U.S. Code » Title 26 » Subtitle Subtitle A— Income Taxes › Chapter CHAPTER 1— NORMAL TAXES AND SURTAXES › Subchapter Subchapter O— Gain or Loss on Disposition of Property › Part PART III— COMMON NONTAXABLE EXCHANGES

26 U.S.C. § 1032

Exchange of stock for property

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(a) Nonrecognition of gain or loss

No gain or loss shall be recognized to a corporation on the receipt of money or other property in exchange for stock (including treasury stock) of such corporation. No gain or loss shall be recognized by a corporation with respect to any lapse or acquisition of an option, or with respect to a securities futures contract (as defined in section 1234B), to buy or sell its stock (including treasury stock).

(b) Basis

For basis of property acquired by a corporation in certain exchanges for its stock, see section 362.

(Aug. 16, 1954, ch. 736, 68A Stat. 303; Pub. L. 98–369, div. A, title I, § 57(a), July 18, 1984, 98 Stat. 574; Pub. L. 106–554, § 1(a)(7) [title IV, § 401(c)], Dec. 21, 2000, 114 Stat. 2763, 2763A–649.)Editorial NotesAmendments

2000—Subsec. (a). Pub. L. 106–554 inserted “, or with respect to a securities futures contract (as defined in section 1234B),” after “an option” in second sentence.

1984—Subsec. (a). Pub. L. 98–369 inserted provision that no gain or loss shall be recognized by a corporation with respect to any lapse or acquisition of an option to buy or sell its stock (including treasury stock).

Statutory Notes and Related SubsidiariesEffective Date of 2000 Amendment

Pub. L. 106–554, § 1(a)(7) [title IV, § 401(j)], Dec. 21, 2000, 114 Stat. 2763, 2763A–651, provided that: “The amendments made by this section [enacting section 1234B of this title and amending this section and sections 1091, 1092, 1223, 1233, 1234A, 1256 and 7701 of this title] shall take effect on the date of the enactment of this Act [Dec. 21, 2000].”

Effective Date of 1984 Amendment

Pub. L. 98–369, div. A, title I, § 57(b), July 18, 1984, 1984, 98 Stat. 574, provided that: “The amendment made by subsection (a) [amending this section] shall apply to options acquired or lapsed after the date of the enactment of this Act [July 18, 1984] in taxable years ending after such date.”

Notes of Decisions
Cited in 10 cases, 1961–2003 · leading case: Beam Ex Rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 833 A.2d 961 (Del. Ch. 2003).
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Beam Ex Rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 833 A.2d 961 (Del. Ch. 2003). “See 26 U.S.C. § 1032 (2003) (no gain or loss recognized for tax purposes on issuance of stock); Paul Munter & Thomas A.”
Nat'l Can Corp. v. United States, 520 F. Supp. 567 (N.D. Ill. 1981). “26 U.S.C. § 1032 ; see Thalhimer Bros., Inc.”
McCrory Corp. v. United States, 651 F.2d 828 (2d Cir. 1981). “§ 1032(a), 26 U.S.C. § 1032 (a), “[n]o gain or loss shall be recognized to a corporation on the receipt of money or other property in exchange for stock (including treasury stock) of such corporation.”
Sid Luckman & Estelle Luckman v. Comm'r of Internal Revenue, 418 F.2d 381 (7th Cir. 1969). “Nevertheless, the Tax Court felt that the enactment of Section 1032 of the 1954 Code ( 26 U.S.C. § 1032 ) made the specific provisions of Section 421(a) (3) redundant unless different intent could be inferred.”
Gen. Elec. Co. v. The United States, 299 F.2d 942 (Ct. Cl. 1962). “(Internal Revenue Code of 1954, § 1032, 26 U.S.C. § 1032 .) Prior to the Internal Revenue Code of 1954, the law was as stated in the regulations quoted, supra.”
Fed. Employees'Distrib. Co. v. United States, 206 F. Supp. 330 (S.D. Cal. 1962). “§ 118 ], or were received “in exchange for stock” pursuant to § 1032(a) of the Internal Revenue Code of 1954 [26 U.S. C. § 1032(a)]; and that, in either case, such fees were exempted from inclusion in plaintiff’s gross income.”
Penn-Texas Corp. (Formerly Colt's Mfg. Co.) v. The United States, 308 F.2d 575 (Ct. Cl. 1962). “This problem does not arise under the 1954 Code, Section 1032, 26 U.S.C.A. § 1032 of which excludes from gross income any gain or loss in an exchange of treasury stock for money or other property.”
Cmty. TV Ass'n of Havre v. United States, 203 F. Supp. 270 (D. Mont. 1962). “” ( 26 U.S.C.A. § 1032 (a).) 4 . The articles and by-laws recite: “The Class B stock shall be distinguished from Class A stock as follows: “(a) Class B stock shall have no voting privileges, all of the voting privileges being vested in Class A stock; “(b) Class B stock shall not…”
Gen. Elec. Co. v. United States, 156 Ct. Cl. 617 (Ct. Cl. 1962). “(Internal Revenue Code of 1954, § 1032, 26 U.S.C. § 1032 .) Prior to the Internal Revenue Code of 1954, the law was as stated in the regulations quoted, supra.”
Girard Trust Corn Exch. Bank v. United States, 191 F. Supp. 551 (E.D. Pa. 1961). “Title 26 U.S.C.A. § 1032 (a) reads: “(a) Nonrecognition of gain or loss.”
— 26 U.S.C. § 1032(a) — 1 case
Fed. Employees'Distrib. Co. v. United States, 206 F. Supp. 330 (S.D. Cal. 1962). “§ 118 ], or were received “in exchange for stock” pursuant to § 1032(a) of the Internal Revenue Code of 1954 [26 U.S. C. § 1032(a)]; and that, in either case, such fees were exempted from inclusion in plaintiff’s gross income.”
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