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§ 354. Exchanges of stock and securities in certain reorganizations
(a)
General rule
(1)
In general
No gain or loss shall be recognized if stock or securities in a corporation a party to a reorganization are, in pursuance of the plan of reorganization, exchanged solely for stock or securities in such corporation or in another corporation a party to the reorganization.
(2)
Limitation
(A)
Excess principal amount
Paragraph (1) shall not apply if—
(B)
Property attributable to accrued interest
Neither paragraph (1) nor so much of section
356 as relates to paragraph (1) shall apply to the extent that any stock (including nonqualified preferred stock, as defined in section
351
(g)(2)), securities, or other property received is attributable to interest which has accrued on securities on or after the beginning of the holder’s holding period.
(C)
Nonqualified preferred stock
(i)
In general
Nonqualified preferred stock (as defined in section
351
(g)(2)) received in exchange for stock other than nonqualified preferred stock (as so defined) shall not be treated as stock or securities.
(ii)
Recapitalizations of family-owned corporations
(I)
In general
Clause (i) shall not apply in the case of a recapitalization under section 368(a)(1)(E) of a family-owned corporation.
(II)
Family-owned corporation
For purposes of this clause, except as provided in regulations, the term “family-owned corporation” means any corporation which is described in clause (i) of section
447
(d)(2)(C) throughout the 8-year period beginning on the date which is 5 years before the date of the recapitalization. For purposes of the preceding sentence, stock shall not be treated as owned by a family member during any period described in section
355
(d)(6)(B).
(III)
Extension of statute of limitations
The statutory period for the assessment of any deficiency attributable to a corporation failing to be a family-owned corporation shall not expire before the expiration of 3 years after the date the Secretary is notified by the corporation (in such manner as the Secretary may prescribe) of such failure, and such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment.
(3)
Cross references
(A)
For treatment of the exchange if any property is received which is not permitted to be received under this subsection (including nonqualified preferred stock and an excess principal amount of securities received over securities surrendered, but not including property to which paragraph (2)(B) applies), see section
356.
(B)
For treatment of accrued interest in the case of an exchange described in paragraph (2)(B), see section
61.
(b)
Exception
(1)
In general
Subsection (a) shall not apply to an exchange in pursuance of a plan of reorganization within the meaning of subparagraph (D) or (G) of section
368
(a)(1), unless—
(c)
Certain railroad reorganizations
Notwithstanding any other provision of this subchapter, subsection (a)(1) (and so much of section
356 as relates to this section) shall apply with respect to a plan of reorganization (whether or not a reorganization within the meaning of section
368
(a)) for a railroad confirmed under section
1173 of title
11 of the United States Code, as being in the public interest.
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Notes
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Parallel authorities (CFR)
PDF (4 pages)
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Notes
No Update(s)
Parallel authorities (CFR)
PDF (4 pages)
Title 26 RSS
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