26 U.S.C. § 1249

Gain from certain sales or exchanges of patents, etc., to foreign corporations

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(a) General rule

Gain from the sale or exchange of a patent, an invention, model, or design (whether or not patented), a copyright, a secret formula or process, or any other similar property right to any foreign corporation by any United States person (as defined in section 7701(a)(30)) which controls such foreign corporation shall, if such gain would (but for the provisions of this subsection) be gain from the sale or exchange of a capital asset or of property described in section 1231, be considered as ordinary income.

(b) Control

For purposes of subsection (a), control means, with respect to any foreign corporation, the ownership, directly or indirectly, of stock possessing more than 50 percent of the total combined voting power of all classes of stock entitled to vote. For purposes of this subsection, the rules for determining ownership of stock prescribed by section 958 shall apply.

(Added Pub. L. 87–834, § 16(a), Oct. 16, 1962, 76 Stat. 1045; amended Pub. L. 89–809, title I, § 104(m)(3), Nov. 13, 1966, 80 Stat. 1563; Pub. L. 94–455, title XIX, § 1901(b)(3)(K), Oct. 4, 1976, 90 Stat. 1793; Pub. L. 113–295, div. A, title II, § 221(a)(84), Dec. 19, 2014, 128 Stat. 4049.)Editorial NotesAmendments

2014—Subsec. (a). Pub. L. 113–295 struck out “after December 31, 1962,” before “of a patent”.

1976—Subsec. (a). Pub. L. 94–455 substituted “ordinary income” for “gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231”.

1966—Subsec. (a). Pub. L. 89–809 substituted “Gain” for “Except as provided in subsection (c), gain”.

Statutory Notes and Related SubsidiariesEffective Date of 2014 Amendment

Amendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

Effective Date of 1976 Amendment

Amendment by Pub. L. 94–455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.

Effective Date of 1966 Amendment

Amendment by Pub. L. 89–809 applicable with respect to taxable years beginning after Dec. 31, 1966, see section 104(n) of Pub. L. 89–809, set out as a note under section 11 of this title.

Effective Date

Pub. L. 87–834, § 16(c), Oct. 16, 1962, 76 Stat. 1045, provided that: “The amendments made by this section [enacting this section] shall apply to taxable years beginning after December 31, 1962.”

Notes of Decisions
Cited in 61 cases, 1927–1979 · leading case: Page v. Lafayette Worsted Co., 66 F.2d 339 (1st Cir. 1933).
Page v. Lafayette Worsted Co., 66 F.2d 339 (1st Cir. 1933). · cites it 4× “But in that case the question was as to the value of securities in 1913, and the change was made, not by the Commissioner who made the first valuation, but by a successor.”
Naumkeag Steam Cotton Co. v. United States, 2 F. Supp. 126 (Ct. Cl. 1933). · cites it 2× “The quoted statement was made with reference to the plaintiff's contention that at the time the commissioner wrote the collector a letter to apply an overpayment for 1918 and 1919 by Daube, which overpayments had been timely allowed, against a profits tax due by a partnership…”
McIlhenny v. Comm'r of Internal Revenue, 39 F.2d 356 (3rd Cir. 1930). “31, thus: “Under the present method of procedure a taxpayer never knows when he is through, as a tax ease may be opened at any time because of a change in ruling-by the treasury department.”
Simmons Mfg. Co. v. Routzahn, 62 F.2d 947 (6th Cir. 1933). · cites it 2× “Congress undertook to do that by section 1106 (a) of the Revenue Act of 1926 (26 USCA § 1249, note), printed in the margin, 2 but repealed the section as of the date of its enactment by section 612 of the Revenue Act of 1928 ( 45 Stat.”
Mascot Oil Co. v. United States, 42 F.2d 309 (Ct. Cl. 1930). · cites it 2× “Case, supra, we held that section 1106(a) of the act of 1926 (26 USCA § 1249 note) was of no benefit to the plaintiff where the taxes in question had been collected prior to the time when the revenue bill of 1926 went into effect unless it was‘shown that the taxes were overpaid.…”
Backus v. United States, 59 F.2d 242 (Ct. Cl. 1932). “Finally it is contended on behalf of the plaintiff that this case was not finally settled by a closing agreement, as provided by section 1006, Revenue Act of 1924 (26 USCA § 1249 note), first enacted in the Revenue Act of 1921, and the.”
Trumbull Steel Co. v. United States, 1 F. Supp. 762 (Ct. Cl. 1932). · cites it 2× “But the application of the 1924 act had not been definitely settled at the time the payments in the ease at bar were made, and, considering the fact that section 1106 of the Bevenue Act of 1926 (26 USCA § 1249 note) was then in force, the whole legal situation was at that time…”
Bankers' Reserve Life Co. v. United States, 42 F.2d 313 (Ct. Cl. 1930). “Subsequent to the determination, assessment, and payment of the tax and interest-in question, plaintiff and the Commissioner, with the approval of the Secretary of the Treasury, on February 25, 1928, executed an agreement to the final determination and assessment of its tax for…”
Larkin v. United States, 78 F.2d 951 (8th Cir. 1935). “” Appellants further contend that if any tax was due the United States by reason of the receipt of the stock by the taxpayers in 1920, such tax was barred by the statute of limitations on March 15, 1926, and all liability extinguished.”
Aetna Life Ins. Co. v. Eaton, 43 F.2d 711 (2d Cir. 1930). “The closing agreement signed by the Commissioner on January 14, 1928, was made *713 under the authority of section 1106 (b) of the Revenue Aet of 1926 (26 USCA § 1249 note), which read as.’follows: “If after a determination and assessment in any ease the taxpayer has paid in…”
Pac. Coast Steel Co. v. McLaughlin, 61 F.2d 73 (9th Cir. 1932). “Our conclusion that the waiver of December 7, 1925, is valid and appellants’ concession relative thereto disposes of any necessity of considering section 1106 (a) of the Revenue Act of 1926 (26 USCA § 1249 note) that provided that the bar of the statute of limitations against…”
WP Brown & Sons Lumber Co. v. Com'r of Internal Revenue, 38 F.2d 425 (6th Cir. 1930). “113 , 26 USCA § 1249, note), specifically provided that the bar of the statute “shall not only operate to bar the remedy but shall extinguish the liability.”
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