(a) Name and address of the corporation from which the distribution is received; the date the distribution is received; and that the distribution was made pursuant to the Bank Holding Company Act of 1956.

(b) A statement of the name or designation, type, class, number, and fair market value on the date of receipt of the stock or securities or other property received upon the distribution and a record of the disposition made thereof, or of any stock or securities retained in the distributing corporation in the year of receipt.

(c) If preferred stock is exchanged for preferred stock or securities are exchanged for securities within the meaning of section 1101 (a) (2) (A) or section 1101(b) (2) (A), a statement of the terms and amount of such newly issued securities or preferred stock, as well as of those surrendered.

(d) A statement as to the distributee's holdings immediately prior to the record date for the distribution of each class of stock or securities outstanding of the distributing corporation, together with the date and manner of acquisition thereof.

(e) The value of the distributing corporation's stock per share or securities immediately prior to and after the distribution.

In the case of a return filed on or before January 4, 1962, such information shall be filed on or before April 4, 1962, by the taxpayer with the district director for the internal revenue district in which such return was filed.

[T.D. 6587, 27 F.R. 35, Jan. 4, 1962] § 1.1102 Statutory provisions; distributions pursuant to Bank Holding Company Act of 1956; special rules.

SEC. 1102. Special rules—(a) Basis of property acquired in distributions. If, by reason of section 1101, gain is not recognized with respect to the receipt of any property, then, under regulations prescribed by the Secretary or his delegate

(1) If the property is received by a shareholder with respect to stock, without the surrender by such shareholder of stock, the basis of the property received and of the stock with respect to which it is distributed shall, in the distributee's hands, be determined by allocating between such property and such stock the adjusted basis of such stock; or

(2) If the property is received by a shareholder in exchange for stock or by a security holder in exchange for securities, the basis

of the property received shall, in the distributee's hands, be the same as the adjusted basis of the stock or securities exchanged, increased by

(A) The amount of the property received which was treated as a dividend, and

(B) The amount of gain to the taxpayer recognized on the property received (not including any portion of such gain which was treated as a dividend).

(b) Periods of limitation. The periods of limitation provided in section 6501 (relating to limitations on assessment and collection) shall not expire, with respect to any deficiency (including interest and additions to the tax) resulting solely from the receipt of property by shareholders in a distribution which is certified by the Board under subsection (a), (b), or (c) of section 1101, until five years after the distributing corporation notifies the Secretary or his delegate (in such manner and with such accompanying information as the Secretary or his delegate may by regulations prescribe) that the period (including extensions thereof) prescribed in section 4(a) of the Bank Holding Company Act of 1956, or section 1101 (e) (2) (B), whichever is applicable, has expired; and such assessment may be made notwithstanding any provision of law or rule of law which would otherwise prevent such assessment.

(c) Allocation of earnings and profits—(1) Distribution of stock in a controlled corporation. In the case of a distribution by a qualified bank holding corporation under section 1101 (a) (1) or (b)(1) of stock in a controlled corporation, proper allocation with respect to the earnings and profits of the distributing corporation and the controlled corporation shall be made under regulations prescribed by the Secretary or his delegate.

(2) Exchanges described in section 1101(c) (2) or (3). In the case of any exchange described in section 1101 (c) (2) or (3), proper allocation with respect to the earnings and profits of the corporation transferring the property and the corporation receiving such property shall be made under regulations prescribed by the Secretary or his delegate.

(3) Definition of controlled corporation. For purposes of paragraph (1), the term "controlled corporation" means a corporation with respect to which at least 80 percent of the total combined voting power of all classes of stock entitled to vote and at least 80 percent of the total number of shares of all other classes of stock is owned by the distributing qualified bank holding corporation.

(d) Itemization of property. In any certification under this part, the Board shall make such specification and itemization of property as may be necessary to carry out the provisions of this part.

[Sec. 1102 as added by sec. 10(a), Bank Holding Company Act 1956 (70 Stat. 139)] [T.D. 6587, 27 F.R. 36, Jan. 4, 1962]

§ 1.1102-1 Basis of property acquired in distributions by qualified bank holding corporations.

In the case of a distribution to a shareholder with respect to stock, without the surrender by such shareholder of stock, to which section 1101 (a) or (b) applies, the sum of the basis of all the stock in the distributing corporation held immediately after the transaction plus the basis of all the nonrecognition property received in the transaction shall be the same as the basis of all the stock in such corporation held immediately before the transaction allocated in proportion to the respective fair market value of each. In the case of an exchange to which section 1101 (a) or (b) applies, in which property is received by a shareholder in exchange for stock or by a security holder in exchange for securities, the basis of all the property received in the exchange and as a part thereof shall be the same as the adjusted basis of the stock or securities exchanged, increased by

(a) The amount of the property received as part of the exchange which was treated as a dividend, and

(b) The amount of gain to the taxpayer recognized on the property received as part of the exchange (not including any portion of such gain which was treated as a dividend).

The basis, in a case involving an exchange, must be apportioned to the properties received, and for this purpose there must be allocated to such other property received as part of the exchange (not permitted to be received without the recognition of gain) an amount of such basis equivalent to the fair market value of such other property at the date of the exchange. Any other property received in connection with a transaction under section 1101 on which gain is realized shall receive a basis in accordance with whichever Code section may be applicable to that portion of the transaction.

[T.D. 6587, 27 F.R. 36, Jan. 4, 1962] § 1.1102-2 Filing of notification under section 1102(b) by qualified bank holding corporations.

Every distributing corporation which is certified as being a qualified bank holding corporation under section 1103 (b) shall, as soon as practical, by written

statement notify the Commissioner of Internal Revenue, Washington 25, D.C., Attention: T:R:R, that the period (including extensions thereof granted by the Board of Governors of the Federal Reserve System) prescribed in section 4(a) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(a)), or section 1101(e) (2) (B) of the Code, whichever is applicable, has expired. In order for such statement to satisfy the requirements for notification under section 1102 (b), there shall be included a statement certifying that the district director for the district in which the distributing corporation filed its return for the taxable year of distribution has been advised of all facts pertinent to the divestment of assets under part VIII (section 1101 and following), subchapter O, chapter I of the Code, including the following:

(a) Name and address of the distributing corporation.

(b) A copy of the plan of divestment forming the basis of the issuance by the Board of any certification under section 1101(a) (1) (B), section 1101(b) (1) (B), section 1101(c) (2) (C), or section 1101(c) (3) (C), as the case may be.

(c) A copy of any such certifications issued to the distributing corporation by the Board.

(d) A certified copy of the corporate resolution authorizing every distribution under section 1101.

(e) Identification and date of acquisition by the distributing corporation of all property distributed under section 1101.

(f) Identification and date of acquisition by the distributing corporation of all property which was transferred to a new corporation under section 1101(c) (2) or (3).

(g) If the date of acquisition in paragraph (e) or (f) of this section was after May 15, 1955, a complete statement of details surrounding the acquisition. If any of such property was acquired in a distribution under section 1101, a copy of the certification covering such distribution.

(h) A statement as to whether any of the distributions under section 1101 contained installment obligations, LIFO inventory, or property either subject to a liability in excess of its basis or in connection with the receipt of which any shareholder assumed a liability in excess of its basis. If so, the statement

shall include complete details, including dates of distribution.

(i) [Reserved.]

(j) Fair market value of the distributing corporation's outstanding securities and stock per share immediately after a distribution.

(k) The amount of the undistributed earnings and profits of the distributing corporation accumulated after February 28, 1913, to date of transfer to a new corporation in an exchange to which section 1101 (c) (2) or (3) applies.

(1) If property was transferred to a new corporation under the provisions of section 1101 (c) (2) or (3), a statement giving the value of the assets transferred together with the value of assets retained. If cash was transferred, a complete substantiation thereof.

(m) If stock in a controlled corporation within the meaning of section 1102 (c) (3) is distributed under section 1101 (a) (1) or (b) (1), a statement giving the accumulated earnings and profits of the controlled corporation (or deficit in earnings as the case may be) immediately prior to the distribution.

(n) A copy of the final certification if issued to the distributing corporation by the Board pursuant to section 1101 (e).

(0) The date of expiration of the period (including extensions thereof) prescribed in section 4(a) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843 (a)), or section 1101(e) (2) (B), whichever is applicable.

(p) A statement showing, for the 5year period preceding any exchange or distribution described in section 1101, the amount of income and expenditures attributable to each of the respective activities and holdings of the bank holding company and further showing the holdings and activities, after the distributions and exchanges described in section 1101, of the bank holding company and the corporations the stock of which is distributed under section 1101.

The periods of limitation (section 6501) with respect to any deficiency, including interest and additions to the tax, resulting solely from the receipt of property by shareholders in a distribution certified by the Board under subsection (a), (b), or (c) of section 1101 shall not expire until 5 years following the date of the notification required under section 1102(b) and this section.

[T.D. 6637, 28 F.R. 1764, Feb. 26, 1963]

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§ 1.1102-3 Allocation of earnings and profits in certain distributions by qualified bank holding corporations. (a) Exchanges described in section 1101(c) (2) or (3). Under section 1102(c), if a qualified bank holding corporation transfers property to a newly created corporation in exchange for all of its stock in a transaction described in section 1101(c) (2) (A) or (3) (A) and immediately thereafter the stock and securities of the controlled corporation are distributed in a distribution or exchange to which section 1101 (a) (2) or (b)(2) applies, the earnings and profits of the bank holding corporation immediately before the transaction shall be allocated between such bank holding corporation and the controlled corporation. Such allocation generally shall be made in proportion to the fair market value of the assets retained by the bank holding corporation and the assets of the controlled corporation immediately after the transaction. In a proper case, allocation shall be made in proportion to the net basis of the assets transferred and of the assets retained or by such other method as may be appropriate under the facts and circumstances of the case. The term "net basis" means the basis of the assets less liabilities assumed or liabilities to which such assets are subject. The part of the earnings and profits of the taxable year of the bank holding corporation in which the transaction occurs allocable to the controlled corporation shall be included in the computation of the earnings and profits of the first taxable year of the controlled corporation ending after the date of the transaction.

(b) Distribution of stock in a controlled corporation under section 1101 (a) (1) or (b)(1). If a qualified bank holding corporation distributes stock of a controlled corporation (as defined in section 1102(c)(3)) in a distribution or exchange to which section 1101 (a) (1) or (b)(1) applies, the earnings and profits of the bank holding corporation shall be decreased by the lesser of the following amounts:

(1) The amount by which the earnings and profits of the bank holding corporation would have been decreased if it had transferred the stock of the controlled corporation to a new corporation in a transaction to which section 1101(c), (2) or (3) applied and immediately r

thereafter distributed the stock of such new corporation under section 1101 (a) (2) or (b) (2) or,

(2) The net worth of the controlled corporation. (For this purpose the term "net worth" means the sum of the bases of all of the properties plus cash minus all liabilities.)

If the earnings and profits of the controlled corporation_immediately before the transaction are less than the amount of the decrease in earnings and profits of the bank holding corporation (including the case in which the controlled corporation has a deficit) the earnings and profits of the controlled corporation, after the transaction, shall be equal to the amount of such decrease. If the earnings and profits of the controlled corporation immediately before the transaction are more than the amount of the decrease in the earnings and profits of the bank holding corporation they shall remain unchanged.

(c) Deficits. A deficit of the distributing corporation shall in no case be allocated to a controlled corporation. [T.D. 6587, 27 F.R. 37, Jan. 4, 1962] § 1.1103 Statutory provisions; distributions pursuant to Bank Holding Company Act of 1956; definitions.

SEC. 1103. Definitions-(a) Bank holding company. For purposes of this part, the term "bank holding company" has the meaning assigned to such term by section 2 of the Bank Holding Company Act of 1956.

(b) Qualified bank holding corporation(1) In general. Except as provided in paragraph (2), for purposes of this part the term “qualified bank holding corporation” means any corporation (as defined in section 7701 (a) (3)) which is a bank holding company and which holds prohibited property acquired by it

(A) on or before May 15, 1955,

(B) In a distribution in which gain to such corporation with respect to the receipt of such property was not recognized by reason of subsection (a) or (b) of section 1101, or

(C) In exchange for all of its stock in an exchange described in section 1101 (c) (2) or (c) (8).

(2) Limitations. (A) A bank holding company shall not be a qualified bank holding corporation, unless it would have been a bank holding company on May 15, 1955, if the Bank Holding Company Act of 1956 had been in effect on such date, or unless it is a bank holding company determined solely by reference to

(1) Property acquired by it on or before May 15, 1955,

(11) Property acquired by it in a distribution in which gain to such corporation with

respect to the receipt of such property was not recognized by reason of subsection (a) or (b) of section 1101, and

(iii) Property acquired by it in exchange for all of its stock in an exchange described in section 1101 (c) (2) or (3).

(B) A bank holding company shall not be a qualified bank holding corporation by reason of property described in subparagraph (B) of paragraph (1) or clause (ii) of subparagraph (A) of this paragraph, unless such property was acquired in a distribution with respect to stock, which stock was acquired by such bank holding company(1) On or before May 15, 1955,

(ii) In a distribution (with respect to stock held by it on May 15, 1955, or with respect to stock in respect of which all previous applications of this clause are satisfied) with respect to which gain to it was not recognized by reason of subsection (a) or (b) of section 1101, or

(iii) In exchange for all of its stock in an exchange described in section 1101 (c) (2) or (3).

(C) A corporation shall be treated as a qualified bank holding corporation only if the Board certifies that it satisfies the foregoing requirements of this subsection.

(c) Prohibited property. For purposes of this part, the term "prohibited property" means, in the case of any bank holding company, property (other than nonexempt property) the disposition of which would be necessary or appropriate to effectuate section 4 of the Bank Holding Company Act of 1956 if such company continued to be a bank holding company beyond the period (including any extensions thereof) specified in subsection (a) of such section or in section 1101(e) (2) (B) of this part, as the case may be. The term "prohibited property" does not include shares of any company held by a bank holding company to the extent that the prohibitions of section 4 of the Bank Holding Company Act of 1956 do not apply to the ownership by such bank holding company of such property by reason of subsection (c) (5) of such section.

(d) Nonexempt property. For purposes of this part, the term "nonexempt property"

means

(1) Obligations (including notes, drafts, bills of exchange, and bankers' acceptances) having a maturity at the time of issuance of not exceeding 24 months, exclusive of days of grace;

(2) Securities issued by or guaranteed as to principal or interest by a government or subdivision thereof or by any instrumentality of a government or subdivision; or

(8) Money, and the right to receive money not evidenced by a security or obligation (other than a security or obligation described in paragraph (1) or (2)).

(e) Board. For purposes of this part, the term "Board" means the Board of Governors of the Federal Reserve System. [Sec. 1103 as added by sec. 10(a), Bank Holding Company Act 1956 (70 Stat. 139)]