26 U.S. Code § 356 - Receipt of additional consideration
If an exchange is described in paragraph (1) but has the effect of the distribution of a dividend (determined with the application of section 318(a)), then there shall be treated as a dividend to each distributee such an amount of the gain recognized under paragraph (1) as is not in excess of his ratable share of the undistributed earnings and profits of the corporation accumulated after February 28, 1913. The remainder, if any, of the gain recognized under paragraph (1) shall be treated as gain from the exchange of property.
The term “other property” does not include securities to the extent that, under section 354 or 355, such securities would be permitted to be received without the recognition of gain.
If, in an exchange or distribution described in section 355, the principal amount of the securities in the controlled corporation which are received exceeds the principal amount of the securities in the distributing corporation which are surrendered, then, with respect to such securities received, the term “other property” means only the fair market value of such excess.
Except as provided in paragraph (2), the term “other property” includes nonqualified preferred stock (as defined in section 351(g)(2)).
Notwithstanding any other provision of this section, to the extent that any of the other property (or money) is received in exchange for section 306 stock, an amount equal to the fair market value of such other property (or the amount of such money) shall be treated as a distribution of property to which section 301 applies.
1997—Subsecs. (e) to (g). Pub. L. 105–34 added subsec. (e) and redesignated former subsecs. (e) and (f) as (f) and (g), respectively.
1990—Subsec. (d)(2)(B)(i). Pub. L. 101–508 struck out “or (d)” after “subsection (c)”.
1982—Subsec. (a)(2). Pub. L. 97–248 inserted “(determined with the application of section 318(a))” after “distribution of a dividend”.
1976—Subsec. (d)(2)(B)(i). Pub. L. 94–253 substituted “subsection (c) or (d) thereof” for “subsection (c) thereof”.
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.