Title 26 — Internal Revenue Code
Part III · Chapter 1 — Normal Taxes and Surtaxes
§ 356. Receipt of additional consideration
Statutory text
Gain on exchanges
Recognition of gain
If—
section 354 or 355 would apply to an exchange but for the fact that
the property received in the exchange consists not only of property permitted by section 354 or 355 to be received without the recognition of gain but also of other property or money,
then the gain, if any, to the recipient shall be recognized, but in an amount not in excess of the sum of such money and the fair market value of such other property.
Treatment as dividend
If an exchange is described in paragraph (1) but has the effect of the distribution of a dividend (determined with the application of section 318(a)), then there shall be treated as a dividend to each distributee such an amount of the gain recognized under paragraph (1) as is not in excess of his ratable share of the undistributed earnings and profits of the corporation accumulated after . The remainder, if any, of the gain recognized under paragraph (1) shall be treated as gain from the exchange of property.
Additional consideration received in certain distributions
If—
section 355 would apply to a distribution but for the fact that
the property received in the distribution consists not only of property permitted by section 355 to be received without the recognition of gain, but also of other property or money,
then an amount equal to the sum of such money and the fair market value of such other property shall be treated as a distribution of property to which section 301 applies.
Loss
If—
section 354 would apply to an exchange or section 355 would apply to an exchange or distribution, but for the fact that
the property received in the exchange or distribution consists not only of property permitted by section 354 or 355 to be received without the recognition of gain or loss, but also of other property or money,
then no loss from the exchange or distribution shall be recognized.
Securities as other property
For purposes of this section—
In general
Except as provided in paragraph (2), the term “other property” includes securities.
Exceptions
Securities with respect to which nonrecognition of gain would be permitted
The term “other property” does not include securities to the extent that, under section 354 or 355, such securities would be permitted to be received without the recognition of gain.
Greater principal amount in section 354 exchange
If—
in an exchange described in section 354 (other than subsection (c) thereof), securities of a corporation a party to the reorganization are surrendered and securities of any corporation a party to the reorganization are received, and
the principal amount of such securities received exceeds the principal amount of such securities surrendered,
then, with respect to such securities received, the term “other property” means only the fair market value of such excess. For purposes of this subparagraph and subparagraph (C), if no securities are surrendered, the excess shall be the entire principal amount of the securities received.
Greater principal amount in section 355 transaction
If, in an exchange or distribution described in section 355, the principal amount of the securities in the controlled corporation which are received exceeds the principal amount of the securities in the distributing corporation which are surrendered, then, with respect to such securities received, the term “other property” means only the fair market value of such excess.
Nonqualified preferred stock treated as other property
For purposes of this section—
In general
Except as provided in paragraph (2), the term “other property” includes nonqualified preferred stock (as defined in section 351(g)(2)).
Exception
The term “other property” does not include nonqualified preferred stock (as so defined) to the extent that, under section 354 or 355, such preferred stock would be permitted to be received without the recognition of gain.
Exchanges for section 306 stock
Notwithstanding any other provision of this section, to the extent that any of the other property (or money) is received in exchange for section 306 stock, an amount equal to the fair market value of such other property (or the amount of such money) shall be treated as a distribution of property to which section 301 applies.
Transactions involving gift or compensation
For special rules for a transaction described in section 354, 355, or this section, but which—
results in a gift, see section 2501 and following, or
has the effect of the payment of compensation, see section 61(a)(1).
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.
Aug. 16, 1954, ch. 736, 68A Stat. 115 · 68A Stat. 115
Enacted · 26 U.S.C. § 356
Aug. 16, 1954, ch. 736, 68A Stat. 115
Source evidence
Code source credit
Aug. 16, 1954, ch. 736, 68A Stat. 115Pub. L. 94–253 § 1(c) · 90 Stat. 295
Substituted · 26 U.S.C. § 356(d)(2)(B)(i)
Pub. L. 94–253 substituted “subsection (c) or (d) thereof” for “subsection (c) thereof”
Source evidence
Code amendment note
Subsec. (d)(2)(B)(i). Pub. L. 94–253 substituted “subsection (c) or (d) thereof” for “subsection (c) thereof”.Enacted provision · exact public law section
(c) Effects on Shareholders and Security Holders.— Section 354 26 USC 354. of such Code (relating to exchanges of stock and securities in certain reorganizations) is amended by adding at the end thereof the following new subsection: “(d) Exchanges Under the Final System Plan for ConRail.— No gain or loss shall be recognized if stock or securities in a corporation are, in pursuance of an exchange to which paragraph (1) or (2) of section 374(c) applies, exchanged solely for stock of the Consolidated Rail Corporation, securities of such Corporation, certificates of value of the United States Railway Association, or any combination thereof.” 26 USC 356. Clause (i) of section 356(d)(2)(B) of such Code (relating to receipt of additional consideration) is amended by striking out “subsection (c) thereof” and inserting in lieu thereof “subsection (c) or (d) thereof”.Pub. L. 97–248 title II § 227(b) · 96 Stat. 324
Inserted · 26 U.S.C. § 356(a)(2)
Pub. L. 97–248 inserted “(determined with the application of section 318(a))” after “distribution of a dividend”
Source evidence
Code amendment note
Subsec. (a)(2). Pub. L. 97–248 inserted “(determined with the application of section 318(a))” after “distribution of a dividend”.Enacted provision · exact public law section
(b) Application for purposes of section 356(a)(2).— Paragraph (2) of section 356(a) (relating to treatment as dividend) is amended by 26 USC 356. inserting “(determined with the application of section 318(a)” after “distribution of a dividend”Revenue Reconciliation Act of 1990
Pub. L. 101–508 title XI § 11801(c)(8)(E) · 104 Stat. 1388
Struck · 26 U.S.C. § 356(d)(2)(B)(i)
Pub. L. 101–508 struck out “or (d)” after “subsection (c)”
Source evidence
Code amendment note
Subsec. (d)(2)(B)(i). Pub. L. 101–508 struck out “or (d)” after “subsection (c)”.Enacted provision · exact public law section
(E) Clause (i) of section 356(d)(2)(B) is amended by striking “or (d)”.Pub. L. 105–34 title X § 1014(d) · 111 Stat. 788
Added · 26 U.S.C. § 356(e)(g)
Pub. L. 105–34 added subsec. (e)
Redesignated · 26 U.S.C. § 356(e)(g)
Pub. L. 105–34 redesignated former subsecs. (e) and (f) as (f) and (g), respectively
Source evidence
Code amendment note
Subsecs. (e) to (g). Pub. L. 105–34 added subsec. (e) and redesignated former subsecs. (e) and (f) as (f) and (g), respectively.Enacted provision · exact public law section
(d) Section 356.— Section 356 is amended by redesignating subsections (e) and (f) as subsections (f) and (g), respectively, and by inserting after subsection (d) the following new subsection: “(e) Nonqualified Preferred Stock Treated as Other Property.— For purposes of this section— “(1) In general.— Except as provided in paragraph (2), the term ‘other property’ includes nonqualified preferred stock (as defined in section 351(g)(2)). “(2) Exception.— The term ‘other property’ does not include nonqualified preferred stock (as so defined) to the extent that, under section 354 or 355, such preferred stock would be permitted to be received without the recognition of gain.”.Effective date note
Amendment by Pub. L. 105–34 applicable, with certain exceptions, to transactions after June 8, 1997, see section 1014(f) of Pub. L. 105–34, set out as a note under section 351 of this title.
5 of 6 references resolved to an enrolled provision · 1 partial
Editorial Notes
Amendments1976–1997 · 4 rounds
1997
Subsecs. (e) to (g). Pub. L. 105–34 added subsec. (e) and redesignated former subsecs. (e) and (f) as (f) and (g), respectively.
1990
Subsec. (d)(2)(B)(i). Pub. L. 101–508 struck out “or (d)” after “subsection (c)”.
1982
Subsec. (a)(2). Pub. L. 97–248 inserted “(determined with the application of section 318(a))” after “distribution of a dividend”.
1976
Subsec. (d)(2)(B)(i). Pub. L. 94–253 substituted “subsection (c) or (d) thereof” for “subsection (c) thereof”.
Statutory Notes and Related Subsidiaries
Effective Date of 1997 Amendment
Amendment by Pub. L. 105–34 applicable, with certain exceptions, to transactions after , see section 1014(f) of Pub. L. 105–34, set out as a note under section 351 of this title.
Effective Date of 1982 Amendment
Pub. L. 97–248, title II, § 227(c)(2), , 96 Stat. 492, provided that: “The amendment made by subsection (b) [amending this section] shall apply to distributions after , in taxable years ending after such date.”
Effective Date of 1976 Amendment
Amendment by Pub. L. 94–253 applicable to taxable years ending after , see section 2 of Pub. L. 94–253, set out as a note under section 354 of this title.
Savings Provision
For provisions that nothing in amendment by Pub. L. 101–508 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 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.
Credits
1954–1997 · 5 acts
- 1954Aug. 16, 1954, ch. 736, 68A Stat. 115
- 1976Pub. L. 94–253, § 1(c), , 90 Stat. 296
- 1982Pub. L. 97–248, title II, § 227(b), , 96 Stat. 492
- 1990Pub. L. 101–508, title XI, § 11801(c)(8)(E), , 104 Stat. 1388–524
- 1997Pub. L. 105–34, title X, § 1014(d), , 111 Stat. 921.
Show as published
(Aug. 16, 1954, ch. 736, 68A Stat. 115; Pub. L. 94–253, § 1(c), , 90 Stat. 296; Pub. L. 97–248, title II, § 227(b), , 96 Stat. 492; Pub. L. 101–508, title XI, § 11801(c)(8)(E), , 104 Stat. 1388–524; Pub. L. 105–34, title X, § 1014(d), , 111 Stat. 921.)