§ 346. Definition and special rule

Statutory text

Complete liquidation

For purposes of this subchapter, a distribution shall be treated as in complete liquidation of a corporation if the distribution is one of a series of distributions in redemption of all of the stock of the corporation pursuant to a plan.

Transactions which might reach same result as partial liquidations

The Secretary shall prescribe such regulations as may be necessary to ensure that the purposes of subsections (a) and (b) of section 222 of the Tax Equity and Fiscal Responsibility Act of 1982 (which repeal the special tax treatment for partial liquidations) may not be circumvented through the use of section 355, 351, or any other provision of law or regulations (including the consolidated return regulations).

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.

1954
Aug. 16, 1954, ch. 736, 68A Stat. 110 · 68A Stat. 110
Enacted · 26 U.S.C. § 346
Aug. 16, 1954, ch. 736, 68A Stat. 110
Source evidence
Code source credit
Aug. 16, 1954, ch. 736, 68A Stat. 110
1982
Pub. L. 97–248 title II § 222(d) · 96 Stat. 324
Substituted · 26 U.S.C. § 346(a)
Pub. L. 97–248 substituted provision that a distribution shall be treated as in complete liquidation if the distribution is one of a series in redemption of all the stock pursuant to a plan for provision that a distribution was to be treated as in partial liquidation if the distribution was one of a series in redemption of all the stock pursuant to a plan, or the distribution was not essentially equivalent to a dividend, was in redemption of part of the stock pursuant to a plan, and occurred within the taxable year or the next taxable year of the plan being adopted, including but not limited to a distribution which met the requirements of former subsec. (b) of this section, and that for the purposes of sections 562(b) and 6043 of this title, a partial liquidation included a redemption of stock to which section 302 of this title applied
Source evidence
Code amendment note
Subsec. (a). Pub. L. 97–248 substituted provision that a distribution shall be treated as in complete liquidation if the distribution is one of a series in redemption of all the stock pursuant to a plan for provision that a distribution was to be treated as in partial liquidation if the distribution was one of a series in redemption of all the stock pursuant to a plan, or the distribution was not essentially equivalent to a dividend, was in redemption of part of the stock pursuant to a plan, and occurred within the taxable year or the next taxable year of the plan being adopted, including but not limited to a distribution which met the requirements of former subsec. (b) of this section, and that for the purposes of sections 562(b) and 6043 of this title, a partial liquidation included a redemption of stock to which section 302 of this title applied.
Enacted provision · exact public law section
(d) Definition and special rule.— Section 346 (defining partial 26 USC 346. liquidation) is amended to read as follows: “SEC. 346. DEFINITION AND SPECIAL RULE. “(a) Complete Liquidation.— For purposes of this subchapter, a distribution shall be treated as in complete liquidation of a corpora-tion if the distribution is one of a series of distributions in redemption of all of the stock of the corporation pursuant to a plan. “(b) Transactions Which Might Reach Same Result as Partial Liquidations.— The Secretary shall prescribe such regulations as may be necessary to ensure that the purposes of subsections (a) and (b) of section 222 of the Tax Equity and Fiscal Responsibility Act of 1982 (which repeal the special tax treatment for partial liquidations) Ante, p. 478. 26 USC 355, 351, 337. may not be circumvented through the use of section 355, 351, 337, or any other provision of law or regulations (including the consolidated return regulations).”
1982
Pub. L. 97–248 title II § 222(d) · 96 Stat. 324
1. Added · 26 U.S.C. § 346(b)
  Pub. L. 97–248 added subsec. (b)
2. Struck · 26 U.S.C. § 346(b)
  Pub. L. 97–248 struck out former subsec. (b) which provided that a distribution was to be treated as in partial liquidation of a corporation if the distribution was attributable to the cessation of a business which had been carried on for the previous 5-year period and had not been acquired by the corporation in a transaction involving recognition of gain or loss during that time, and if the distributing corporation was actively involved in a trade or business immediately after the distribution under the terms described above for the business being liquidated, and that compliance with the above requirements would be determined without regard to whether or not the distribution was pro rata with respect to all the shareholders of the corporation
Source evidence
Code amendment note
Subsec. (b). Pub. L. 97–248 added subsec. (b) and struck out former subsec. (b) which provided that a distribution was to be treated as in partial liquidation of a corporation if the distribution was attributable to the cessation of a business which had been carried on for the previous 5-year period and had not been acquired by the corporation in a transaction involving recognition of gain or loss during that time, and if the distributing corporation was actively involved in a trade or business immediately after the distribution under the terms described above for the business being liquidated, and that compliance with the above requirements would be determined without regard to whether or not the distribution was pro rata with respect to all the shareholders of the corporation.
Enacted provision · exact public law section
(d) Definition and special rule.— Section 346 (defining partial 26 USC 346. liquidation) is amended to read as follows: “SEC. 346. DEFINITION AND SPECIAL RULE. “(a) Complete Liquidation.— For purposes of this subchapter, a distribution shall be treated as in complete liquidation of a corpora-tion if the distribution is one of a series of distributions in redemption of all of the stock of the corporation pursuant to a plan. “(b) Transactions Which Might Reach Same Result as Partial Liquidations.— The Secretary shall prescribe such regulations as may be necessary to ensure that the purposes of subsections (a) and (b) of section 222 of the Tax Equity and Fiscal Responsibility Act of 1982 (which repeal the special tax treatment for partial liquidations) Ante, p. 478. 26 USC 355, 351, 337. may not be circumvented through the use of section 355, 351, 337, or any other provision of law or regulations (including the consolidated return regulations).”
1982
Pub. L. 97–248 title II § 222(d) · 96 Stat. 324
Struck · 26 U.S.C. § 346(c)
Pub. L. 97–248 struck out subsec. (c) which provided that the fact that, with respect to a shareholder, a distribution qualified under section 302(a) by reason of section 302(b) would not be taken into account in determining whether the distribution, with respect to such shareholder, was also a distribution in partial liquidation of the corporation
Source evidence
Code amendment note
Subsec. (c). Pub. L. 97–248 struck out subsec. (c) which provided that the fact that, with respect to a shareholder, a distribution qualified under section 302(a) by reason of section 302(b) would not be taken into account in determining whether the distribution, with respect to such shareholder, was also a distribution in partial liquidation of the corporation.
Enacted provision · exact public law section
(d) Definition and special rule.— Section 346 (defining partial 26 USC 346. liquidation) is amended to read as follows: “SEC. 346. DEFINITION AND SPECIAL RULE. “(a) Complete Liquidation.— For purposes of this subchapter, a distribution shall be treated as in complete liquidation of a corpora-tion if the distribution is one of a series of distributions in redemption of all of the stock of the corporation pursuant to a plan. “(b) Transactions Which Might Reach Same Result as Partial Liquidations.— The Secretary shall prescribe such regulations as may be necessary to ensure that the purposes of subsections (a) and (b) of section 222 of the Tax Equity and Fiscal Responsibility Act of 1982 (which repeal the special tax treatment for partial liquidations) Ante, p. 478. 26 USC 355, 351, 337. may not be circumvented through the use of section 355, 351, 337, or any other provision of law or regulations (including the consolidated return regulations).”
1986
Tax Reform Act of 1986
Pub. L. 99–514 title VI § 631(e)(7) · 100 Stat. 2085
Struck · 26 U.S.C. § 346(b)
Pub. L. 99–514 struck out “337,” after “351,”
Source evidence
Code amendment note
Subsec. (b). Pub. L. 99–514 struck out “337,” after “351,”.
Enacted provision · exact public law section
(7) Subsection (b) of section 346 is amended by striking out “337,”.
Effective date note
Amendment by Pub. L. 99–514 applicable to any distribution in complete liquidation, and any sale or exchange, made by a corporation after July 31, 1986, unless such corporation is completely liquidated before Jan. 1, 1987, any transaction described in section 338 of this title for which the acquisition date occurs after Dec. 31, 1986, and any distribution, not in complete liquidation, made after Dec. 31, 1986, with exceptions and special and transitional rules, see section 633 of Pub. L. 99–514, set out as an Effective Date note under section 336 of this title.

5 of 6 references resolved to an enrolled provision · 1 partial

Editorial Notes

References in Text

Subsections (a) and (b) of section 222 of the Tax Equity and Fiscal Responsibility Act of 1982, referred to in subsec. (b), are subsecs. (a) and (b) of Pub. L. 97–248, title II, § 222, Sept. 3, 1982, 96 Stat. 478, which amended sections 331(a) and 336(a) of this title.

Amendments1982–1986 · 2 rounds

1986

Subsec. (b). Pub. L. 99–514 struck out “337,” after “351,”.

1982

Subsec. (a). Pub. L. 97–248 substituted provision that a distribution shall be treated as in complete liquidation if the distribution is one of a series in redemption of all the stock pursuant to a plan for provision that a distribution was to be treated as in partial liquidation if the distribution was one of a series in redemption of all the stock pursuant to a plan, or the distribution was not essentially equivalent to a dividend, was in redemption of part of the stock pursuant to a plan, and occurred within the taxable year or the next taxable year of the plan being adopted, including but not limited to a distribution which met the requirements of former subsec. (b) of this section, and that for the purposes of sections 562(b) and 6043 of this title, a partial liquidation included a redemption of stock to which section 302 of this title applied.

Subsec. (b). Pub. L. 97–248 added subsec. (b) and struck out former subsec. (b) which provided that a distribution was to be treated as in partial liquidation of a corporation if the distribution was attributable to the cessation of a business which had been carried on for the previous 5-year period and had not been acquired by the corporation in a transaction involving recognition of gain or loss during that time, and if the distributing corporation was actively involved in a trade or business immediately after the distribution under the terms described above for the business being liquidated, and that compliance with the above requirements would be determined without regard to whether or not the distribution was pro rata with respect to all the shareholders of the corporation.

Subsec. (c). Pub. L. 97–248 struck out subsec. (c) which provided that the fact that, with respect to a shareholder, a distribution qualified under section 302(a) by reason of section 302(b) would not be taken into account in determining whether the distribution, with respect to such shareholder, was also a distribution in partial liquidation of the corporation.

Statutory Notes and Related Subsidiaries

Effective Date of 1986 Amendment

Amendment by Pub. L. 99–514 applicable to any distribution in complete liquidation, and any sale or exchange, made by a corporation after July 31, 1986, unless such corporation is completely liquidated before Jan. 1, 1987, any transaction described in section 338 of this title for which the acquisition date occurs after Dec. 31, 1986, and any distribution, not in complete liquidation, made after Dec. 31, 1986, with exceptions and special and transitional rules, see section 633 of Pub. L. 99–514, set out as an Effective Date note under section 336 of this title.

Effective Date of 1982 Amendment

Amendment by Pub. L. 97–248 applicable to distributions after Aug. 31, 1982, with exceptions for certain partial liquidations, see section 222(f) of Pub. L. 97–248, set out as a note under section 302 of this title.

Credits

1954–1986 · 3 acts

1954Aug. 16, 1954, ch. 736, 68A Stat. 110
1982Pub. L. 97–248, title II, § 222(d), Sept. 3, 1982, 96 Stat. 479
1986Pub. L. 99–514, title VI, § 631(e)(7), Oct. 22, 1986, 100 Stat. 2273.

Show as published

(Aug. 16, 1954, ch. 736, 68A Stat. 110; Pub. L. 97–248, title II, § 222(d), Sept. 3, 1982, 96 Stat. 479; Pub. L. 99–514, title VI, § 631(e)(7), Oct. 22, 1986, 100 Stat. 2273.)