Taxable Years Taxable Years Taxable Years Sec. 115. (b) Source of distribu- Sec. 115. (b) Source of distribu- Sec. 115. (b) Source of distributions. For the purposes of this tions.-For the purposes of this tions. For the purposes of this chapter every distribution is made chapter every distribution is made chapter every distribution is made out of earnings or profits to the ex- out of earnings or profits to the ex- out of earnings or profits to the extent thereof, and from the most re- tent thereof, and from the most re- tent thereof, and from the most recently accumulated earnings or cently accumulated earnings or cently accumulated earnings or profits. Any earnings or profits profits. Any earnings or profits profits. Any earnings or profits accumulated, or increase in value of accumulated, or increase in value of accumulated, or increase in value of property accrued, before March 1, property accrued, before March 1, property accrued, before March 1, 1913, may be distributed exempt 1913, may be distributed exempt 1913, may be distributed exempt from tax, after the earnings and from tax, after the earnings and from tax, after the earnings and profits accumulated after Feb-profits accumulated after Feb-profits accumulated after February 28, 1913, have been distrib-ruary 28, 1913, have been distrib-ruary 28, 1913, have been distributed, but any such tax-free dis- uted, but any such tax-free uted, but any such tax-free tribution shall be applied against distribution shall be applied against distribution shall be applied against and reduce the adjusted basis of and reduce the adjusted basis of and reduce the adjusted basis of the stock provided in section 113. the stock provided in section 113. the stock provided in section 113. The preceding sentence shall not The preceding sentence shall not apply to a distribution which is a apply to a distribution which is a dividend within the meaning of the dividend within the meaning of the last sentence of subsection (a). last sentence of subsection (a). Sec. 115 (b), I. R. C., supra, amended by Sec. 186 (b), R. A. of 1942, to read as above. Sec. 186 (f) of said Act makes amendment effective as of Feb. 10, 1939, date of enactment of I. R. C. But see Sec. 186 (g) of R. A. of 1942 in fn. 16, prescribing limitation on retroactive application of said amendment. For Sec. 115 (b), I. R. C., before amendment, see 1942 column. Sec. 115 (b), I. R. C., supra, amended by Sec. 186 (b), R. A. of 1942, by adding language in italics. Sec. 186 (f) of said Act makes amendment effective as of Feb. 10, 1939, date of enactment of I. R. C. But see Sec. 186 (g) of R. A. of 1942 prescribing limitation on retroactive application of said amendment. See fn. 16. Sec. 115. (c) Distributions in Sec. 115. (c) Distributions in liquidation.—Amounts distributed liquidation.-Amounts The preceding sentence shall not apply to a distribution which is a dividend within the meaning of the last sentence of subsection (a). Sec. 115 (b), I. R. C., supra, amended by Sec. 186 (b), R. A. of 1942, by adding language in italics. Sec. 186 (f) of said Act makes amendment effective as of Feb. 10, 1939, date of enactment of I. R. C. But see Sec. 186 (g) of R. A. of 1942 prescribing limitation on retroactive application of said amendment. See fn. 16. Sec. 115. (c) Distributions in distributed liquidation.-Amounts distributed in complete liquidation of a corpo- in complete liquidation of a corpo- in complete liquidation of a corporation shall be treated as in full ration shall be treated as in full ration shall be treated as in full payment in exchange for the payment in exchange for the payment in exchange for the stock, and amounts distributed in stock, and amounts distributed in stock, and amounts distributed in partial liquidation of a corporation partial liquidation of a corporation partial liquidation of a corporation shall be treated as in part or full shall be treated as in part or full shall be treated as in part or full payment in exchange for the stock. payment in exchange for the stock. payment in exchange for the stock. The gain or loss to the distributee The gain or loss to the distributee The gain or loss to the distributee resulting from such exchange shall resulting from such exchange shall resulting from such exchange shall be determined under section 111, be determined under section 111, be determined under section 111, but shall be recognized only to the but shall be recognized only to the but shall be recognized only to the extent provided in section 112. extent provided in section 112. extent provided in section In the case of amounts distributed Despite the provisions of section Despite the provisions of section (whether before January 1, 1939, 117, the gain so recognized shall be 117, the gain so recognized shall be or on or after such date) in par- considered as a short term capital considered as a short-term capital tial liquidation (other than a dis- gain, except in the ease of amounts gain, except in the case of amounts tribution to which the provisions distributed in complete liquidation. distributed in complete liquidation. of subsection (h) of this section For the purpose of the preceding For the purpose of the preceding tion made such distribution agreeing to the inclusion of the amount of such distribution to him in his gross income as a taxable dividend. If any such person is no longer in existence or is under disability then the consent may be made by his legal representative; and (3) Each such consent filed is accompanied by cash, or such other medium of payment as the Commissioner may by regulations authorize, in an amount equal to the amount that would be required by section 143 (b) or 144 of the applicable revenue law to be deducted and withheld by the corporation if the amount of the distribution to the shareholder had been paid to the shareholder in cash as a dividend. The amount accompanying such 112. consent shall be credited against the tax under the applicable revenue law imposed by section 211 (a) or 231 (a) upon the shareholder. (h) OVERPAYMENTS AND DEFICIENCIES.-If the refund or credit of any overpayment for any taxable year, to the extent resulting from the application of subsections (e) and (g) of this section is prevented on the date of the enactment of this Act or within one year from such date, then, notwithstanding any other provision of law or rule of law (other than this subsection and other than section 3761 of the Internal Revenue Code or section 3229 of the Revised Statutes, or such section or Taxable Years Beginning before 1939 Sec. 115. (b) Source of distribu Sec. 115. (b) Source of distribu- Sec. 115. (b) Source of distributions. For the purposes of this tions. For the purposes of this tions. chapter every distribution is made chapter every distribution is made out of earnings or profits to the ex- out of earnings or profits to the extent thereof, and from the most re- tent thereof, and from the most recently accumulated earnings or cently accumulated earnings profits. Any earnings or profits profits. Any earnings or profits. accumulated, or increase in value of accumulated, or increase in value of property accrued, before March 1, property accrued, before March 1, 1913, may be distributed exempt 1913, may be distributed exempt from tax, after the earnings and from tax, after the earnings and profits accumulated after Feb-profits accumulated after February 28, 1913, have been distrib-ruary 28, 1913, have been distributed, but any such tax-free uted, but any such tax-free distribution shall be applied against distribution shall be applied against and reduce the adjusted basis of and reduce the adjusted basis of the the stock provided in section 113. The preceding sentence shall not apply to a distribution which is a dividend within the meaning of the last sentence of subsection (a). Sec. 115 (b), I. R. C., supra, amended by Sec. 186 (b), R. A. of 1942, by adding language in italics. Sec. 186 (f) of said Act makes amendment effective as of Feb. 10, 1939, date of enactment of I. R. C. But, see Sec. 186 (g) of R. A. of 1942 prescribing limitation on retroactive application of said amendment. See fn. 16. stock provided in section 113. The Sec. 115 (b), I. R. C., See p. 180, Eighth Edition. Retroactivity See Sec. 186, R. A. of 1942, in fn. 16, for retroactive amendment of Sec. 115 (b), R. A. of 1936 and 1938. Sec. 115. (c) Distributions in Sec. 115. (c) Distributions in liquidation.-Amounts distributed liquidation.-Amounts distributed in complete liquidation of a corpo- in complete liquidation of a corporation shall be treated as in full ration shall be treated as in full payment in exchange for the payment in exchange for the stock, and amounts distributed in stock, and amounts distributed in partial liquidation of a corporation partial liquidation of a corporation shall be treated as in part or full shall be treated as in part or full payment in exchange for the stock. payment in exchange for the stock. The gain or loss to the distributee The gain or loss to the distributee resulting from such exchange shall resulting from such exchange shall be determined under section 111, be determined under section 111, but shall be recognized only to the but shall be recognized only to the extent provided in section 112. extent provided in section 112. Despite the provisions of section Despite the provisions of section. 117, the gain so recognized shall be 117, the gain so recognized shall be considered as a short-term capital considered as a short-term capital gain, except in the case of amounts gain, except in the case of amounts distributed in complete liquidation. distributed in complete liquidation. For the purpose of the preceding For the purpose of the preceding as amended by section 815 of the Revenue Act of 1938, relating to compromises), such overpayment shall be refunded or credited in the same manner as in the case of an income tax erroneously collected if claim therefor is filed within one year from the date of the enactment of this Act. If the assessment or collection of any deficiency for any taxable year, to the extent resulting from the application of subsections (e) and (g) of this section, is prevented on the date of the filing of the shareholders' consents referred to in subsection (e) or on the date of filing of the claim referred to in subsection (g) (1) or within one year from the date of filing of such consents or claim, as the case may be, then, notwith Sec. 115. (c) Distributions in liquidation. See p. 182, Eighth Edition. standing any other provision of law or rule of law, such deficiency shall be assessed and collected if assessment is made within one year from the date of the filing of such consents or claim, as the case may be. The failure of a shareholder to include in his gross income for the proper taxable year the amount specified in the consent made by him referred to in subsection (g) (2) shall have the same effect, with respect to the deficiency resulting therefrom, as is provided in section 272 (f) of the applicable revenue law with respect to a deficiency resulting from a mathematical error appearing on the face of the return. Taxable Years Taxable Years Taxable Years are applicable) the part of such sentenee, "complete liquidation" in sentence, "complete liquidation" indistribution which is properly eludes any one of a series of distri- cludes any one of a series of districhargeable to capital account shall butions made by a corporation in butions made by a corporation in not be considered a distribution of complete cancellation or redemption complete cancellation or redemption earnings or profits. If any distri- of all of its stock in accordance of all of its stock in accordance bution in partial liquidation or in with a bona fide plan of liquidation with a bona fide plan of liquidation complete liquidation (including any and under which the transfer of the and under which the transfer of the one of a series of distributions property under the liquidation is to property under the liquidation is to made by the corporation in com- be completed within a time speei be completed within a time speciplete cancellation or redemption of fied in the plan, not exceeding, fied in the plan, not exceeding, all its stock) is made by a foreign from the close of the taxable year from the close of the taxable year corporation which with respect to during which is made the first of during which is made the first of any taxable year beginning on or the series of distributions under the series of distributions under before, and ending after, August the plan, (1) three years, if the the plan, (1) three years, if the 26, 1937, was a foreign personal first of such series of distributions first of such series of distributions holding company, and with respect is made in a taxable year begin is made in a taxable year beginto which a United States group (as ning after December 31, 1937, or ning after December 31, 1937, or defined in section 331 (a) (2)) (2) two years, if the first of such (2) two years, if the first of such existed after August 26, 1937, and series of distributions was made in series of distributions was made in before January 1, 1938, then, de- taxable year beginning before a taxable year beginning before spite the foregoing provisions of January 1, 1938. In the case of January 1, 1938. In the case of this subsection, the gain recognized amounts distributed (whether be- amounts distributed (whether beresulting from such distribution fore January 1, 1939, or on or af- fore January 1, 1939, or on or afshall be considered as a gain from ter such date) in partial liquida- ter such date) in partial liquidathe sale or exchange of a capital tion (other than a distribution to tion (other than a distribution to asset held for not more than 6 which the provisions of subsection which the provisions of subsection (h) of this section are applicable) (h) of this section are applicable) the part of such distribution which the part of such distribution which is properly chargeable to capital is properly chargeable to capital account shall not be considered a account shall not be considered a distribution of earnings or profits. distribution of earnings or profits. If any distribution in partial If any distribution in complete liquidation or in complete liquida- liquidation (including any one of tion (including any one of a series a series of distributions made by of distributions made by the corpo- the corporation in complete canration in complete cancellation or redemption of all its stock) is made by a foreign corporation which with respect to any taxable year beginning on or before, and ending after, August 26, 1937, was a foreign personal holding company, and with respect to which a United States group (as defined in section 331 (a) (2)) existed after August 26, 1937, and before January 1, 1938, then, despite the foregoing provisions of this subsection, the gain recognized resulting from such distribution shall be considered as a short term capital gain— months. Sec. 115 (c), I. R. C., supra, amended by Sec. 147, R. A. of 1942, to read as above. Sec. 101 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1941. For Sec. 115 (c), I. R. C., before amendment, see 1942 column. See, 115, (e) (1) Unless such liquidation is completed before July 1, 1038;er cellation or redemption of all its stock) is made by a foreign corporation which with respect to any taxable year beginning on or be fore, and ending after, August 26, 1937, was a foreign personal holding company, and with respect to which a United States group (as defined in section 331 (a) (2)) existed after August 26, 1937, and before January 1, 1938, then, despite the foregoing provisions of this subsection, the gain recognized resulting from such distribution shall be considered as a short-term capital gain Sec. 115. (c) (1) Unless such liquidation is completed before July 1, 1938; or -See. 115. (e) (2) Unless (if it is Sec. 115. (c) (2) Unless (if it is established to the satisfaction of established to the satisfaction of the Commissioner by evidence sub the Commissioner by evidence submitted before July 1, 1938, that due mitted before July 1, 1938, that due to the laws of the foreign country to the laws of the foreign country in which such corporation is ineer in which such corporation is incorporated, or for other reason, it is porated, or for other reason, it is er will be impossible to complete or will be impossible to complete the liquidation of such company the liquidation of such company sentence, "complete liquidation" in- sentence, "complete liquidation" in- (2)) Sec. 115. (c) (1) Unless such Sec. 115. (c) (1) Unless such liquidation is completed before liquidation is completed before 'July 1, 1938; or July 1, 1938; or Sec. 115. (c) (2) Unless (if it is Sec. 115. (c) (2) Unless (if it is established to the satisfaction of established to the satisfaction of the the Commissioner by evidence sub- Commissioner by evidence submitted mitted before July 1, 1938, that due before July 1, 1938, that due to the to the laws of the foreign country laws of the foreign country in which in which such corporation is incor- such corporation is incorporated, or porated, or for other reason, it is for other reason, it is or will be imor will be impossible to complete possible to complete the liquidation the liquidation of such company of such company before such date) Taxable Years Beginning before 1939 before such date) the liquidation is Sec. 115 (c), I. R. C., supra, Taxable Years before such date) the liquidation is completed on or before such date as the Commissioner may find reasonable, but not later than December 31, 1938. Sec. 115. (d) Other distributions Sec. 115. (d) Other distributions Sec. 115. (d) Other distributions from capital. If any distribution from capital. If any distribution from capital.-If any distribution made by a corporation to its share-made by a corporation to its share- made by a corporation to its shareholders is not out of increase in holders is not out of increase in holders is not out of increase in value of property accrued before value of property accrued before value of property accrued before March 1, 1913, and is not a divi- March 1, 1913, and is not a divi- March 1, 1913, and is not a dividend, then the amount of such dis- dend, then the amount of such dis- dend, then the amount of such distribution shall be applied against tribution shall be applied against tribution shall be applied against and reduce the adjusted basis of and reduce the adjusted basis of and reduce the adjusted basis of the stock provided in section 113, the stock provided in section 113, the stock provided in section 113, and if in excess of such basis, such and if in excess of such basis, such and if in excess of such basis, such excess shall be taxable in the same excess shall be taxable in the same excess shall be taxable in the same manner as a gain from the sale or manner as a gain from the sale or manner as a gain from the sale or exchange of property. This sub-exchange of property. This sub- exchange of property. This subsection shall not apply to a distri-section shall not apply to a distri- section shall not apply to a distribution in partial or complete liqui- bution in partial or complete liqui-bution in partial or complete liquidation or to a distribution which, dation or to a distribution which, dation or to a distribution which, under subsection (f) (1), is not under subsection (f) (1), is not under subsection (f) (1), is not treated as a dividend, whether or treated as a dividend, whether or treated as a dividend, whether or not otherwise a dividend. not otherwise a dividend. Sec. 115 (d), I. R. C., supra, amended by Sec. 214 (b), R. A. of 1939 to read as above. Sec. 214 (d) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1938. For Sec. 115 (d), I. R. C., before amendment, see fn. 17. not otherwise a dividend. Sec. 115 (d), I. R. C., supra, amended by Sec. 214 (b), R. A. of 1939 to read as above. Sec. 214 (d) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1938. For Sec. 115 (d), I. R. C., before amendment, see fn. 17. Sec. 115. (e) Distributions by Sec. 115. (e) Distributions by personal service corporations.- personal service corporations. Any distribution made by a corpo- Any distribution made by a corporation, which was classified as a ration, which was classified as a personal service corporation under personal service corporation under the provisions of the Revenue Act the provisions of the Revenue Act of 1918 or the Revenue Act of of 1918 or the Revenue Act of 1921, out of its earnings or profits 1921, out of its earnings or profits which were taxable in accordance which were taxable in accordance with the provisions of section 218 with the provisions of section 218 of the Revenue Act of 1918, 40 of the Revenue Act of 1918, 40 Stat. 1070, or section 218 of the Stat. 1070, or section 218 of the Revenue Act of 1921, 42 Stat. 245, Revenue Act of 1921, 42 Stat. 245, shall be exempt from tax to the shall be exempt from tax to the distributees. distributees. 17 Sec. 115, (d), I. R. C., as originally enacted read as follows: Sec. 115. (d) Other distributions from capital.-If any distribution (not in partial or complete liquidation) made by a corporation to its shareholders is not out of increase in value of property accrued before March 1, Sec. 115 (d), I. R. C., supra, amended by Sec. 214 (b), R. A. of 1939 to read as above. Sec. 214 (d) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1938. For Sec. 115 (d), I. R. C., before amendment, see fn. 17. Sec. 115. (e) Distributions by personal service corporations.— Any distribution made by a corporation, which was classified as a personal service corporation under the provisions of the Revenue Act of 1918 or the Revenue Act of 1921, out of its earnings or profits which were taxable in accordance with the provisions of section 218 of the Revenue Act of 1918, 40 Stat. 1070, or section 218 of the Revenue Act of 1921, 42 Stat. 245, shall be exempt from tax to the distributees. 1913, and is not a dividend, then the amount of such distribution shall be applied against and reduce the adjusted basis of the stock provided in section 113, and if in excess of such basis, such excess shall be taxable in the same manner as a gain from the sale or exchange of property. |