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Internal Revenue Code Section 332: Complete liquidations of subsidiaries

Location in U.S. Code: Title 26A, Chapter 1C

Section 332. Complete liquidations of subsidiaries
(a) General rule
No gain or loss shall be recognized on the receipt by a
corporation of property distributed in complete liquidation of
another corporation.
(b) Liquidations to which section applies
For purposes of this section, a distribution shall be considered
to be in complete liquidation only if -
(1) the corporation receiving such property was, on the date of
the adoption of the plan of liquidation, and has continued to be
at all times until the receipt of the property, the owner of
stock (in such other corporation) meeting the requirements of
section 1504(a)(2); and either
(2) the distribution is by such other corporation in complete
cancellation or redemption of all its stock, and the transfer of
all the property occurs within the taxable year; in such case the
adoption by the shareholders of the resolution under which is
authorized the distribution of all the assets of such corporation
in complete cancellation or redemption of all its stock shall be
considered an adoption of a plan of liquidation, even though no
time for the completion of the transfer of the property is
specified in such resolution; or
(3) such distribution is one of a series of distributions by
such other corporation in complete cancellation or redemption of
all its stock in accordance with a plan of liquidation under
which the transfer of all the property under the liquidation is
to be completed within 3 years from the close of the taxable year
during which is made the first of the series of distributions
under the plan, except that if such transfer is not completed
within such period, or if the taxpayer does not continue
qualified under paragraph (1) until the completion of such
transfer, no distribution under the plan shall be considered a
distribution in complete liquidation.
If such transfer of all the property does not occur within the
taxable year, the Secretary may require of the taxpayer such bond,
or waiver of the statute of limitations on assessment and
collection, or both, as he may deem necessary to insure, if the
transfer of the property is not completed within such 3-year
period, or if the taxpayer does not continue qualified under
paragraph (1) until the completion of such transfer, the assessment
and collection of all income taxes then imposed by law for such
taxable year or subsequent taxable years, to the extent
attributable to property so received. A distribution otherwise
constituting a distribution in complete liquidation within the
meaning of this subsection shall not be considered as not
constituting such a distribution merely because it does not
constitute a distribution or liquidation within the meaning of the
corporate law under which the distribution is made; and for
purposes of this subsection a transfer of property of such other
corporation to the taxpayer shall not be considered as not
constituting a distribution (or one of a series of distributions)
in complete cancellation or redemption of all the stock of such
other corporation, merely because the carrying out of the plan
involves (A) the transfer under the plan to the taxpayer by such
other corporation of property, not attributable to shares owned by
the taxpayer, on an exchange described in section 361, and (B) the
complete cancellation or redemption under the plan, as a result of
exchanges described in section 354, of the shares not owned by the
taxpayer.
(c) Deductible liquidating distributions of regulated investment
companies and real estate investment trusts
If a corporation receives a distribution from a regulated
investment company or a real estate investment trust which is
considered under subsection (b) as being in complete liquidation of
such company or trust, then, notwithstanding any other provision of
this chapter, such corporation shall recognize and treat as a
dividend from such company or trust an amount equal to the
deduction for dividends paid allowable to such company or trust by
reason of such distribution.