Section 354: Exchanges of stock and securities in certain reorganizations
Internal Revenue Code
Table of Contents
§354. Exchanges of stock and securities in certain reorganizations
(1) In general
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.
(i) the principal amount of any such securities received exceeds the principal amount of any such securities surrendered, or
(B) Property attributable to accrued interest
Neither paragraph (1) nor so much of section 356 as relates to paragraph (1) shall apply to the extent that any stock (including nonqualified preferred stock, as defined in section 351(g)(2)), securities, or other property received is attributable to interest which has accrued on securities on or after the beginning of the holder's holding period.
(i) In general
Nonqualified preferred stock (as defined in section 351(g)(2)) received in exchange for stock other than nonqualified preferred stock (as so defined) shall not be treated as stock or securities.
(I) In general
Clause (i) shall not apply in the case of a recapitalization under section 368(a)(1)(E) of a family-owned corporation.
(II) Family-owned corporation
For purposes of this clause, except as provided in regulations, the term "family-owned corporation" means any corporation which is described in clause (i) of section 447(d)(2)(C) 1 throughout the 8-year period beginning on the date which is 5 years before the date of the recapitalization. For purposes of the preceding sentence, stock shall not be treated as owned by a family member during any period described in section 355(d)(6)(B).
(III) Extension of statute of limitations
The statutory period for the assessment of any deficiency attributable to a corporation failing to be a family-owned corporation shall not expire before the expiration of 3 years after the date the Secretary is notified by the corporation (in such manner as the Secretary may prescribe) of such failure, and such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment.
(3) Cross references
(A) For treatment of the exchange if any property is received which is not permitted to be received under this subsection (including nonqualified preferred stock and an excess principal amount of securities received over securities surrendered, but not including property to which paragraph (2)(B) applies), see section 356.
(B) For treatment of accrued interest in the case of an exchange described in paragraph (2)(B), see section 61.
(1) In general
Subsection (a) shall not apply to an exchange in pursuance of a plan of reorganization within the meaning of subparagraph (D) or (G) of section 368(a)(1), unless—
(A) the corporation to which the assets are transferred acquires substantially all of the assets of the transferor of such assets; and
(B) the stock, securities, and other properties received by such transferor, as well as the other properties of such transferor, are distributed in pursuance of the plan of reorganization.
(2) Cross reference
For special rules for certain exchanges in pursuance of plans of reorganization within the meaning of subparagraph (D) or (G) of section 368(a)(1), see section 355.
(c) Certain railroad reorganizations
Notwithstanding any other provision of this subchapter, subsection (a)(1) (and so much of section 356 as relates to this section) shall apply with respect to a plan of reorganization (whether or not a reorganization within the meaning of section 368(a)) for a railroad confirmed under
(Aug. 16, 1954, ch. 736,
Editorial Notes
References in Text
Section 447(d), referred to in subsec. (a)(2)(C)(ii)(II), was repealed and provisions not relating to family-owned corporations were redesignated as section 447(d) by
Amendments
1998—Subsec. (a)(2)(C)(ii)(III).
1997—Subsec. (a)(2)(B).
Subsec. (a)(2)(C).
Subsec. (a)(3)(A).
1995—Subsec. (c).
1990—Subsec. (d).
1980—Subsec. (a)(2).
Subsec. (a)(3).
Subsec. (b).
Subsec. (c).
1978—Subsec. (c).
1976—Subsec. (d).
Statutory Notes and Related Subsidiaries
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1997 Amendment
Amendment by
Effective Date of 1995 Amendment
Amendment by
Effective Date of 1980 Amendment
Amendment by section 4(e)(1) of
Amendment by section 4(h)(1) of
Amendment by section 6(i)(2) of
Effective Date of 1976 Amendment
Savings Provision
For provisions that nothing in amendment by
Abolition of United States Railway Association and Transfer of Functions
United States Railway Association abolished effective Apr. 1, 1987, all powers, duties, rights, and obligations of Association relating to Consolidated Rail Corporation under Regional Rail Reorganization Act of 1973 (