26 U.S. Code § 306 - Dispositions of certain stock
If the section 306 stock is redeemed in a distribution in complete liquidation to which part II (sec. 331 and following) applies.
To the extent that, under any provision of this subtitle, gain or loss to the shareholder is not recognized with respect to the disposition of the section 306 stock.
Stock (other than common stock issued with respect to common stock) which was distributed to the shareholder selling or otherwise disposing of such stock if, by reason of section 305(a), any part of such distribution was not includible in the gross income of the shareholder.
Except as otherwise provided in subparagraph (B), stock the basis of which (in the hands of the shareholder selling or otherwise disposing of such stock) is determined by reference to the basis (in the hands of such shareholder or any other person) of section 306 stock.
For purposes of this section, the term “section 306 stock” does not include any stock no part of the distribution of which would have been a dividend at the time of the distribution if money had been distributed in lieu of the stock.
The amount treated under subsection (a)(1)(A) as ordinary income shall, for purposes of part I of subchapter N (sec. 861 and following, relating to determination of sources of income), be treated as derived from the same source as would have been the source if money had been received from the corporation as a dividend at the time of the distribution of such stock. If under the preceding sentence such amount is determined to be derived from sources within the United States, such amount shall be considered to be fixed or determinable annual or periodical gains, profits, and income within the meaning of section 871(a) or section 881(a), as the case may be.
2003—Subsec. (a)(1)(D). Pub. L. 108–27 added subpar. (D).
1990—Subsec. (h). Pub. L. 101–508 struck out subsec. (h) which related to stock received in distributions and reorganizations to which 1939 Code applied.
1984—Subsec. (b)(1). Pub. L. 98–369, § 712(i)(2), substituted “interest, etc.” for “interest” in heading.
Subsec. (c)(3). Pub. L. 98–369, § 712(l)(6), incorporated existing second sentence in provision designated subpar. (A) and added subpar. (B).
Subsec. (c)(4). Pub. L. 98–369, § 712(l)(5)(B), substituted “the rules of section 304(c)(3)(B) shall apply” for “sections 318(a)(2)(C) and 318(a)(3)(C) shall be applied without regard to the 50 percent limitation contained therein”.
1982—Subsec. (b)(1)(B). Pub. L. 97–248, § 222(e)(2), substituted “paragraph (3) or (4) of section 302(b)” for “section 302(b)(3)”.
Subsec. (b)(2). Pub. L. 97–248, § 222(e)(1)(A), struck out “partial or” before “complete liquidation”.
Subsec. (c)(3). Pub. L. 97–248, § 226(b), added par. (3).
Subsec. (c)(4). Pub. L. 97–248, § 227(a), added par. (4).
1978—Subsec. (a)(3). Pub. L. 95–600, § 702(a)(1), added par. (3) which related to ordinary income from the sale or redemption of section 306 stock which was carryover basis property adjusted for 1976 value. See Repeals note below.
Subsec. (b)(5). Pub. L. 95–600, § 702(a)(2), added par. (5) which provided that subsec. (a) of this section shall not apply to the extent that section 303 applies to a distribution in redemption of section 306 stock. See Repeals note below.
1976—Subsec. (a)(1)(A), (B)(i). Pub. L. 94–455, § 1901(b)(3)(J), substituted “ordinary income” for “gain from the sale of property which is not a capital asset”.
Subsec. (b)(4). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
Subsec. (f). Pub. L. 94–455, § 1901(b)(3)(J), substituted “ordinary income” for “gain from the sale of property which is not a capital asset”.
Amendment by Pub. L. 108–27 applicable, except as otherwise provided, to taxable years beginning after Dec. 31, 2002, see section 302(f) of Pub. L. 108–27, set out as an Effective and Termination Dates of 2003 Amendment note under section 1 of this title.
Amendment by Pub. L. 98–369 effective as if included in the provision of the Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97–248, to which such amendment relates, see section 715 of Pub. L. 98–369, set out as a note under section 31 of this title.
Amendment by section 222(e)(1)(A), (2) of 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.
Amendment by section 226(b) of Pub. L. 97–248 applicable to transfers occurring after Aug. 31, 1982, except for certain transfers pursuant to an application to form a BHC filed with the Federal Reserve Board before Aug. 16, 1982, see section 226(c) of Pub. L. 97–248, set out as a note under section 304 of this title.
Amendment by Pub. L. 96–223 (repealing section 702(a)(1), (2) of Pub. L. 95–600 and the amendments made thereby, which had amended this section) applicable in respect of decedents dying after Dec. 31, 1976, and, except for certain elections, this title to be applied and administered as if those repealed provisions had not been enacted, see section 401(b), (e) of Pub. L. 96–223, set out as a note under section 1023 of this title.
Pub. L. 95–600, title VII, § 702(a)(3), Nov. 6, 1978, 92 Stat. 2925, provided that the amendments made by section 702(a) of Pub. L. 95–600 would apply to the estates of decedents dying after Dec. 31, 1979, prior to repeal by Pub. L. 96–223, title IV, § 401(a), Apr. 2, 1980, 94 Stat. 299.
Pub. L. 95–600, § 702(a)(1), (2), cited as a credit to this section, and the amendments made thereby, were repealed by Pub. L. 96–223, title IV, § 401(a), Apr. 2, 1980, 94 Stat. 299, resulting in the text of this section reading as it read prior to enactment of section 702(a)(1), (2). See Effective Date of 1980 Amendment and Revival of Prior Law note above.
For provisions that nothing in amendment by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.
Written determinations for this section
These documents, sometimes referred to as "Private Letter Rulings", are taken from the IRS Written Determinations page; the IRS also publishes a fuller explanation of what they are and what they mean. The collection is updated (at our end) daily. It appears that the IRS updates their listing every Friday.
Note that the IRS often titles documents in a very plain-vanilla, duplicative way. Do not assume that identically-titled documents are the same, or that a later document supersedes another with the same title. That is unlikely to be the case.
Release dates appear exactly as we get them from the IRS. Some are clearly wrong, but we have made no attempt to correct them, as we have no way guess correctly in all cases, and do not wish to add to the confusion.
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- Definitions Relating to Corporate Reorganizations : 2013-02-22
- Recapitalization (Type "E") : 2013-02-22
- Dispositions of Certain Stock : 2013-02-22
- Section 306 Stock v. Not 306 Stock : 2013-02-22
- Intercompany Transactions : 2007-09-14
- Statutory Merger or Consolidation (Type "A") : 2007-09-14
- Section 306 Stock v. Not 306 Stock : 2007-09-14
- Statutory Merger or Consolidation (Type "A") : 2007-03-30
- Section 306 Stock v. Not 306 Stock : 2007-03-30
- Stock Dividends : 2004-03-12
- Section 306 Stock v. Not 306 Stock : 2004-03-12
- Non-Qualified Preferred Stock : 2004-03-12
- Distribution of Non-Qualified Preferred Stock : 2004-03-12
- Recapitalization (Type "E") : 2003-03-14
- Dispositions of Certain Stock : 2003-03-14
- Section 306 Stock v. Not 306 Stock : 2000-07-21
- Recapitalizations : 2000-07-21
- Disproportionate Distributions : 1999-11-19
- Section 306 Stock v. Not 306 Stock : 1999-11-19
- Disproportionate Redemption of stock : 1999-11-19
- Stock Dividends : 1999-01-08
- Section 306 Stock v. Not 306 Stock : 1999-01-08