§ 361. Nonrecognition of gain or loss to corporations; treatment of distributions

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.

1. 1954

   Aug. 16, 1954, ch. 736, 68A Stat. 118 · 68A Stat. 118

   Enacted · 26 U.S.C. § 361

   Aug. 16, 1954, ch. 736, 68A Stat. 118

   Source evidence

   Code source credit
   Aug. 16, 1954, ch. 736, 68A Stat. 118

2. 1986

   Tax Reform Act of 1986

   Pub. L. 99–514 title XVIII § 1804(g)(1) · 100 Stat. 2085

   Amended · 26 U.S.C. § 361

   Pub. L. 99–514 amended section generally. Prior to amendment, section related to whether gain or loss was recognized if corporation which was party to reorganization exchanged property, pursuant to plan of reorganization, for stock or securities in another corporation which was party to the reorganization or for other property or money

   Source evidence

   Code amendment note
   Pub. L. 99–514 amended section generally. Prior to amendment, section related to whether gain or loss was recognized if corporation which was party to reorganization exchanged property, pursuant to plan of reorganization, for stock or securities in another corporation which was party to the reorganization or for other property or money.

   Enacted provision · exact public law section
   (1) In general.— Section 361 (relating to nonrecognition of gain or loss to corporations) is amended to read as follows: “SEC. 361. NONRECOGNITION OF GAIN OR LOSS TO TRANSFEROR CORPORATION; OTHER TREATMENT OF TRANSFEROR CORPORATION; ETC. “(a) General Rule.— No gain or loss shall be recognized to a transferor corporation which is a party to a reorganization on any exchange of property pursuant to the plan of reorganization. “(b) Other Treatment of Transferor Corporation.— In the case of a transferor corporation which is a party to a reorganization— “(1) sections 336 and 337 shall not apply with respect to any liquidation of such corporation pursuant to the plan of reorganization, “(2) the basis of the property (other than stock and securities described in paragraph (3)) received by the corporation pursuant to such plan of reorganization shall be the same as it would be in the hands of the transferor of such property, adjusted by the amount of gain or loss recognized to such transferor on such transfer, and “(3) no gain or loss shall be recognized by such corporation on any disposition (pursuant to the plan of reorganization) of stock or securities which were received pursuant to such plan and which are in another corporation which is a party to such reorganization. For purposes of paragraph (3), if the transferor corporation is merged, consolidated, or liquidated pursuant to the plan of reorganization, or if a transaction meets the requirements of section 368(a)(l)(C) pursuant to a waiver granted by the Secretary under section 368(a)(2)(G)(ii), any distribution of such stock or securities by the transferor corporation to its creditors in connection with such transaction shall be treated as pursuant to such plan of reorganization. “(c) Treatment of Distributions of Appreciated Property.— Notwithstanding any other provision of this subtitle, gain shall be recognized on the distribution of property (other than property permitted by section 354, 355, or 356 to be received without the recognition of gain) pursuant to a plan of reorganization in the same manner as if such property had been sold to the distributee at its fair market value.”

3. 1988

   Technical and Miscellaneous Revenue Act of 1988

   Pub. L. 100–647 title I § 1018(d)(5)(A) · 102 Stat. 3342

   1. Substituted · 26 U.S.C. § 361

      Pub. L. 100–647 substituted “corporations; treatment of distributions” for “transferor corporations; other treatment of transferor corporation; etc.” in section catchline

   2. Amended · 26 U.S.C. § 361

      Pub. L. 100–647 amended text generally, revising content and structure of section

   Source evidence

   Code amendment note
   Pub. L. 100–647 substituted “corporations; treatment of distributions” for “transferor corporations; other treatment of transferor corporation; etc.” in section catchline and amended text generally, revising content and structure of section.

   Enacted provision · exact public law section
   (A) Section 361 of the 1986 Code is amended to read as follows: “SEC. 361. NONRECOGNITION OF GAIN OR LOSS TO CORPORATIONS; TREATMENT OF DISTRIBUTIONS. “(a) General Rule.— No gain or loss shall be recognized to a corporation if such corporation is a party to a reorganization and exchanges property, in pursuance of the plan of reorganization, solely for stock or securities in another corporation a party to the reorganization. “(b) Exchanges Not Solely in Kind.— “(1) Gain.— If subsection (a) would apply to an exchange but for the fact that the property received in exchange consists not only of stock or securities permitted by subsection (a) to be received without the recognition of gain, but also of other property or money, then— “(A) Property distributed.— If the corporation receiving such other property or money distributes it in pursuance of the plan of reorganization, no gain to the corporation shall be recognized from the exchange, but “(B) Property not distributed.— If the corporation receiving such other property or money does not distribute it in pursuance of the plan of reorganization, the gain, if any, to the corporation shall be recognized. The amount of gain recognized under subparagraph (B) shall not exceed the sum of the money and the fair market value of the other property so received which is not so distributed. “(2) Loss.— If subsection (a) would apply to an exchange but for the fact that the property received in exchange consists not only of property permitted by subsection (a) to be received without the recognition of gain or loss, but also of other property or money, then no loss from the exchange shall be recognized. “(3) Treatment of transfers to creditors.— For purposes of paragraph (1), any transfer of the other property or money received in the exchange by the corporation to its creditors in connection with the reorganization shall be treated as a distribution in pursuance of the plan of reorganization. The Secretary may prescribe such regulations as may be necessary to prevent avoidance of tax through abuse of the preceding sentence or subsection (c)(3). “(c) Treatment of Distributions.— “(1) In general.— Except as provided in paragraph (2), no gain or loss shall be recognized to a corporation a party to a reorganization on the distribution to its shareholders of property in pursuance of the plan of reorganization. “(2) Distributions of appreciated property.— “(A) In general.— If— “(i) in a distribution referred to in paragraph (1), the corporation distributes property other than qualified property, and “(ii) the fair market value of such property exceeds its adjusted basis (in the hands of the distributing corporation), then gain shall be recognized to the distributing corporation as if such property were sold to the distributee at its fair market value. “(B) Qualified property.— For purposes of this subsection, the term ‘qualified property’ means— “(i) any stock in (or right to acquire stock in) the distributing corporation or obligation of the distributing corporation, or “(ii) any stock in (or right to acquire stock in) another corporation which is a party to the reorganization or obligation of another corporation which is such a party if such stock (or right) or obligation is received by the distributing corporation in the exchange. “(C) Treatment of liabilities.— If any property distributed in the distribution referred to in paragraph (1) is subject to a liability or the shareholder assumes a liability of the distributing corporation in connection with the distribution, then, for purposes of subparagraph (A), the fair market value of such property shall be treated as not less than the amount of such liability. “(3) Treatment of certain transfers to creditors.— For purposes of this subsection, any transfer of qualified property by the corporation to its creditors in connection with the reorganization shall be treated as a distribution to its shareholders pursuant to the plan of reorganization. “(4) Coordination with other provisions.— Section 311 and subpart B of part II of this subchapter shall not apply to any distribution referred to in paragraph (1).”

4. 1990

   Revenue Reconciliation Act of 1990

   Pub. L. 101–508 title XI § 11321(b) · 104 Stat. 1388

   Added · 26 U.S.C. § 361(c)(5)

   Pub. L. 101–508 added par. (5)

   Source evidence

   Code amendment note
   Subsec. (c)(5). Pub. L. 101–508 added par. (5).

   Enacted provision · exact public law section
   (b) Technical Amendment.— Subsection (c) of section 361 is amended by adding at the end thereof the following new paragraph: “(5) Cross Reference.— “For provision providing for recognition of gain in certain distributions, see section 355(d).”

5. 2004

   Pub. L. 108–357 title VIII § 898(a) · 118 Stat. 1418

   Inserted · 26 U.S.C. § 361(b)(3)

   Pub. L. 108–357 inserted at end “In the case of a reorganization described in section 368(a)(1)(D) with respect to which stock or securities of the corporation to which the assets are transferred are distributed in a transaction which qualifies under section 355, this paragraph shall apply only to the extent that the sum of the money and the fair market value of other property transferred to such creditors does not exceed the adjusted bases of such assets transferred.”

   Source evidence

   Code amendment note
   Subsec. (b)(3). Pub. L. 108–357 inserted at end “In the case of a reorganization described in section 368(a)(1)(D) with respect to which stock or securities of the corporation to which the assets are transferred are distributed in a transaction which qualifies under section 355, this paragraph shall apply only to the extent that the sum of the money and the fair market value of other property transferred to such creditors does not exceed the adjusted bases of such assets transferred.”

   Enacted provision · exact public law section
   (a) In General.— Section 361(b)(3) (relating to treatment of transfers to creditors) is amended by adding at the end the following new sentence: “In the case of a reorganization described in section 368(a)(1)(D) with respect to which stock or securities of the corporation to which the assets are transferred are distributed in a transaction which qualifies under section 355, this paragraph shall apply only to the extent that the sum of the money and the fair market value of other property transferred to such creditors does not exceed the adjusted bases of such assets transferred.”.

   Effective date note
   Amendment by Pub. L. 109–135 effective as if included in the provision of the American Jobs Creation Act of 2004, Pub. L. 108–357, to which such amendment relates, see section 403(nn) of Pub. L. 109–135, set out as a note under section 26 of this title.

6. 2005

   Tax Technical Corrections Act of 2005

   Pub. L. 109–135 title IV § 403(jj)(1) · 119 Stat. 2577

   Inserted · 26 U.S.C. § 361(b)(3)

   Pub. L. 109–135 inserted before period at end “(reduced by the amount of the liabilities assumed (within the meaning of section 357(c)))”

   Source evidence

   Code amendment note
   Subsec. (b)(3). Pub. L. 109–135 inserted before period at end “(reduced by the amount of the liabilities assumed (within the meaning of section 357(c)))”.

   Enacted provision · exact public law section
   (1) Paragraph (3) of section 361(b) is amended by inserting “(reduced by the amount of the liabilities assumed (within the meaning of section 357(c)))” before the period at the end.

   Effective date note
   Amendment by Pub. L. 109–135 effective as if included in the provision of the American Jobs Creation Act of 2004, Pub. L. 108–357, to which such amendment relates, see section 403(nn) of Pub. L. 109–135, set out as a note under section 26 of this title.

6 of 7 references resolved to an enrolled provision · 1 partial