposes of subsection (a), the assets of the target corporation shall be treated as purchased for an amount equal to the sum of— “(A) the grossed-up basis of the purchasing corporation’s recently purchased stock, and “(B) the basis of the purchasing corporation’s nonrecently purchased stock. “(2) Adjustment for liabilities and other relevant items.— The amount described in paragraph (1) shall be adjusted under regulations prescribed by the Secretary for liabilities of the target corporation and other relevant items. “(3) Election to step-up the basis of certain target stock.— “(A) In general.— Under regulations prescribed by the Secretary, the basis of the purchasing corporation’s nonrecently purchased stock shall be the basis amount determined under subparagraph (B) of this paragraph if the purchasing corporation makes an election to recognize gain as if such stock were sold on the acquisition date for an amount equal to the basis amount determined under subparagraph (B). “(B) Determination of basis amount.— For purposes of subparagraph (A), the basis amount determined under this subparagraph shall be an amount equal to the grossed-up basis determined under subparagraph (A) of paragraph (1) multiplied by a fraction— “(i) the numerator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(ii) the denominator of which is 100 percent minus the percentage referred to in clause (i). “(4) Grossed-up basis.— For purposes of paragraph (1), the grossed-up basis shall be an amount equal to the basis of the corporation’s recently purchased stock, multiplied by a fraction— “(A) the numerator of which is 100 percent, minus the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(B) the denominator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s recently purchased stock. “(5) Allocation among assets.— The amount determined under paragraphs (1) and (2) shall be allocated among the assets of the target corporation under regulations prescribed by the Secretary. “(6) Definitions of recently purchased stock and nonrecently purchased stock.— For purposes of this subsection— “(A) Recently purchased stock.— The term ‘recently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which was purchased by such corporation during the 12-month acquisition period. “(B) Nonrecently purchased stock.— The term ‘nonrecently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which is not recently purchased stock.”Tax Reform Act of 1984
Pub. L. 98–369 § 712(k)(1)(B) · 98 Stat. 494
Redesignated · 26 U.S.C. § 338(b)(3)
Pub. L. 98–369, § 712(k)(1)(B), added par. (3). Former par. (3) redesignated (5)
Source evidence
Code amendment note
Subsec. (b)(3). Pub. L. 98–369, § 712(k)(1)(B), added par. (3). Former par. (3) redesignated (5).Enacted provision · exact public law section
(B) Basis of assets after deemed purchase.— Subsection (b) of section 338 (relating to price at which deemed sale made) is amended to read as follows: “(b) Basis of Assets After Deemed Purchase.— “(1) In general.— For purposes of subsection (a), the assets of the target corporation shall be treated as purchased for an amount equal to the sum of— “(A) the grossed-up basis of the purchasing corporation’s recently purchased stock, and “(B) the basis of the purchasing corporation’s nonrecently purchased stock. “(2) Adjustment for liabilities and other relevant items.— The amount described in paragraph (1) shall be adjusted under regulations prescribed by the Secretary for liabilities of the target corporation and other relevant items. “(3) Election to step-up the basis of certain target stock.— “(A) In general.— Under regulations prescribed by the Secretary, the basis of the purchasing corporation’s nonrecently purchased stock shall be the basis amount determined under subparagraph (B) of this paragraph if the purchasing corporation makes an election to recognize gain as if such stock were sold on the acquisition date for an amount equal to the basis amount determined under subparagraph (B). “(B) Determination of basis amount.— For purposes of subparagraph (A), the basis amount determined under this subparagraph shall be an amount equal to the grossed-up basis determined under subparagraph (A) of paragraph (1) multiplied by a fraction— “(i) the numerator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(ii) the denominator of which is 100 percent minus the percentage referred to in clause (i). “(4) Grossed-up basis.— For purposes of paragraph (1), the grossed-up basis shall be an amount equal to the basis of the corporation’s recently purchased stock, multiplied by a fraction— “(A) the numerator of which is 100 percent, minus the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(B) the denominator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s recently purchased stock. “(5) Allocation among assets.— The amount determined under paragraphs (1) and (2) shall be allocated among the assets of the target corporation under regulations prescribed by the Secretary. “(6) Definitions of recently purchased stock and nonrecently purchased stock.— For purposes of this subsection— “(A) Recently purchased stock.— The term ‘recently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which was purchased by such corporation during the 12-month acquisition period. “(B) Nonrecently purchased stock.— The term ‘nonrecently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which is not recently purchased stock.”Tax Reform Act of 1984
Pub. L. 98–369 § 712(k)(1)(B) · 98 Stat. 494
Redesignated · 26 U.S.C. § 338(b)(4)
Pub. L. 98–369, § 712(k)(1)(B), redesignated former par. (2) as (4)
Substituted · 26 U.S.C. § 338(b)(4)
Pub. L. 98–369, § 712(k)(1)(B), substituted in introductory text “corporation’s recently purchased stock,” for “purchasing corporation’s stock in the target corporation on the acquisition date”
Inserted · 26 U.S.C. § 338(b)(4)
Pub. L. 98–369, § 712(k)(1)(B), inserted in subpar. (A) “minus the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock”
Substituted · 26 U.S.C. § 338(b)(4)
Pub. L. 98–369, § 712(k)(1)(B), substituted in subpar. (B) “in the target corporation attributable to the purchasing corporation’s recently purchased stock” for “of the target corporation held by the purchasing corporation on the acquisition date”
Source evidence
Code amendment note
Subsec. (b)(4). Pub. L. 98–369, § 712(k)(1)(B), redesignated former par. (2) as (4), substituted in introductory text “corporation’s recently purchased stock,” for “purchasing corporation’s stock in the target corporation on the acquisition date”, inserted in subpar. (A) “minus the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock”, and substituted in subpar. (B) “in the target corporation attributable to the purchasing corporation’s recently purchased stock” for “of the target corporation held by the purchasing corporation on the acquisition date”.Enacted provision · exact public law section
(B) Basis of assets after deemed purchase.— Subsection (b) of section 338 (relating to price at which deemed sale made) is amended to read as follows: “(b) Basis of Assets After Deemed Purchase.— “(1) In general.— For purposes of subsection (a), the assets of the target corporation shall be treated as purchased for an amount equal to the sum of— “(A) the grossed-up basis of the purchasing corporation’s recently purchased stock, and “(B) the basis of the purchasing corporation’s nonrecently purchased stock. “(2) Adjustment for liabilities and other relevant items.— The amount described in paragraph (1) shall be adjusted under regulations prescribed by the Secretary for liabilities of the target corporation and other relevant items. “(3) Election to step-up the basis of certain target stock.— “(A) In general.— Under regulations prescribed by the Secretary, the basis of the purchasing corporation’s nonrecently purchased stock shall be the basis amount determined under subparagraph (B) of this paragraph if the purchasing corporation makes an election to recognize gain as if such stock were sold on the acquisition date for an amount equal to the basis amount determined under subparagraph (B). “(B) Determination of basis amount.— For purposes of subparagraph (A), the basis amount determined under this subparagraph shall be an amount equal to the grossed-up basis determined under subparagraph (A) of paragraph (1) multiplied by a fraction— “(i) the numerator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(ii) the denominator of which is 100 percent minus the percentage referred to in clause (i). “(4) Grossed-up basis.— For purposes of paragraph (1), the grossed-up basis shall be an amount equal to the basis of the corporation’s recently purchased stock, multiplied by a fraction— “(A) the numerator of which is 100 percent, minus the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(B) the denominator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s recently purchased stock. “(5) Allocation among assets.— The amount determined under paragraphs (1) and (2) shall be allocated among the assets of the target corporation under regulations prescribed by the Secretary. “(6) Definitions of recently purchased stock and nonrecently purchased stock.— For purposes of this subsection— “(A) Recently purchased stock.— The term ‘recently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which was purchased by such corporation during the 12-month acquisition period. “(B) Nonrecently purchased stock.— The term ‘nonrecently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which is not recently purchased stock.”Tax Reform Act of 1984
Pub. L. 98–369 § 712(k)(1)(B) · 98 Stat. 494
Redesignated · 26 U.S.C. § 338(b)(5)
Pub. L. 98–369, § 712(k)(1)(B), redesignated former par. (3) as (5)
Inserted · 26 U.S.C. § 338(b)(5)
Pub. L. 98–369, § 712(k)(1)(B), inserted reference to par. (2)
Source evidence
Code amendment note
Subsec. (b)(5). Pub. L. 98–369, § 712(k)(1)(B), redesignated former par. (3) as (5) and inserted reference to par. (2).Enacted provision · exact public law section
(B) Basis of assets after deemed purchase.— Subsection (b) of section 338 (relating to price at which deemed sale made) is amended to read as follows: “(b) Basis of Assets After Deemed Purchase.— “(1) In general.— For purposes of subsection (a), the assets of the target corporation shall be treated as purchased for an amount equal to the sum of— “(A) the grossed-up basis of the purchasing corporation’s recently purchased stock, and “(B) the basis of the purchasing corporation’s nonrecently purchased stock. “(2) Adjustment for liabilities and other relevant items.— The amount described in paragraph (1) shall be adjusted under regulations prescribed by the Secretary for liabilities of the target corporation and other relevant items. “(3) Election to step-up the basis of certain target stock.— “(A) In general.— Under regulations prescribed by the Secretary, the basis of the purchasing corporation’s nonrecently purchased stock shall be the basis amount determined under subparagraph (B) of this paragraph if the purchasing corporation makes an election to recognize gain as if such stock were sold on the acquisition date for an amount equal to the basis amount determined under subparagraph (B). “(B) Determination of basis amount.— For purposes of subparagraph (A), the basis amount determined under this subparagraph shall be an amount equal to the grossed-up basis determined under subparagraph (A) of paragraph (1) multiplied by a fraction— “(i) the numerator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(ii) the denominator of which is 100 percent minus the percentage referred to in clause (i). “(4) Grossed-up basis.— For purposes of paragraph (1), the grossed-up basis shall be an amount equal to the basis of the corporation’s recently purchased stock, multiplied by a fraction— “(A) the numerator of which is 100 percent, minus the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(B) the denominator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s recently purchased stock. “(5) Allocation among assets.— The amount determined under paragraphs (1) and (2) shall be allocated among the assets of the target corporation under regulations prescribed by the Secretary. “(6) Definitions of recently purchased stock and nonrecently purchased stock.— For purposes of this subsection— “(A) Recently purchased stock.— The term ‘recently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which was purchased by such corporation during the 12-month acquisition period. “(B) Nonrecently purchased stock.— The term ‘nonrecently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which is not recently purchased stock.”Tax Reform Act of 1984
Pub. L. 98–369 § 712(k)(1)(B) · 98 Stat. 494
Added · 26 U.S.C. § 338(b)(6)
Pub. L. 98–369, § 712(k)(1)(B), added par. (6)
Source evidence
Code amendment note
Subsec. (b)(6). Pub. L. 98–369, § 712(k)(1)(B), added par. (6).Enacted provision · exact public law section
(B) Basis of assets after deemed purchase.— Subsection (b) of section 338 (relating to price at which deemed sale made) is amended to read as follows: “(b) Basis of Assets After Deemed Purchase.— “(1) In general.— For purposes of subsection (a), the assets of the target corporation shall be treated as purchased for an amount equal to the sum of— “(A) the grossed-up basis of the purchasing corporation’s recently purchased stock, and “(B) the basis of the purchasing corporation’s nonrecently purchased stock. “(2) Adjustment for liabilities and other relevant items.— The amount described in paragraph (1) shall be adjusted under regulations prescribed by the Secretary for liabilities of the target corporation and other relevant items. “(3) Election to step-up the basis of certain target stock.— “(A) In general.— Under regulations prescribed by the Secretary, the basis of the purchasing corporation’s nonrecently purchased stock shall be the basis amount determined under subparagraph (B) of this paragraph if the purchasing corporation makes an election to recognize gain as if such stock were sold on the acquisition date for an amount equal to the basis amount determined under subparagraph (B). “(B) Determination of basis amount.— For purposes of subparagraph (A), the basis amount determined under this subparagraph shall be an amount equal to the grossed-up basis determined under subparagraph (A) of paragraph (1) multiplied by a fraction— “(i) the numerator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(ii) the denominator of which is 100 percent minus the percentage referred to in clause (i). “(4) Grossed-up basis.— For purposes of paragraph (1), the grossed-up basis shall be an amount equal to the basis of the corporation’s recently purchased stock, multiplied by a fraction— “(A) the numerator of which is 100 percent, minus the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock, and “(B) the denominator of which is the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s recently purchased stock. “(5) Allocation among assets.— The amount determined under paragraphs (1) and (2) shall be allocated among the assets of the target corporation under regulations prescribed by the Secretary. “(6) Definitions of recently purchased stock and nonrecently purchased stock.— For purposes of this subsection— “(A) Recently purchased stock.— The term ‘recently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which was purchased by such corporation during the 12-month acquisition period. “(B) Nonrecently purchased stock.— The term ‘nonrecently purchased stock’ means any stock in the target corporation which is held by the purchasing corporation on the acquisition date and which is not recently purchased stock.”Tax Reform Act of 1984
Pub. L. 98–369 § 712(k)(2) · 98 Stat. 494
Inserted · 26 U.S.C. § 338(c)(1)
Pub. L. 98–369, § 712(k)(2), inserted in last sentence “and section 333 does not apply to such liquidation”
Source evidence
Code amendment note
Subsec. (c)(1). Pub. L. 98–369, § 712(k)(2), inserted in last sentence “and section 333 does not apply to such liquidation”.Enacted provision · exact public law section
(2) Coordination with section 333.— The last sentence of paragraph (1) of section 338(c) (relating to coordination with 26 USC 338. section 337 where purchasing corporation holds less than 100 percent of stock) is amended by striking out “such 1-year period” and inserting in lieu thereof “such 1-year period and section 333 does not apply to such liquidation”.Tax Reform Act of 1984
Pub. L. 98–369 § 712(k)(3) · 98 Stat. 494
Substituted · 26 U.S.C. § 338(e)(2)
Pub. L. 98–369, § 712(k)(3), substituted “wholly” for “(in whole or in part)” in subpar. (B)
Struck · 26 U.S.C. § 338(e)(2)
Pub. L. 98–369, § 712(k)(3), struck out subpar. (D) providing for nonapplication of par. (1) to any acquisition by the purchasing corporation if, to the extent provided in regulations, the property acquired is located outside the United States
Redesignated · 26 U.S.C. § 338(e)(2)
Pub. L. 98–369, § 712(k)(3), redesignated subpar. (E) as (D), and, in subpar. (D) as redesignated
Inserted · 26 U.S.C. § 338(e)(2)
Pub. L. 98–369, § 712(k)(3), inserted “and meets such conditions as such regulations may provide”
Source evidence
Code amendment note
Subsec. (e)(2). Pub. L. 98–369, § 712(k)(3), substituted “wholly” for “(in whole or in part)” in subpar. (B), struck out subpar. (D) providing for nonapplication of par. (1) to any acquisition by the purchasing corporation if, to the extent provided in regulations, the property acquired is located outside the United States, redesignated subpar. (E) as (D), and, in subpar. (D) as redesignated, inserted “and meets such conditions as such regulations may provide”.Enacted provision · exact public law section
(3) Exceptions to deemed election rule.— Paragraph (2) of section 338(e) (relating to exceptions) is amended— (A) by striking out “(in whole or in part)” in subparagraph i B) and inserting in lieu thereof “wholly”, (B) by inserting “or” at the end of subparagraph (C), and (C) by striking out subparagraphs (D) and (E) and inserting in lieu thereof the following: “(D) such acquisition is described in regulations prescribed by the Secretary and meets such conditions as such regulations may provide.”Tax Reform Act of 1984
Pub. L. 98–369 § 712(k)(4) · 98 Stat. 494
Substituted · 26 U.S.C. § 338(g)(1)
Pub. L. 98–369, § 712(k)(4), substituted “the 15th day of the 9th month beginning after the month in which the acquisition date occurs” for “75 days after the acquisition date”
Source evidence
Code amendment note
Subsec. (g)(1). Pub. L. 98–369, § 712(k)(4), substituted “the 15th day of the 9th month beginning after the month in which the acquisition date occurs” for “75 days after the acquisition date”.Enacted provision · exact public law section
(4) Time for making election.— Paragraph (1) of section 338(g) (relating to election) is amended to read as follows: “(1) When made.— Except as otherwise provided in regulations, an election under this section shall be made not later than the 15th day of the 9th month beginning after the month in which the acquisition date occurs.”Tax Reform Act of 1984
Pub. L. 98–369 § 712(k)(5)(C) · 98 Stat. 494
Changed · 26 U.S.C. § 338(h)(1)
Pub. L. 98–369, § 712(k)(5)(C), included within 12-month acquisition period the period beginning with the date on which the acquiring corporation is first considered as owning stock owned by corporation from which acquisition was made
Source evidence
Code amendment note
Subsec. (h)(1). Pub. L. 98–369, § 712(k)(5)(C), included within 12-month acquisition period the period beginning with the date on which the acquiring corporation is first considered as owning stock owned by corporation from which acquisition was made.Enacted provision · exact public law section
(C) Paragraph (1) of section 338(h) (defining 12-month acquisition period) is amended by inserting before the period at the end thereof the following: “(or, if any of such stock was acquired in an acquisition which is a purchase by reason of subparagraph (C) of paragraph (3), the date on which the acquiring corporation is first considered under section 318(a) (other than paragraph (4) thereof) as owning stock owned by the corporation from which such acquisition was made).”Tax Reform Act of 1984
Pub. L. 98–369 § 712(k)(5)(D) · 98 Stat. 494
Changed · 26 U.S.C. § 338(h)(3)(A)(ii)
Pub. L. 98–369, § 712(k)(5)(D), included references to sections 354, 355, and 356 and in defining “purchase” provided that the stock not be acquired in any other transaction described in regulations in which the transferor does not recognize the entire amount of the gain or loss realized on the transaction
Source evidence
Code amendment note
Subsec. (h)(3)(A)(ii). Pub. L. 98–369, § 712(k)(5)(D), included references to sections 354, 355, and 356 and in defining “purchase” provided that the stock not be acquired in any other transaction described in regulations in which the transferor does not recognize the entire amount of the gain or loss realized on the transaction.Enacted provision · exact public law section
(D) Clause (ii) of section 338(h)(3)(A) (defining purchase) is amended to read as follows: “(ii) the stock is not acquired in an exchange to which section 351, 354, 355, or 356 applies and is not acquired in any other transaction described in regulations in which the transferor does not recognize the entire amount of the gain or loss realized on the transaction, and”.Tax Reform Act of 1984
Pub. L. 98–369 § 712(k)(5)(A) · 98 Stat. 494
Substituted · 26 U.S.C. § 338(h)(3)(B)
Pub. L. 98–369, § 712(k)(5)(A), substituted in heading “under subsection (a)” for “of stock of subsidiaries”
Substituted · 26 U.S.C. § 338(h)(3)(B)
Pub. L. 98–369, § 712(k)(5)(A), substituted in heading “The term ‘purchase’ includes any deemed purchase under subsection (a)(2). The acquisition date for a corporation which is deemed purchased under subsection (a)(2) shall be determined under regulations prescribed by the Secretary” for “If stock in a corporation is acquired by purchase (within the meaning of subparagraph (A)) and, as a result of such acquisition, the corporation making such purchase is treated (by reason of section 318(a)) as owning stock in a 3rd corporation, the corporation making such purchase shall be treated as having purchased such stock in such 3rd corporation. The corporation making such purchase shall be treated as purchasing stock in the 3rd corporation by reason of the preceding sentence on the first day on which the purchasing corporation is considered under section 318(a) as owning such stock”
Source evidence
Code amendment note
Subsec. (h)(3)(B). Pub. L. 98–369, § 712(k)(5)(A), substituted in heading “under subsection (a)” for “of stock of subsidiaries” and in text “The term ‘purchase’ includes any deemed purchase under subsection (a)(2). The acquisition date for a corporation which is deemed purchased under subsection (a)(2) shall be determined under regulations prescribed by the Secretary” for “If stock in a corporation is acquired by purchase (within the meaning of subparagraph (A)) and, as a result of such acquisition, the corporation making such purchase is treated (by reason of section 318(a)) as owning stock in a 3rd corporation, the corporation making such purchase shall be treated as having purchased such stock in such 3rd corporation. The corporation making such purchase shall be treated as purchasing stock in the 3rd corporation by reason of the preceding sentence on the first day on which the purchasing corporation is considered under section 318(a) as owning such stock”.Enacted provision · exact public law section
(A) Subparagraph (B) of section 338(h)(3) (defining purchase) is amended to read as follows: “(B) Deemed purchase under subsection (a).— The term ‘purchase’ includes any deemed purchase under subsection (a)(2). The acquisition date for a corporation which is deemed purchased under subsection (a)(2) shall be determined under regulations prescribed by the Secretary.”Tax Reform Act of 1984
Pub. L. 98–369 § 712(k)(5)(B) · 98 Stat. 494
Added · 26 U.S.C. § 338(h)(3)(C)
Pub. L. 98–369, § 712(k)(5)(B), added subpar. (C)
Source evidence
Code amendment note
Subsec. (h)(3)(C). Pub. L. 98–369, § 712(k)(5)(B), added subpar. (C).Enacted provision · exact public law section
(B) Paragraph (3) of section 338(h) is amended by adding at the end thereof the following new subparagraph: “(C) Certain stock acquisitions from related corporations.— “(i) In general.— Clause (iii) of subparagraph (A) shall not apply to an acquisition of stock from a related corporation if at least 50 percent in value of the stock of such related corporation was acquired by purchase (within the meaning of subparagraph (A) and (B)). “(ii) Certain distributions.— Clause (i) of subparagraph (A) shall not apply to an acquisition of stock described in clause (i) of this subparagraph if the corporation acquiring such stock— “(I) made a qualified stock purchase of stock of the related corporation, and “(II) made an election under this section (or is treated under subsection (e) as having made such an election) with respect to such qualified stock purchase. “(iii) Related corporation defined.— For purposes of this subparagraph, a corporation is a related corporation if stock owned by such corporation is treated (under section 318(a) other than paragraph (4) thereof) as owned by the corporation acquiring the stock.”Tax Reform Act of 1984
Pub. L. 98–369 § 712(k)(6)(A) · 98 Stat. 494
Added · 26 U.S.C. § 338(h)(7)
Pub. L. 98–369, § 712(k)(6)(A), added par. (7)
Struck · 26 U.S.C. § 338(h)(7)
Pub. L. 98–369, § 712(k)(6)(A), struck out former par. (7) which had provided that acquisitions by purchasing corporation include acquisitions by corporations affiliated with purchasing corporation. See subsec. (h)(8)
Source evidence
Code amendment note
Subsec. (h)(7). Pub. L. 98–369, § 712(k)(6)(A), added par. (7) and struck out former par. (7) which had provided that acquisitions by purchasing corporation include acquisitions by corporations affiliated with purchasing corporation. See subsec. (h)(8).Enacted provision · exact public law section
(A) Subsection (h) of section 338 (relating to definitions 26 USC 338. and special rules) is amended by striking out paragraph (7), by redesignating paragraphs (8) and (9) as paragraphs (9) and (10), respectively, and by inserting after paragraph (6) the following new paragraphs: “(7) Additional percentage must be attributable to purchase, etc.— For purposes of subsection (c)(1), any increase in the maximum percentage of stock taken into account over the percentage of stock (by value) of the target corporation held by the purchasing corporation on the acquisition date shall be taken into account only to the extent such increase is attributable to— “(A) purchase, or “(B) a redemption of stock of the target corporation— “(i) to which section 302(a) applies, or “(ii) in the case of a shareholder who is not a corporation, to which section 301 applies. “(8) Acquisitions by affiliated group treated as made by i corporation.— Except as provided in regulations prescribed by the Secretary, stock and asset acquisitions made by members of the same affiliated group shall be treated as made by 1 corporation.”Tax Reform Act of 1984
Pub. L. 98–369 § 712(k)(6)(A) · 98 Stat. 494
Redesignated · 26 U.S.C. § 338(h)(8)
Pub. L. 98–369, § 712(k)(6)(A), added par. (8) incorporating former par. (7) provision stating that “Except as otherwise provided in regulations, an acquisition of stock or assets by any member of an affiliated group which includes a purchasing corporation shall be treated as made by the purchasing corporation.” Former par. (8) redesignated (9)
Source evidence
Code amendment note
Subsec. (h)(8). Pub. L. 98–369, § 712(k)(6)(A), added par. (8) incorporating former par. (7) provision stating that “Except as otherwise provided in regulations, an acquisition of stock or assets by any member of an affiliated group which includes a purchasing corporation shall be treated as made by the purchasing corporation.” Former par. (8) redesignated (9).Enacted provision · exact public law section
(A) Subsection (h) of section 338 (relating to definitions 26 USC 338. and special rules) is amended by striking out paragraph (7), by redesignating paragraphs (8) and (9) as paragraphs (9) and (10), respectively, and by inserting after paragraph (6) the following new paragraphs: “(7) Additional percentage must be attributable to purchase, etc.— For purposes of subsection (c)(1), any increase in the maximum percentage of stock taken into account over the percentage of stock (by value) of the target corporation held by the purchasing corporation on the acquisition date shall be taken into account only to the extent such increase is attributable to— “(A) purchase, or “(B) a redemption of stock of the target corporation— “(i) to which section 302(a) applies, or “(ii) in the case of a shareholder who is not a corporation, to which section 301 applies. “(8) Acquisitions by affiliated group treated as made by i corporation.— Except as provided in regulations prescribed by the Secretary, stock and asset acquisitions made by members of the same affiliated group shall be treated as made by 1 corporation.”Tax Reform Act of 1984
Pub. L. 98–369 § 712(k)(6)(A) · 98 Stat. 494
Redesignated · 26 U.S.C. § 338(h)(9)
Pub. L. 98–369, § 712(k)(6)(A), (B), redesignated former par. (8) as (9)
Redesignated · 26 U.S.C. § 338(h)(9)
Pub. L. 98–369, § 712(k)(6)(A), (B), substituted therein “paragraph (10)” for “paragraph (9)”. Former par. (9) redesignated (10)
Source evidence
Code amendment note
Subsec. (h)(9). Pub. L. 98–369, § 712(k)(6)(A), (B), redesignated former par. (8) as (9) and substituted therein “paragraph (10)” for “paragraph (9)”. Former par. (9) redesignated (10).Enacted provision · exact public law section
(A) Subsection (h) of section 338 (relating to definitions 26 USC 338. and special rules) is amended by striking out paragraph (7), by redesignating paragraphs (8) and (9) as paragraphs (9) and (10), respectively, and by inserting after paragraph (6) the following new paragraphs: “(7) Additional percentage must be attributable to purchase, etc.— For purposes of subsection (c)(1), any increase in the maximum percentage of stock taken into account over the percentage of stock (by value) of the target corporation held by the purchasing corporation on the acquisition date shall be taken into account only to the extent such increase is attributable to— “(A) purchase, or “(B) a redemption of stock of the target corporation— “(i) to which section 302(a) applies, or “(ii) in the case of a shareholder who is not a corporation, to which section 301 applies. “(8) Acquisitions by affiliated group treated as made by i corporation.— Except as provided in regulations prescribed by the Secretary, stock and asset acquisitions made by members of the same affiliated group shall be treated as made by 1 corporation.”Tax Reform Act of 1984
Pub. L. 98–369 § 712(k)(6)(A) · 98 Stat. 494
Redesignated · 26 U.S.C. § 338(h)(10)
Pub. L. 98–369, § 712(k)(6)(A), redesignated former par. (9) as (10)
Source evidence
Code amendment note
Subsec. (h)(10). Pub. L. 98–369, § 712(k)(6)(A), redesignated former par. (9) as (10).Enacted provision · exact public law section
(A) Subsection (h) of section 338 (relating to definitions 26 USC 338. and special rules) is amended by striking out paragraph (7), by redesignating paragraphs (8) and (9) as paragraphs (9) and (10), respectively, and by inserting after paragraph (6) the following new paragraphs: “(7) Additional percentage must be attributable to purchase, etc.— For purposes of subsection (c)(1), any increase in the maximum percentage of stock taken into account over the percentage of stock (by value) of the target corporation held by the purchasing corporation on the acquisition date shall be taken into account only to the extent such increase is attributable to— “(A) purchase, or “(B) a redemption of stock of the target corporation— “(i) to which section 302(a) applies, or “(ii) in the case of a shareholder who is not a corporation, to which section 301 applies. “(8) Acquisitions by affiliated group treated as made by i corporation.— Except as provided in regulations prescribed by the Secretary, stock and asset acquisitions made by members of the same affiliated group shall be treated as made by 1 corporation.”Tax Reform Act of 1984
Pub. L. 98–369 § 712(k)(6)(C) · 98 Stat. 494
Added · 26 U.S.C. § 338(h)(11)(15)
Pub. L. 98–369, § 712(k)(6)(C), added pars. (11) to (15)
Source evidence
Code amendment note
Subsec. (h)(11) to (15). Pub. L. 98–369, § 712(k)(6)(C), added pars. (11) to (15).Enacted provision · exact public law section
(C) Subsection (h) of section 338 is amended by adding at the end thereof the following new paragraphs: “(11) Elective formula for determining fair market value.— For purposes of subsection (a)(1), fair market value may be determined on the basis of a formula provided in regulations prescribed by the Secretary which takes into account liabilities and other relevant items. “(12) Section 337 to apply where target had adopted plan for complete liquidation.— If— “(A) during the 12-month period ending on the acquisition date the target corporation adopted a plan of complete liquidation, “(B) such plan was not rescinded before the close of the acquisition date, and “(C) the purchasing corporation makes an election under this section (or is treated under subsection (e) as having made such an election) with respect to the target corporation, then, subject to rules similar to the rules of subsection (c)(1), for purposes of section 337 (and other provisions which relate to section 337), the target corporation shall be treated as having distributed all of its assets as of the close of the acquisition date. “(13) Tax on deemed sale not taken into account for estimated tax purposes.— For purposes of section 6655, tax attributable to the sale described in subsection (a)(1) shall not be taken into account. “(14) Coordination with section 341.— For purposes of determining whether section 341 applies to a disposition within 1 year after the acquisition date of stock by a shareholder (other than the acquiring corporation) who held stock in the target corporation on the acquisition date, section 341 shall be applied without regard to this section. “(15) Combined deemed sale return.— Under regulations prescribed by the Secretary, a combined deemed sale return may be filed by all target corporations acquired by a purchasing corporation on the same acquisition date if such target corporations were members of the same selling consolidated group (as defined in subparagraph (B) of paragraph (10)).”Tax Reform Act of 1984
Pub. L. 98–369 § 712(k)(7) · 98 Stat. 494
Amended · 26 U.S.C. § 338(i)
Pub. L. 98–369, § 712(k)(7), provided in introductory text that the regulations be appropriate to carry out the purposes of this section; designated existing provisions as par. (1)
Substituted · 26 U.S.C. § 338(i)
Pub. L. 98–369, § 712(k)(7), provided in introductory text that the regulations be appropriate to carry out the purposes of this section; substituted therein “treatment of stock and asset sales and purchases” for “treatment of stock and asset purchases with respect to a target corporation and its target affiliates (whether by treating all of them as stock purchases or as asset purchases)” before “may not be circumvented”
Added · 26 U.S.C. § 338(i)
Pub. L. 98–369, § 712(k)(7), provided in introductory text that the regulations be appropriate to carry out the purposes of this section; added par. (2)
Source evidence
Code amendment note
Subsec. (i). Pub. L. 98–369, § 712(k)(7), provided in introductory text that the regulations be appropriate to carry out the purposes of this section; designated existing provisions as par. (1) and substituted therein “treatment of stock and asset sales and purchases” for “treatment of stock and asset purchases with respect to a target corporation and its target affiliates (whether by treating all of them as stock purchases or as asset purchases)” before “may not be circumvented”, and added par. (2).Enacted provision · exact public law section
(7) Subsection (i) of section 338 (relating to regulations) is amended to read as follows: “(i) Regulations.— The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including— “(1) regulations to ensure that the purpose of this section to require consistency of treatment of stock and asset sales and purchases may not be circumvented through the use of any provision of law or regulations (including the consolidated return regulations) and “(2) regulations providing for the coordination of the provisions of this section with the provision of this title relating to foreign corporations and their shareholders.”Tax Reform Act of 1986
Pub. L. 99–514 § 631(b)(1) · 100 Stat. 2085
Struck · 26 U.S.C. § 338(a)(1)
Pub. L. 99–514, § 631(b)(1), struck out “to which section 337 applies” after “in a single transaction”
Source evidence
Code amendment note
Subsec. (a)(1). Pub. L. 99–514, § 631(b)(1), struck out “to which section 337 applies” after “in a single transaction”.Enacted provision · exact public law section
(1) Subsection (a) of section 338 (relating to certain stock purchases treated as asset acquisitions) is amended by striking out “to which section 337 applies”.Tax Reform Act of 1986
Pub. L. 99–514 § 631(b)(2) · 100 Stat. 2085
Struck · 26 U.S.C. § 338(c)
Pub. L. 99–514, § 631(b)(2), struck out subsec. (c) relating to special rules for coordination with section 337 where purchasing corporation holds less than 100 percent of stock, and in case of certain redemptions where an election is made under this section
Source evidence
Code amendment note
Subsec. (c). Pub. L. 99–514, § 631(b)(2), struck out subsec. (c) relating to special rules for coordination with section 337 where purchasing corporation holds less than 100 percent of stock, and in case of certain redemptions where an election is made under this section.Enacted provision · exact public law section
(2) Subsection (c) of section 338 is hereby repealed.Tax Reform Act of 1986
Pub. L. 99–514 § 1804(e)(8)(A) · 100 Stat. 2085
Amended · 26 U.S.C. § 338(d)(3)
Pub. L. 99–514, § 1804(e)(8)(A), amended par. (3) generally. Prior to amendment, par. (3) read as follows: “The term ‘qualified stock purchase’ means any transaction or series of transactions in which stock of 1 corporation possessing—
Source evidence
Code amendment note
Subsec. (d)(3). Pub. L. 99–514, § 1804(e)(8)(A), amended par. (3) generally. Prior to amendment, par. (3) read as follows: “The term ‘qualified stock purchase’ means any transaction or series of transactions in which stock of 1 corporation possessing—“(A) at least 80 percent of total combined voting power of all classes of stock entitled to vote, and “(B) 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), is acquired by another corporation by purchase during the 12-month acquisition period.”
Enacted provision · exact public law section
(A) In general.— Paragraph (3) of section 338(d) (defining qualified stock purchase) is amended to read as follows: “(3) Qualified stock purchase.— The term ‘qualified stock purchase’ means any transaction or series of transactions in which stock (meeting the requirements of section 1504(a)(2)) of 1 corporation is acquired by another corporation by purchase during the 12-month acquisition period.”Tax Reform Act of 1986
Pub. L. 99–514 § 1899A(7) · 100 Stat. 2085
Substituted · 26 U.S.C. § 338(h)(3)(C)(i)
Pub. L. 99–514, § 1899A(7), substituted “subparagraphs” for “subparagraph”
Source evidence
Code amendment note
Subsec. (h)(3)(C)(i). Pub. L. 99–514, § 1899A(7), substituted “subparagraphs” for “subparagraph”.Enacted provision · exact public law section
(7) Clause (i) of section 338(h)(3)(C) is amended by striking out “subparagraph (A) and (B)” and inserting in lieu thereof “subparagraphs (A) and (B)”.Tax Reform Act of 1986
Pub. L. 99–514 § 1275(c)(6) · 100 Stat. 2085
Struck · 26 U.S.C. § 338(h)(6)(B)(i)
Pub. L. 99–514, § 1275(c)(6), struck out “a corporation described in section 934(b),” after “DISC,”
Source evidence
Code amendment note
Subsec. (h)(6)(B)(i). Pub. L. 99–514, § 1275(c)(6), struck out “a corporation described in section 934(b),” after “DISC,”.Enacted provision · exact public law section
(6) Clause (i) of section 338(h)(6)(B) is amended by striking out “a corporation described in section 934(b),”.Tax Reform Act of 1986
Pub. L. 99–514 § 631(b)(3) · 100 Stat. 2085
Inserted · 26 U.S.C. § 338(h)(10)(B)
Pub. L. 99–514, § 631(b)(3), inserted provision that to the extent provided in regulations, term “selling consolidated group” also includes any affiliated group of corporations which includes the target corporation (whether or not such group files a consolidated return)
Source evidence
Code amendment note
Subsec. (h)(10)(B). Pub. L. 99–514, § 631(b)(3), inserted provision that to the extent provided in regulations, term “selling consolidated group” also includes any affiliated group of corporations which includes the target corporation (whether or not such group files a consolidated return).Enacted provision · exact public law section
(3) Subparagraph (B) of section 338(h)(10) is amended by adding at the end thereof the following new sentence: “To the extent provided in regulations, such term also includes any affiliated group of corporations which includes the target corporation (whether or not such group files a consolidated return).”Tax Reform Act of 1986
Pub. L. 99–514 § 631(e)(5) · 100 Stat. 2085
Struck · 26 U.S.C. § 338(h)(12)
Pub. L. 99–514, § 631(e)(5), struck out par. (12) relating to applicability of section 337 where target had adopted plan for complete liquidation
Source evidence
Code amendment note
Subsec. (h)(12). Pub. L. 99–514, § 631(e)(5), struck out par. (12) relating to applicability of section 337 where target had adopted plan for complete liquidation.Enacted provision · exact public law section
(5) Paragraph (12) of section 338(h) is hereby repealed.Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1018(d)(9) · 102 Stat. 3342
Substituted · 26 U.S.C. § 338(e)(3)
Pub. L. 100–647, § 1018(d)(9), substituted “which meet the requirements of section 1504(a)(2)” for “which meet the 80 percent requirements of subparagraphs (A) and (B) of subsection (d)(3)”
Source evidence
Code amendment note
Subsec. (e)(3). Pub. L. 100–647, § 1018(d)(9), substituted “which meet the requirements of section 1504(a)(2)” for “which meet the 80 percent requirements of subparagraphs (A) and (B) of subsection (d)(3)”.Enacted provision · exact public law section
(9) Paragraph (3) of section 338(e) of the 1986 Code is amended by striking out “which meet the 80 percent requirements of subparagraphs (A) and (B) of subsection (d)(3)” and inserting in lieu thereof “which meet the requirements of section 1504(a)(2)”.Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1006(e)(20) · 102 Stat. 3342
Struck · 26 U.S.C. § 338(h)(7)
Pub. L. 100–647, § 1006(e)(20), struck out par. (7) which read as follows: “Additional percentage must be attributable to purchase, etc.—For purposes of subsection (c)(1), any increase in the maximum percentage of stock taken into account over the percentage of stock (by value) of the target corporation held by the purchasing corporation on the acquisition date shall be taken into account only to the extent such increase is attributable to—
Source evidence
Code amendment note
Subsec. (h)(7). Pub. L. 100–647, § 1006(e)(20), struck out par. (7) which read as follows: “Additional percentage must be attributable to purchase, etc.—For purposes of subsection (c)(1), any increase in the maximum percentage of stock taken into account over the percentage of stock (by value) of the target corporation held by the purchasing corporation on the acquisition date shall be taken into account only to the extent such increase is attributable to—“(A) purchase, or “(B) a redemption of stock of the target corporation— “(i) to which section 302(a) applies, or “(ii) in the case of a shareholder who is not a corporation, to which section 301 applies.”
Enacted provision · exact public law section
(20) Paragraph (7) of section 338(h) of the 1986 Code is hereby repealed.Technical and Miscellaneous Revenue Act of 1988
Pub. L. 100–647 § 1012(bb)(5)(A) · 102 Stat. 3342
Added · 26 U.S.C. § 338(h)(16)
Pub. L. 100–647, § 1012(bb)(5)(A), added par. (16)
Source evidence
Code amendment note
Subsec. (h)(16). Pub. L. 100–647, § 1012(bb)(5)(A), added par. (16).Enacted provision · exact public law section
(A) In general— Subsection (h) of section 338 of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(16) Coordination with foreign tax credit provisions.— Except as provided in regulations, this section shall not apply for purposes of determining the source or character of any item for purposes of subpart A of part HI of subchapter N of this chapter (relating to foreign tax credit). The preceding sentence shall not apply to any gain to the extent such gain is includible in gross income as a dividend under section 1248 (determined without regard to any deemed sale under this section by a foreign corporation).”Revenue Reconciliation Act of 1990
Pub. L. 101–508 title XI § 11323(c)(1) · 104 Stat. 1388
Added · 26 U.S.C. § 338(h)(10)(C)
Pub. L. 101–508 added subpar. (C)
Source evidence
Code amendment note
Subsec. (h)(10)(C). Pub. L. 101–508 added subpar. (C).Enacted provision · exact public law section
(1) In general.— Paragraph (10) of section 338(h) is amended by adding at the end thereof the following new subparagraph: “(C) Information required to be furnished to the secretary.— Under regulations, where an election is made under subparagraph (A), the purchasing corporation and the common parent of the selling consolidated group shall, at such times and in such manner as may be provided in regulations, furnish to the Secretary the following information: “(i) The amount allocated under subsection (b)(5) to goodwill or going concern value. “(ii) Any modification of the amount described in clause (i). “(iii) Any other information as the Secretary deems necessary to carry out the provisions of this paragraph.”Pub. L. 108–27 title III § 302(e)(4)(B)(i) · 117 Stat. 752
Struck · 26 U.S.C. § 338(h)(14)
Pub. L. 108–27 struck out heading and text of par. (14). Text read as follows: “For purposes of determining whether section 341 applies to a disposition within 1 year after the acquisition date of stock by a shareholder (other than the acquiring corporation) who held stock in the target corporation on the acquisition date, section 341 shall be applied without regard to this section.”
Source evidence
Code amendment note
Subsec. (h)(14). Pub. L. 108–27 struck out heading and text of par. (14). Text read as follows: “For purposes of determining whether section 341 applies to a disposition within 1 year after the acquisition date of stock by a shareholder (other than the acquiring corporation) who held stock in the target corporation on the acquisition date, section 341 shall be applied without regard to this section.”Enacted provision · exact public law section
(i) Section 338(h) is amended by striking paragraph (14).Pub. L. 108–357 title VIII § 839(a) · 118 Stat. 1418
Inserted · 26 U.S.C. § 338(h)(13)
Pub. L. 108–357 inserted at end “The preceding sentence shall not apply with respect to a qualified stock purchase for which an election is made under paragraph (10).”
Source evidence
Code amendment note
Subsec. (h)(13). Pub. L. 108–357 inserted at end “The preceding sentence shall not apply with respect to a qualified stock purchase for which an election is made under paragraph (10).”Enacted provision · exact public law section
(a) In General.— Paragraph (13) of section 338(h) (relating to tax on deemed sale not taken into account for estimated tax purposes) is amended by adding at the end the following: “The preceding sentence shall not apply with respect to a qualified stock purchase for which an election is made under paragraph (10).”.Effective date note
Pub. L. 108–357, title VIII, § 839(b), Oct. 22, 2004, 118 Stat. 1597, provided that: “The amendment made by subsection (a) [amending this section] shall apply to transactions occurring after the date of the enactment of this Act [Oct. 22, 2004].”Energy and Water Development and Related Agencies Appropriations Act, 2018
Pub. L. 115–141 § 401(a)(64) · 132 Stat. 348
Substituted · 26 U.S.C. § 338(h)(3)(A)(iii)
Pub. L. 115–141, § 401(a)(64), substituted “paragraph” for “paragaraph”
Source evidence
Code amendment note
Subsec. (h)(3)(A)(iii). Pub. L. 115–141, § 401(a)(64), substituted “paragraph” for “paragaraph”.Enacted provision · exact public law section
Sec. 401. The Nuclear Regulatory Commission shall comply with the July 5, 2011, version of Chapter VI of its Internal Commission Procedures when responding to Congressional requests for information.Energy and Water Development and Related Agencies Appropriations Act, 2018
Pub. L. 115–141 § 401(d)(1)(D)(vii) · 132 Stat. 348
Substituted · 26 U.S.C. § 338(h)(6)(B)(i)
Pub. L. 115–141, § 401(d)(1)(D)(vii), substituted “or a DISC” for “, a DISC, or a corporation to which an election under section 936 applies”
Source evidence
Code amendment note
Subsec. (h)(6)(B)(i). Pub. L. 115–141, § 401(d)(1)(D)(vii), substituted “or a DISC” for “, a DISC, or a corporation to which an election under section 936 applies”.Enacted provision · exact public law section
Sec. 401. The Nuclear Regulatory Commission shall comply with the July 5, 2011, version of Chapter VI of its Internal Commission Procedures when responding to Congressional requests for information.
54 of 54 references resolved to an enrolled provision
Editorial Notes
Prior Provisions
A prior section 338, act Aug. 16, 1954, ch. 736, 68A Stat. 107, made reference to a special rule relating to the effect on earnings and profits of certain distributions in partial liquidation in section 312(e), prior to repeal by Pub. L. 97–248, § 222(e)(4).
Amendments1983–2018 · 8 rounds
2018
Subsec. (h)(3)(A)(iii). Pub. L. 115–141, § 401(a)(64), substituted “paragraph” for “paragaraph”.
Subsec. (h)(6)(B)(i). Pub. L. 115–141, § 401(d)(1)(D)(vii), substituted “or a DISC” for “, a DISC, or a corporation to which an election under section 936 applies”.
2004
Subsec. (h)(13). Pub. L. 108–357 inserted at end “The preceding sentence shall not apply with respect to a qualified stock purchase for which an election is made under paragraph (10).”
2003
Subsec. (h)(14). Pub. L. 108–27 struck out heading and text of par. (14). Text read as follows: “For purposes of determining whether section 341 applies to a disposition within 1 year after the acquisition date of stock by a shareholder (other than the acquiring corporation) who held stock in the target corporation on the acquisition date, section 341 shall be applied without regard to this section.”
1990
Subsec. (h)(10)(C). Pub. L. 101–508 added subpar. (C).
1988
Subsec. (e)(3). Pub. L. 100–647, § 1018(d)(9), substituted “which meet the requirements of section 1504(a)(2)” for “which meet the 80 percent requirements of subparagraphs (A) and (B) of subsection (d)(3)”.
Subsec. (h)(7). Pub. L. 100–647, § 1006(e)(20), struck out par. (7) which read as follows: “Additional percentage must be attributable to purchase, etc.—For purposes of subsection (c)(1), any increase in the maximum percentage of stock taken into account over the percentage of stock (by value) of the target corporation held by the purchasing corporation on the acquisition date shall be taken into account only to the extent such increase is attributable to—
“(A) purchase, or
“(B) a redemption of stock of the target corporation—
“(i) to which section 302(a) applies, or
“(ii) in the case of a shareholder who is not a corporation, to which section 301 applies.”
Subsec. (h)(16). Pub. L. 100–647, § 1012(bb)(5)(A), added par. (16).
1986
Subsec. (a)(1). Pub. L. 99–514, § 631(b)(1), struck out “to which section 337 applies” after “in a single transaction”.
Subsec. (c). Pub. L. 99–514, § 631(b)(2), struck out subsec. (c) relating to special rules for coordination with section 337 where purchasing corporation holds less than 100 percent of stock, and in case of certain redemptions where an election is made under this section.
Subsec. (d)(3). Pub. L. 99–514, § 1804(e)(8)(A), amended par. (3) generally. Prior to amendment, par. (3) read as follows: “The term ‘qualified stock purchase’ means any transaction or series of transactions in which stock of 1 corporation possessing—
“(A) at least 80 percent of total combined voting power of all classes of stock entitled to vote, and
“(B) 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),
is acquired by another corporation by purchase during the 12-month acquisition period.”
Subsec. (h)(3)(C)(i). Pub. L. 99–514, § 1899A(7), substituted “subparagraphs” for “subparagraph”.
Subsec. (h)(6)(B)(i). Pub. L. 99–514, § 1275(c)(6), struck out “a corporation described in section 934(b),” after “DISC,”.
Subsec. (h)(10)(B). Pub. L. 99–514, § 631(b)(3), inserted provision that to the extent provided in regulations, term “selling consolidated group” also includes any affiliated group of corporations which includes the target corporation (whether or not such group files a consolidated return).
Subsec. (h)(12). Pub. L. 99–514, § 631(e)(5), struck out par. (12) relating to applicability of section 337 where target had adopted plan for complete liquidation.
1984
Subsec. (a)(1). Pub. L. 98–369, § 712(k)(1)(A), inserted “at fair market value” after “acquisition date”.
Subsec. (b). Pub. L. 98–369, § 712(k)(1)(B), substituted “Basis of assets after deemed purchase” for “Price at which deemed sale made” in heading.
Subsec. (b)(1). Pub. L. 98–369, § 712(k)(1)(B), amended par. (1) generally, substituting “as purchased for an amount equal to the sum of” for “as sold (and purchased) at an amount equal to” in introductory text, “purchasing corporation’s recently purchased stock, and” for “purchasing corporation’s stock in the target corporation on the acquisition date” in subpar. (A), and “the basis of the purchasing corporation’s nonrecently purchased stock” in subpar. (B) in lieu of provision relating to adjustment for liabilities and other relevant items, now covered in par. (2).
Subsec. (b)(2). Pub. L. 98–369, § 712(k)(1)(B), amended par. (2) generally, incorporating former par. (1)(B) provision, inserting heading “Adjustment for liabilities and other relevant items” and substituting “adjusted under regulations” for “properly adjusted under regulations”. Former par. (2) redesignated (4).
Subsec. (b)(3). Pub. L. 98–369, § 712(k)(1)(B), added par. (3). Former par. (3) redesignated (5).
Subsec. (b)(4). Pub. L. 98–369, § 712(k)(1)(B), redesignated former par. (2) as (4), substituted in introductory text “corporation’s recently purchased stock,” for “purchasing corporation’s stock in the target corporation on the acquisition date”, inserted in subpar. (A) “minus the percentage of stock (by value) in the target corporation attributable to the purchasing corporation’s nonrecently purchased stock”, and substituted in subpar. (B) “in the target corporation attributable to the purchasing corporation’s recently purchased stock” for “of the target corporation held by the purchasing corporation on the acquisition date”.
Subsec. (b)(5). Pub. L. 98–369, § 712(k)(1)(B), redesignated former par. (3) as (5) and inserted reference to par. (2).
Subsec. (b)(6). Pub. L. 98–369, § 712(k)(1)(B), added par. (6).
Subsec. (c)(1). Pub. L. 98–369, § 712(k)(2), inserted in last sentence “and section 333 does not apply to such liquidation”.
Subsec. (e)(2). Pub. L. 98–369, § 712(k)(3), substituted “wholly” for “(in whole or in part)” in subpar. (B), struck out subpar. (D) providing for nonapplication of par. (1) to any acquisition by the purchasing corporation if, to the extent provided in regulations, the property acquired is located outside the United States, redesignated subpar. (E) as (D), and, in subpar. (D) as redesignated, inserted “and meets such conditions as such regulations may provide”.
Subsec. (g)(1). Pub. L. 98–369, § 712(k)(4), substituted “the 15th day of the 9th month beginning after the month in which the acquisition date occurs” for “75 days after the acquisition date”.
Subsec. (h)(1). Pub. L. 98–369, § 712(k)(5)(C), included within 12-month acquisition period the period beginning with the date on which the acquiring corporation is first considered as owning stock owned by corporation from which acquisition was made.
Subsec. (h)(3)(A)(ii). Pub. L. 98–369, § 712(k)(5)(D), included references to sections 354, 355, and 356 and in defining “purchase” provided that the stock not be acquired in any other transaction described in regulations in which the transferor does not recognize the entire amount of the gain or loss realized on the transaction.
Subsec. (h)(3)(B). Pub. L. 98–369, § 712(k)(5)(A), substituted in heading “under subsection (a)” for “of stock of subsidiaries” and in text “The term ‘purchase’ includes any deemed purchase under subsection (a)(2). The acquisition date for a corporation which is deemed purchased under subsection (a)(2) shall be determined under regulations prescribed by the Secretary” for “If stock in a corporation is acquired by purchase (within the meaning of subparagraph (A)) and, as a result of such acquisition, the corporation making such purchase is treated (by reason of section 318(a)) as owning stock in a 3rd corporation, the corporation making such purchase shall be treated as having purchased such stock in such 3rd corporation. The corporation making such purchase shall be treated as purchasing stock in the 3rd corporation by reason of the preceding sentence on the first day on which the purchasing corporation is considered under section 318(a) as owning such stock”.
Subsec. (h)(3)(C). Pub. L. 98–369, § 712(k)(5)(B), added subpar. (C).
Subsec. (h)(7). Pub. L. 98–369, § 712(k)(6)(A), added par. (7) and struck out former par. (7) which had provided that acquisitions by purchasing corporation include acquisitions by corporations affiliated with purchasing corporation. See subsec. (h)(8).
Subsec. (h)(8). Pub. L. 98–369, § 712(k)(6)(A), added par. (8) incorporating former par. (7) provision stating that “Except as otherwise provided in regulations, an acquisition of stock or assets by any member of an affiliated group which includes a purchasing corporation shall be treated as made by the purchasing corporation.” Former par. (8) redesignated (9).
Subsec. (h)(9). Pub. L. 98–369, § 712(k)(6)(A), (B), redesignated former par. (8) as (9) and substituted therein “paragraph (10)” for “paragraph (9)”. Former par. (9) redesignated (10).
Subsec. (h)(10). Pub. L. 98–369, § 712(k)(6)(A), redesignated former par. (9) as (10).
Subsec. (h)(11) to (15). Pub. L. 98–369, § 712(k)(6)(C), added pars. (11) to (15).
Subsec. (i). Pub. L. 98–369, § 712(k)(7), provided in introductory text that the regulations be appropriate to carry out the purposes of this section; designated existing provisions as par. (1) and substituted therein “treatment of stock and asset sales and purchases” for “treatment of stock and asset purchases with respect to a target corporation and its target affiliates (whether by treating all of them as stock purchases or as asset purchases)” before “may not be circumvented”, and added par. (2).
1983
Subsec. (h)(8), (9). Pub. L. 97–448 added pars. (8) and (9).
Statutory Notes and Related Subsidiaries
Effective Date of 2004 Amendment
Pub. L. 108–357, title VIII, § 839(b), , 118 Stat. 1597, provided that: “The amendment made by subsection (a) [amending this section] shall apply to transactions occurring after the date of the enactment of this Act [].”
Effective Date of 2003 Amendment
Amendment by Pub. L. 108–27 applicable, except as otherwise provided, to taxable years beginning after , see section 302(f) of Pub. L. 108–27, set out as an Effective and Termination Dates of 2003 Amendment note under section 1 of this title.
Effective Date of 1990 Amendment
Pub. L. 101–508, title XI, § 11323(d), , 104 Stat. 1388–465, provided that:
“(1) In general.—
Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 1060 and 6724 of this title] shall apply to acquisitions after .
“(2) Binding contract exception.—
The amendments made by this section shall not apply to any acquisition pursuant to a written binding contract in effect on , and at all times thereafter before such acquisition.”
Effective Date of 1988 Amendment
Pub. L. 100–647, title I, § 1012(bb)(5)(B), , 102 Stat. 3535, provided that: “The amendment made by subparagraph (A) [amending this section] shall apply to qualified stock purchases (as defined in section 338(d)(3) of the 1986 Code) after , except that, in the case of an election under section 338(h)(10) of the 1986 Code, such amendment shall apply to qualified stock purchases (as so defined) after .”
Amendment by sections 1006(e)(20) and 1018(d)(9) of 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 section 631(b), (e)(5) of Pub. L. 99–514 applicable to any distribution in complete liquidation, and any sale or exchange, made by a corporation after , unless such corporation is completely liquidated before , any transaction described in section 338 of this title for which the acquisition date occurs after , and any distribution, not in complete liquidation, made after , 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.
Amendment by section 1275(c)(6) of Pub. L. 99–514 applicable to taxable years beginning after , with certain exceptions and qualifications, see section 1277 of Pub. L. 99–514, set out as a note under section 931 of this title.
Pub. L. 99–514, title XVIII, § 1804(e)(8)(B), , 100 Stat. 2804, provided that: “The amendment made by subparagraph (A) [amending this section] shall apply in cases where the 12-month acquisition period (as defined in section 338(h)(1) of the Internal Revenue Code of 1954 [now 1986] begins after .”
Effective Date of 1984 Amendment
Pub. L. 98–369, div. A, title VII, § 712(k)(9), , 98 Stat. 952, as amended by Pub. L. 99–514, § 2, , 100 Stat. 2095, provided that:
“(A) In general.—
The amendments made by this subsection [amending this section and sections 269 and 318 of this title] shall not apply to any qualified stock purchase (as defined in section 338(d)(3) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) where the acquisition date (as defined in section 338(h)(2) of such Code) is before .
“(B) Extension of time for making election.—
In the case of any qualified stock purchase described in subparagraph (A), the time for making an election under section 338 of such Code shall not expire before the close of the 60th day after the date of the enactment of this Act [].”
Amendment by section 712(k) 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 1983 Amendment
Amendment by Pub. L. 97–448 effective as if included in the provisions of the Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97–248, to which such amendment relates, see section 311(d) of Pub. L. 97–448, set out as a note under section 31 of this title.
Effective Date
Pub. L. 97–248, title II, § 224(d), , 96 Stat. 489, as amended by Pub. L. 97–448, title III, § 306(a)(8)(B), , 96 Stat. 2403; Pub. L. 99–514, § 2, , 100 Stat. 2095, provided that:
“(1) In general.—
The amendments made by this section [enacting this section and amending sections 168, 318, 334, 336, 337, 381, and 617 of this title] shall apply to any target corporation (within the meaning of section 338 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] as added by this section) with respect to which the acquisition date (within the meaning of such section) occurs after .
“(2) Certain acquisitions before .—
If—
“(A) an acquisition date (within the meaning of section 338 of such Code without regard to paragraph (5) of this subsection) occurred after , and before ,
“(B) the target corporation (within the meaning of section 338 of such Code) is not liquidated before , and
“(C) the purchasing corporation (within the meaning of section 338 of such Code) makes, not later than , an election under section 338 of such Code,
then the amendments made by this section shall apply to the acquisition of such target corporation.
“(3) Certain acquisitions of financial institutions.—
In any case in which—
“(A) there is, on , a binding contract to acquire control (within the meaning of section 368(c) of such Code) of any financial institution,
“(B) the approval of one or more regulatory authorities is required in order to complete such acquisition, and
“(C) within 90 days after the date of the final approval of the last such regulatory authority granting final approval, a plan of complete liquidation of such financial institution is adopted,
then the purchasing corporation may elect not to have the amendments made by this section apply to the acquisition pursuant to such contract.
“(4) Extension of time for making elections; revocation of elections.—
“(A) Extension.—
The time for making an election under section 338 of such Code shall not expire before the close of .
“(B) Revocation.—
Any election made under section 338 of such Code may be revoked by the purchasing corporation if revoked before .
“(5) Rules for acquisitions described in paragraph (2).—
“(A) In general.—
For purposes of applying section 338 of such Code with respect to any acquisition described in paragraph (2)—
“(i) the date selected under subparagraph (B) of this paragraph shall be treated as the acquisition date,
“(ii) a rule similar to the last sentence of section 334(b)(2) of such Code (as in effect on ) shall apply, and
“(iii) subsections (e), (f), and (i) of such section 338, and paragraphs (4), (6), (8), and (9) of subsection (h) of such section 338, shall not apply.
“(B) Selection of acquisition date by purchasing corporation.—
The purchasing corporation may select any date for purposes of subparagraph (A)(i) if such date—
“(i) is after the later of , or the acquisition date (within the meaning of section 338 of such Code without regard to this paragraph), and
“(ii) is on or before the date on which the election described in paragraph (2)(C) is made.”
Savings Provision
For provisions that nothing in amendment by section 401(d)(1)(D)(vii) of Pub. L. 115–141 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to , for purposes of determining liability for tax for periods ending after , see section 401(e) of Pub. L. 115–141, set out as a note under section 23 of this title.
Treatment of Certain Corporation Organized on February 22, 1983
Pub. L. 99–514, title XVIII, § 1804(e)(9), , 100 Stat. 2804, provided that:
“In the case of a Rhode Island corporation which was organized on , and which on —
“(A) purchased the stock of another corporation,
“(B) filed an election under section 338(g) of the Internal Revenue Code of 1986 with respect to such purchase, and
“(C) merged into the acquired corporation,
such purchase of stock shall be considered as made by the acquiring corporation, such election shall be valid, and the acquiring corporation shall be considered a purchasing corporation for purposes of section 338 of such Code without regard to the duration of the existence of the acquiring corporation.”
Special Rules for Deemed Purchases under Prior Law
Pub. L. 98–369, div. A, title VII, § 712(k)(10), , 98 Stat. 953, as amended by Pub. L. 99–514, § 2, , 100 Stat. 2095, provided that: “If, before , a corporation was treated as making a qualified stock purchase (as defined in section 338(d)(3) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]), but would not be so treated under the amendments made by paragraphs (5) and (6) [amending subsec. (h) and section 318(b)(4) of this title] of this subsection, the amendments made by such paragraphs shall not apply to such purchase unless such corporation elects (at such time and in such manner as the Secretary of the Treasury or his delegate may by regulations prescribe) to have the amendments made by such paragraphs apply.”
Exception for Stock Purchases in Contemplation of Target Corporation as Member of Affiliated Group
Pub. L. 97–448, title III, § 306(a)(8)(A)(ii), , 96 Stat. 2402, as amended by Pub. L. 98–369, div. A, title VII, § 722(a)(3), , 98 Stat. 973; Pub. L. 99–514, § 2, , 100 Stat. 2095, provided that:
“If—
“(I) any portion of a qualified stock purchase is pursuant to a binding contract entered into on or after , and on or before the date of the enactment of this Act [], and
“(II) the purchasing corporation establishes by clear and convincing evidence that such contract was negotiated on the contemplation that, with respect to the deemed sale under section 338 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], the target corporation would be treated as a member of the affiliated group which includes the selling corporation,
then the amendment made by clause (i) [amending subsec. (h)] shall not apply to such qualified stock purchase.”
Credits
1982–2018 · 9 acts
- 1982Added Pub. L. 97–248, title II, § 224(a), , 96 Stat. 485
- 1983amended Pub. L. 97–448, title III, § 306(a)(8)(A)(i), , 96 Stat. 2402
- 1984Pub. L. 98–369, div. A, title VII, § 712(k)(1)–(5)(D), (6), (7), , 98 Stat. 948–952
- 1986Pub. L. 99–514, title VI, § 631(b), (e)(5), title XII, § 1275(c)(6), title XVIII, §§ 1804(e)(8)(A), 1899A(7), , 100 Stat. 2272, 2273, 2599, 2804, 2958
- 1988Pub. L. 100–647, title I, §§ 1006(e)(20), 1012(bb)(5)(A), 1018(d)(9), , 102 Stat. 3403, 3535, 3581
- 1990Pub. L. 101–508, title XI, § 11323(c)(1), , 104 Stat. 1388–465
- 2003Pub. L. 108–27, title III, § 302(e)(4)(B)(i), , 117 Stat. 763
- 2004Pub. L. 108–357, title VIII, § 839(a), , 118 Stat. 1597
- 2018Pub. L. 115–141, div. U, title IV, § 401(a)(64), (d)(1)(D)(vii), , 132 Stat. 1187, 1207.
Show as published
(Added Pub. L. 97–248, title II, § 224(a), , 96 Stat. 485; amended Pub. L. 97–448, title III, § 306(a)(8)(A)(i), , 96 Stat. 2402; Pub. L. 98–369, div. A, title VII, § 712(k)(1)–(5)(D), (6), (7), , 98 Stat. 948–952; Pub. L. 99–514, title VI, § 631(b), (e)(5), title XII, § 1275(c)(6), title XVIII, §§ 1804(e)(8)(A), 1899A(7), , 100 Stat. 2272, 2273, 2599, 2804, 2958; Pub. L. 100–647, title I, §§ 1006(e)(20), 1012(bb)(5)(A), 1018(d)(9), , 102 Stat. 3403, 3535, 3581; Pub. L. 101–508, title XI, § 11323(c)(1), , 104 Stat. 1388–465; Pub. L. 108–27, title III, § 302(e)(4)(B)(i), , 117 Stat. 763; Pub. L. 108–357, title VIII, § 839(a), , 118 Stat. 1597; Pub. L. 115–141, div. U, title IV, § 401(a)(64), (d)(1)(D)(vii), , 132 Stat. 1187, 1207.)