Sec. 112. (b) (1) Property held Sec. 112. (b) (1) Property held for productive use or investment. for productive use or investment. -No gain or loss shall be recog--No gain or loss shall be recognized if property held for produc- nized if property held for productive use in trade or business or for tive use in trade or business or for investment (not including stock in investment (not including stock in trade or other property held pri- trade or other property held primarily for sale, nor stocks, bonds, marily for sale, nor stocks, bonds, notes, choses in action, certificates notes, choses in action, certificates of trust or beneficial interest, or of trust or beneficial interest, or other securities or evidences of in- other securities or evidences of indebtedness or interest) is exchanged debtedness or interest) is exchanged solely for property of a like kind solely for property of a like kind to be held either for productive use to be held either for productive use in trade or business or for invest-in trade or business or for investment. ment. Sec. 112. (b) (2) Stock for stock Sec. 112. (b) (2) Stock for stock of same corporation.-No gain or of same corporation.-No gain or loss shall be recognized if common loss shall be recognized if common stock in a corporation is exchanged stock in a corporation is exchanged solely for common stock in the same solely for common stock in the same corporation, or if preferred stock corporation, or if preferred stock in a corporation is exchanged solely in a corporation is exchanged solely for preferred stock in the same cor- for preferred stock in the same corporation. poration. Sec. 112. (b) (3) Stock for stock on reorganization.-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. Sec. 112. (b) (3) Stock for stock on reorganization. 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. Sec. 112. (b) (4) Same-Gain Sec. 112. (b) (4) Same.-Gain of corporation.-No gain or loss of corporation. No gain or loss shall be recognized if a corporation shall be recognized if a corporation a party to a reorganization ex- a party to a reorganization exchanges property, in pursuance of changes property, in pursuance of the plan of reorganization, solely the plan of reorganization, solely for stock or securities in another for stock or securities in another corporation a party to the reorgan- corporation a party to the reorganiization. zation. Taxable Years Beginning before 1939 Sec. 112. (b) Exchanges solely in kind. Sec. 112. (b) (1) Property held for productive use or investment. See p. 140, Eighth Edition. Sec. 112. (b) (2) Stock for stock of same corporation. See p. 140, Eighth Edition. Sec. 112. (b) (3) Stock for stock on reorganization. See p. 140, Eighth Edition. Sec. 112. (b) (4) Same-Gain of corporation. See p. 142, Eighth Edition. See p. 142, Eighth Edition. Sec. 112. (b) (5) Transfer to Sec. 112. (b) (5) Transfer to Sec. 112. (b) (5) Transfer to corporation controlled by trans- corporation controlled by trans- corporation controlled by transferor.-No gain or loss shall be feror.-No gain or loss shall be feror. recognized if property is trans-recognized if property is transferred to a corporation by one or ferred to a corporation by one or more persons solely in exchange more persons solely in exchange for stock or securities in such cor- for stock or securities in such corporation, and immediately after poration, and immediately after. the exchange such person or per- the exchange such person or persons are in control of the corpora- sons are in control of the corporation; but in the case of an ex- tion; but in the case of an exchange by two or more persons change by two or more persons this paragraph shall apply only if this paragraph shall apply only if the amount of the stock and secu- the amount of the stock and secu Taxable Years Taxable Years Taxable Years rities received by each is substan- rities received by each is substan- rities received by each is substantially in proportion to his interest tially in proportion to his interest tially in proportion to his interest in the property prior to the ex- in the property prior to the ex- in the property prior to the exchange. Where the transferee as- change. Where the transferee as- change. Where the transferee assumes a liability of a transferor, or sumes a liability of a transferor, or sumes a liability of a transferor, or where the property of a transferor where the property of a transferor where the property of a transferor is transferred subject to a liability, is transferred subject to a liability. is transferred subject to a liability, then for the purpose only of deter- then for the purpose only of deter- then for the purpose only of determining whether the amount of mining whether the amount of mining whether the amount of stock or securities received by each stock or securities received by each stock or securities received by each of the transferors is in the propor- of the transferors is in the propor- of the transferors is in the proportion required by this paragraph, tion required by this paragraph, tion required by this paragraph, the amount of such liability (if un- the amount of such liability (if un- the amount of such liability (if under subsection (k) it is not to be der subsection (k) it is not to be der subsection (k) it is not to be considered as "other property or considered as "other property or considered as "other property or money") shall be considered as money") shall be considered as money") shall be considered as stock or securities received by such stock or securities received by such stock or securities received by such transferor. transferor. transferor. Sec. 112 (b) (5), I. R. C., supra, amended by Sec. 213 (c), R. A. of 1939, to read as above. Sec. 213 (e) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1938. For Sec. 112 (b) (5), supra, before amendment, see explanation under Sec. 112 (b) (5) in 1939 column. Sec. 112 (b) (5), I. R. C., supra, amended by Sec. 213 (c), R. A. of 1939, to read as above. Sec. 213 (e) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1938. For Sec. 112 (b) (5), supra, before amendment, see explanation under Sec. 112 (b) (5) in 1939 column. Sec. 112 (b) (5), I. R. C., supra, amended by Sec. 213 (c), R. A. of 1939, to read as above. Sec. 213 (e) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1938. For Sec. 112 (b) (5), supra, before amendment, see explanation under Sec. 112 (b) (5) in 1939 column. Sec. 112. (b) (6) Property re- Sec. 112. (b) (6) Property reSec. 112. (b) (6) Property received by corporation on complete ceived by corporation on complete ceived by corporation on complete liquidation of another.-No gain liquidation of another.-No gain liquidation of another. No gain or loss shall be recognized upon or loss shall be recognized upon or loss shall be recognized upon the receipt by a corporation of the receipt by a corporation of the receipt by a corporation of property distributed in complete property distributed in complete property distributed in complete liquidation of another corporation. liquidation of another corporation. liquidation of another corporation. For the purposes of this para- For the purposes of this para- For the purposes of this paragraph a distribution shall be con- graph a distribution shall be con- graph a distribution shall be considered to be in complete liquida-sidered to be in complete liquida- sidered to be in complete liquidation only iftion only iftion only if (A) the corporation receiving (A) the corporation receiving (A) the corporation receiving such property was, on the date of such property was, on the date of such property was, on the date of the adoption of the plan of liqui- the adoption of the plan of liqui- the adoption of the plan of liquidation, and has continued to be dation, and has continued to be dation, and has continued to be at all times until the receipt of at all times until the receipt of at all times until the receipt of the property, the owner of stock the property, the owner of stock the property, the owner of stock (in such other corporation) pos- (in such other corporation) pos- (in such other corporation) possessing at least 80 per centum of the total combined voting power of all classes of stock entitled to vote and the owner of at least 80 per sessing at least 80 per centum of sessing at least 80 per centum of the total combined voting power of all classes of stock entitled to vote and the owner of at least 80 per rities received by each is substan- rities received by each is substan- or Sec. 112. (b) (6) Property re- Sec. 112. (b) (6) Property received by corporation on complete ceived by corporation on complete liquidation of another.-No gain liquidation of another. No gain or loss shall be recognized upon or loss shall be recognized upon the receipt by a corporation of the receipt by a corporation of property distributed in complete property distributed in complete. liquidation of another corporation. liquidation of another corporation. For the purposes of this paragraph a distribution shall be considered to be in complete liquidation only if For the purposes of this para- (A) the corporation receiving (A) the corporation receiving such property was, on the date of such property was, on the date of the adoption of the plan of liqui- the adoption of the plan of liquidation, and has continued to be dation, and has continued to be at all times until the receipt of at all times until the receipt of the property, the owner of stock the property, the owner of stock (in such other corporation) possessing at least 80 per centum of the total combined voting power of all classes of stock entitled to vote and the owner of at least 80 per (in such other corporation) pos- 10 Sec. 213 (h), R. A. of 1939, reads as follows: Sec. 213. (h) Substantially proportionate interests under prior acts. (1) Section 112 (b) (5) of the Revenue Acts of 1938, 1936, 1934, 1932, and 1928, and section 203 (b) (4) of the Revenue Acts of 1926 and 1924 are amended by inserting at the end thereof the following: "Where the transferee assumes a liability of a transferor, or where the property of a transferor is transferred subject to a liability, then for the purpose only of determining whether the amount of stock or securities received by each of the transferors is in the proportion required by this paragraph, the amount of such liability (if under section 213 of the Revenue Act of 1939 it is Taxable Years Beginning before 1939 Retroactivity See fn. 10 for retroactive amendment of Sec. 112 (b) (5), R. A. of 1938, and prior Acts, by Sec. 213 (h), R. A. of 1939. Sec. 112. (b) (6) Property received by corporation on complete liquidation of another. See p. 142, Eighth Edition. not considered as 'other property or money') shall be considered as stock or securities received by such transferor. If, as the result of a determination of the tax liability of the taxpayer for the taxable year in which the exchange occurred, by a decision of the Board of Tax Appeals or of a court which became final before the ninetieth day after the date of the enactment of the Revenue Act of 1939, or by a closing agreement, the treatment of the amount of such liability was different from the treatment which would result from the application of the preceding sentence, such sentence shall not apply and the result of such determination shall be deemed proper." (2) The amendments made by paragraph (1) to the respective Acts amended shall be effective as to each of such Acts as of the date of enactment of such Act. Taxable Years centum of the total number of shares of all other classes of stock (except nonvoting stock which is limited and preferred as to dividends), and was at no time on or after the date of the adoption of the plan of liquidation and until the receipt of the property the owner of a greater percentage of any class of stock than the percentage of such class owned at the time of the receipt of the property; and centum of the total number of centum of the total number of (B) no distribution under the (B) no distribution under the liquidation was made before the liquidation was made before the liquidation was made before the first day of the first taxable year of the corporation beginning after December 31, 1935; and either first day of the first taxable year (B) no distribution under the first day of the first taxable year of the corporation beginning after December 31, 1935; and either (C) the distribution is by such (C) the distribution is by such (C) the distribution is by such other corporation in complete can- other corporation in complete can- other corporation in complete cancellation or redemption of all its cellation or redemption of all its cellation or redemption of all its stock, and the transfer of all the stock, and the transfer of all the stock, and the transfer of all the property occurs within the taxable property occurs within the taxable property occurs within the taxable year; in such case the adoption by year; in such case the adoption by year; in such case the adoption by the shareholders of the resolution the shareholders of the resolution the shareholders of the resolution under which is authorized the dis- under which is authorized the dis-under which is authorized the distribution of all the assets of such tribution of all the assets of such tribution of all the assets of such corporation in complete cancella- corporation in complete cancella- corporation in complete cancellation or redemption of all its stock, tion or redemption of all its stock, tion or redemption of all its stock. shall be considered an adoption of shall be considered an adoption of shall be considered an adoption of a plan of liquidation, even though a plan of liquidation, even though a plan of liquidation, even though no time for the completion of the transfer of the property is specified in such resolution; or no time for the completion of the transfer of the property is specified in such resolution; or no time for the completion of the transfer of the property is specified in such resolution; or (D) such distribution is one of (D) such distribution is one of (D) such distribution is one of a series of distributions by such a series of distributions by such a series of distributions by such other corporation in complete can- other corporation in complete can- other corporation in complete cancellation or redemption of all its cellation or redemption of all its cellation or redemption of all its stock in accordance with a plan of stock in accordance with a plan of stock in accordance with a plan of liquidation under which the trans- liquidation under which the trans-liquidation under which the transfer of all the property under the fer of all the property under the fer of all the property under the liquidation is to be completed liquidation is to be completed liquidation is, to be completed within three years from the close within three years from the close within three years from the close of the taxable year during which of the taxable year during which of the taxable year during which is made the first of the series of is made the first of the series of is made the first of the series of distributions under the plan, ex- distributions under the plan, ex- distributions under the plan, except that if such transfer is not cept that if such transfer is not cept that if such transfer is not completed within such period, or completed within such period, or completed within such period, or if the taxpayer does not continue if the taxpayer does not continue if the taxpayer does not continue qualified under subparagraph (A) qualified under subparagraph (A) qualified under subparagraph (A) until the completion of such trans- until the completion of such transuntil the completion of such transfer, no distribution under the plan shall be considered a distribution shall be considered a distribution fer, no distribution under the plan fer, no distribution under the plan shall be considered a distribution in complete liquidation. in complete liquidation. in complete liquidation. If such transfer of all the prop- If such transfer of all the prop- If such transfer of all the property does not occur within the tax-erty does not occur within the tax-erty does not occur within the taxable year the commissioner may able year the Commissioner may able year the Commissioner may require of the taxpayer such bond, require of the taxpayer such bond, require of the taxpayer such bond, or waiver of the statute of limi- or waiver of the statute of limi- or waiver of the statute of limitations on assessment and collec-tations on assessment and collec- tations on assessment and collection, or both, as he may deem tion, or both, as he may deem tion, or both, as he may deem necessary to insure, if the transfer necessary to insure, if the transfer necessary to insure, if the transfer of the property is not completed of the property is not completed of the property is not completed Taxable Years entum of the total number of hares of all other classes of stock except nonvoting stock which is imited and preferred as to divilends), and was at no time on or after the date of the adoption of he plan of liquidation and until he receipt of the property the owner of a greater percentage of any class of stock than the perentage of such class owned at the time of the receipt of the property; and (B) no distribution under the iquidation was made before the Erst day of the first taxable year of the corporation beginning after December 31, 1935; and either Taxable Years centum of the total number of (B) no distribution under the (C) the distribution is by such (C) the distribution is by such other corporation in complete can- other corporation in complete canellation or redemption of all its cellation or redemption of all its stock, and the transfer of all the stock, and the transfer of all the property occurs within the taxable property occurs within the taxable year; in such case the adoption by year; in such case the adoption by the shareholders of the resolution the shareholders of the resolution Ander which is authorized the dis- under which is authorized the distribution of all the assets of such tribution of all the assets of such corporation in complete cancella-corporation in complete cancellation or redemption of all its stock, tion or redemption of all its stock, tall be considered an adoption of shall be considered an adoption of a plan of liquidation, even though a plan of liquidation, even though no time for the completion of the no time for the completion of the transfer of the property is speci- transfer of the property is speciSed in such resolution; or fied in such resolution; or (D) such distribution is one of (D) such distribution is one of a series of distributions by such a series of distributions by such other corporation in complete can- other corporation in complete cancellation or redemption of all its cellation or redemption of all its stock in accordance with a plan of stock in accordance with a plan of quidation under which the trans- liquidation under which the transfer of all the property under the fer of all the property under the liquidation is to be completed liquidation is to be completed within three years from the close within three years from the close of the taxable year during which of the taxable year during which is made the first of the series of is made the first of the series of distributions under the plan, ex- distributions under the plan, except that if such transfer is not cept that if such transfer is not completed within such period, or completed within such period, or if the taxpayer does not continue if the taxpayer does not continue qualified under subparagraph (A) qualified under subparagraph (A) until the completion of such trans- until the completion of such transfer, no distribution under the plan fer, no distribution under the plan shall be considered a distribution shall be considered a distribution in complete liquidation. in complete liquidation. If such transfer of all the prop- If such transfer of all the property does not occur within the tax-erty does not occur within the taxable year the Commissioner may able year the Commissioner may require of the taxpayer such bond, require of the taxpayer such bond, or waiver of the statute of limi-or waiver of the statute of limitations on assessment and collec-tations on assessment and collection, or both, as he may deem tion, or both, as he may deem necessary to insure, if the transfer necessary to insure, if the transfer of the property is not completed of the property is not completed Taxable Years Beginning before 1939 |