26 U.S.C. § 346

Definition and special rule

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(a) Complete liquidation

For purposes of this subchapter, a distribution shall be treated as in complete liquidation of a corporation if the distribution is one of a series of distributions in redemption of all of the stock of the corporation pursuant to a plan.

(b) Transactions which might reach same result as partial liquidations

The Secretary shall prescribe such regulations as may be necessary to ensure that the purposes of subsections (a) and (b) of section 222 of the Tax Equity and Fiscal Responsibility Act of 1982 (which repeal the special tax treatment for partial liquidations) may not be circumvented through the use of section 355, 351, or any other provision of law or regulations (including the consolidated return regulations).

(Aug. 16, 1954, ch. 736, 68A Stat. 110; Pub. L. 97–248, title II, § 222(d), Sept. 3, 1982, 96 Stat. 479; Pub. L. 99–514, title VI, § 631(e)(7), Oct. 22, 1986, 100 Stat. 2273.)Editorial NotesReferences in Text

Subsections (a) and (b) of section 222 of the Tax Equity and Fiscal Responsibility Act of 1982, referred to in subsec. (b), are subsecs. (a) and (b) of Pub. L. 97–248, title II, § 222, Sept. 3, 1982, 96 Stat. 478, which amended sections 331(a) and 336(a) of this title.

Amendments

1986—Subsec. (b). Pub. L. 99–514 struck out “337,” after “351,”.

1982—Subsec. (a). Pub. L. 97–248 substituted provision that a distribution shall be treated as in complete liquidation if the distribution is one of a series in redemption of all the stock pursuant to a plan for provision that a distribution was to be treated as in partial liquidation if the distribution was one of a series in redemption of all the stock pursuant to a plan, or the distribution was not essentially equivalent to a dividend, was in redemption of part of the stock pursuant to a plan, and occurred within the taxable year or the next taxable year of the plan being adopted, including but not limited to a distribution which met the requirements of former subsec. (b) of this section, and that for the purposes of sections 562(b) and 6043 of this title, a partial liquidation included a redemption of stock to which section 302 of this title applied.

Subsec. (b). Pub. L. 97–248 added subsec. (b) and struck out former subsec. (b) which provided that a distribution was to be treated as in partial liquidation of a corporation if the distribution was attributable to the cessation of a business which had been carried on for the previous 5-year period and had not been acquired by the corporation in a transaction involving recognition of gain or loss during that time, and if the distributing corporation was actively involved in a trade or business immediately after the distribution under the terms described above for the business being liquidated, and that compliance with the above requirements would be determined without regard to whether or not the distribution was pro rata with respect to all the shareholders of the corporation.

Subsec. (c). Pub. L. 97–248 struck out subsec. (c) which provided that the fact that, with respect to a shareholder, a distribution qualified under section 302(a) by reason of section 302(b) would not be taken into account in determining whether the distribution, with respect to such shareholder, was also a distribution in partial liquidation of the corporation.

Statutory Notes and Related SubsidiariesEffective Date of 1986 Amendment

Amendment by Pub. L. 99–514 applicable to any distribution in complete liquidation, and any sale or exchange, made by a corporation after July 31, 1986, unless such corporation is completely liquidated before Jan. 1, 1987, any transaction described in section 338 of this title for which the acquisition date occurs after Dec. 31, 1986, and any distribution, not in complete liquidation, made after Dec. 31, 1986, with exceptions and special and transitional rules, see section 633 of Pub. L. 99–514, set out as an Effective Date note under section 336 of this title.

Effective Date of 1982 Amendment

Amendment by Pub. L. 97–248 applicable to distributions after Aug. 31, 1982, with exceptions for certain partial liquidations, see section 222(f) of Pub. L. 97–248, set out as a note under section 302 of this title.

Notes of Decisions

Cited in 10 cases, 1961–1985 · leading case: Eva D. Bradbury v. Commissioner of Internal Revenue

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Eva D. Bradbury v. Commissioner of Internal Revenue (1962) ca1 “Excluding the partial liquidation sections of § 346, 26 U.S.C.A. § 346 . 5 . In the instant case, there was no question but that the corporation had sufficient accumulated earnings and profits from which to make the distribution and that it was made therefrom.”

Gravois Planing Mill Company, Charles A. And Florence Beckemeier v. Commissioner of Internal Revenue (1962) ca8 “; (b), 26 U.S.C.A. § 346 (a, b). 11 . Inasmuch as the taxpayer involved in Tobacco Products filed its return with the New York Collector, any appeal in that ease presumably would also have been to the Second Circuit.”

United States v. Gerald and Gladys Carey (1961) ca8 ““That said redemption since it also resulted in a contracting of the corporation’s activity because of the reduced capital, since it was part of a plan and thereunder completed within the time limits prescribed by Section 346(a) (2) [ 26 U.S.C.A. § 346 (a) (2)], constituted a…”

United States v. General Bancshares Corporation, General Bancshares Corporation v. United States (1968) ca8 “The Government further maintains that the divestment plan does not meet the definition of a partial liquidation as prescribed by § 346 of the Code, 26 U.S.C. § 346 , (a point conceded by the taxpayer), making inapplicable those cases holding that expenses incurred in connection…”

Transamerica Corporation v. United States (1966) cand “Similarly, if Transamerica had chosen to distribute its bank stocks under the form of the partial liquidation contemplated by 26 U.S.C. § 346 , it could have claimed at least deduction of expenses incurred therein under decisions holding that such expense may be deducted as…”

Fowler Hosiery Company, Inc. v. Commissioner of Internal Revenue (1962) ca7 “The Tax Court sustained the Commissioner of Internal Revenue’s determination that a $1,500,000 cash distribution (which Fowler received from its wholly owned Canadian subsidiary, Fowler Hosiery Company of Canada, Limited) was a distribution in partial liquidation within the…”

Van Keppel v. United States (1962) ksd “02(b) (1) and § 346 of the Internal Revenue Code of 1954, 26 U.S.C.A. § 346 . It is unnecessary to examine these questions in view of the foregoing decision.”

Oscar E. Baan and Evelyn K. Baan v. Commissioner of Internal Revenue (1971) ca9 “Before the Tax Court, taxpayers advanced alternative theories for the position that the realized gain was not taxable, one theory based upon section 355, and the other upon section 354, of the Internal Revenue Code of 1954 (Code), 26 U.”

Kenton Meadows Company, Inc., a West Virginia Corporation, Kenton Meadows and Acel I. Meadows, Husband and Wife v. Commi (1985) ca4 “Two issues are raised on appeal: (1) whether the Tax Court erred in determining that a distribution of bank stock owned by the corporate taxpayer in exchange for a portion of its outstanding stock was a distribution of property taxable as a dividend rather than as a capital gain…”

Midwest Investment Co. v. United States (1975) ndd “The parties are in agreement that a partial liquidation under 26 U.S.C. § 346 was had. The problem is that this section merely defines partial liquidation, and does not detail the tax consequences attendant upon such a liquidation.”

Annotations are extracted automatically from the opinions in the Syfert caselaw corpus and ranked by authority, recency, and treatment. Dots show Syfertize treatment of the citing case itself.