US Code

Public Law 119-73 (01/23/2026)

26 U.S.C. § 301

Distributions of property

(a)

In general

Except as otherwise provided in this chapter, a distribution of property (as defined in section 317(a)) made by a corporation to a shareholder with respect to its stock shall be treated in the manner provided in subsection (c).

(b)

Amount distributed

(1)

General rule

For purposes of this section, the amount of any distribution shall be the amount of money received, plus the fair market value of the other property received.

(2)

Reduction for liabilities

The amount of any distribution determined under paragraph (1) shall be reduced (but not below zero) by—
(A)
the amount of any liability of the corporation assumed by the shareholder in connection with the distribution, and
(B)
the amount of any liability to which the property received by the shareholder is subject immediately before, and immediately after, the distribution.
(3)

Determination of fair market value

For purposes of this section, fair market value shall be determined as of the date of the distribution.

(c)

Amount taxable

In the case of a distribution to which subsection (a) applies—
(1)

Amount constituting dividend

That portion of the distribution which is a dividend (as defined in section 316) shall be included in gross income.

(2)

Amount applied against basis

That portion of the distribution which is not a dividend shall be applied against and reduce the adjusted basis of the stock.

(3)

Amount in excess of basis

(A)

In general

Except as provided in subparagraph (B), that portion of the distribution which is not a dividend, to the extent that it exceeds the adjusted basis of the stock, shall be treated as gain from the sale or exchange of property.

(B)

Distributions out of increase in value accrued before

That portion of the distribution which is not a dividend, to the extent that it exceeds the adjusted basis of the stock and to the extent that it is out of increase in value accrued before , shall be exempt from tax.

(d)

Basis

The basis of property received in a distribution to which subsection (a) applies shall be the fair market value of such property.

(e)

Special rule for certain distributions received by 20 percent corporate shareholder

(1)

In general

Except to the extent otherwise provided in regulations, solely for purposes of determining the taxable income of any 20 percent corporate shareholder (and its adjusted basis in the stock of the distributing corporation), section 312 shall be applied with respect to the distributing corporation as if it did not contain subsections (k) and (n) thereof.

(2)

20 percent corporate shareholder

For purposes of this subsection, the term “20 percent corporate shareholder” means, with respect to any distribution, any corporation which owns (directly or through the application of section 318)—
(A)
stock in the corporation making the distribution possessing at least 20 percent of the total combined voting power of all classes of stock entitled to vote, or
(B)
at least 20 percent of the total value of all stock of the distributing corporation (except nonvoting stock which is limited and preferred as to dividends),
but only if, but for this subsection, the distributee corporation would be entitled to a deduction under section 243 or 245 with respect to such distribution.
(3)

Application of section 312(n)(7) not affected

The reference in paragraph (1) to subsection (n) of section 312 shall be treated as not including a reference to paragraph (7) of such subsection.

(4)

Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection.

(f)

Special rules

(1)
For distributions in redemption of stock, see section 302.
(2)
For distributions in complete liquidation, see part II (sec. 331 and following).
(3)
For distributions in corporate organizations and reorganizations, see part III (sec. 351 and following).
(4)
For taxation of dividends received by individuals at capital gain rates, see section 1(h)(11).

Aug. 16, 1954, ch. 73668A Stat. 84Pub. L. 87–403, § 2(a)76 Stat. 5Pub. L. 87–83476 Stat. 977Pub. L. 88–272, title II, § 231(b)(2)78 Stat. 105Pub. L. 88–484, § 1(b)(1)78 Stat. 597Pub. L. 89–570, § 1(b)(2)80 Stat. 762Pub. L. 89–809, title I, § 104(f)80 Stat. 1559Pub. L. 91–172, title II, § 211(b)(1)83 Stat. 570Pub. L. 92–178, title III, § 312(a)85 Stat. 526Pub. L. 94–455, title II, § 205(c)(1)(B)90 Stat. 1535Pub. L. 95–628, § 3(a)92 Stat. 3627Pub. L. 98–369, div. A, title I98 Stat. 569Pub. L. 99–514, title VI, § 612(b)(1)100 Stat. 2250Pub. L. 100–203, title X, § 10222(b)(1)101 Stat. 1330–411Pub. L. 100–647, title I, § 1006(e)(10)102 Stat. 3401Pub. L. 108–27, title III, § 302(e)(2)117 Stat. 763Pub. L. 113–295, div. A, title II, § 221(a)(41)(G)128 Stat. 4044(, ; , , ; , §§ 5(a), (b), 13(f)(2), , , 1035; , , ; , , ; , , ; , , ; , (2), title IX, § 905(b)(2), , , 714; , , ; , (C), title XIX, §§ 1901(a)(41), (b)(32)(A), 1906(b)(13)(A), , , 1771, 1800, 1834; , (b), , ; , §§ 54(b), 61(d), title VII, § 712(i)(1), , , 582, 948; , title XVIII, § 1804(f)(2)(B), , , 2805; , , ; –(12), title II, § 2004(j)(3)(B), , , 3402, 3605; , , ; , , .)

Editorial Notes

Amendments

Pub. L. 113–2952014—Subsec. (e)(2). struck out “, 244,” after “section 243” in concluding provisions.

Pub. L. 108–272003—Subsec. (f)(4). added par. (4).

Pub. L. 100–647, § 1006(e)(10)1988—Subsec. (b)(1). , amended par. (1) generally. Prior to amendment, par. (1) contained subpars. (A) to (D) which provided what the amount of any distribution would be for noncorporate distributees, corporate distributees, certain corporate distributees of foreign corporations, and foreign corporate distributees.

Pub. L. 100–647, § 1006(e)(11)Subsec. (d). , amended subsec. (d) generally. Prior to amendment, subsec. (d) contained pars. (1) to (4) which provided what the basis of property received would be for noncorporate distributees, corporate distributees, foreign corporate distributees, and certain corporate distributees of foreign corporations.

Pub. L. 100–647, § 2004(j)(3)(B)Subsec. (e). , added par. (3) and redesignated former par. (3) as (4).

Pub. L. 100–647, § 1006(e)(12), redesignated subsec. (f) as (e) and struck out former subsec. (e) which related to special rule for holding period of appreciated property distributed to corporation.

Pub. L. 100–647, § 1006(e)(12)Subsecs. (f), (g). , redesignated subsec. (g) as (f). Former subsec. (f) redesignated (e).

Pub. L. 100–2031987—Subsec. (f)(1). substituted “subsections (k) and (n)” for “subsection (n)”.

Pub. L. 99–514, § 1804(f)(2)(B)1986—Subsec. (f)(3). , substituted “this subsection” for “this section”.

Pub. L. 99–514, § 612(b)(1)Subsec. (g)(4). , struck out par. (4) which provided: “For partial exclusion from gross income of dividends received by individuals, see section 116.”

Pub. L. 98–369, § 54(b)1984—Subsec. (e). , added subsec. (e). Former subsec. (e) redesignated (f).

Pub. L. 98–369, § 712(i)(1)Subsec. (e)(2). , substituted “complete liquidation” for “partial or complete liquidation” in subsec. (e)(2), which became subsec. (g)(2).

Pub. L. 98–369, § 61(d)Subsec. (f). , added subsec. (f). Former subsec. (f) redesignated (g).

Pub. L. 98–369, § 54(b), redesignated former subsec. (e) as (f).

Pub. L. 98–369Subsec. (g). , §§ 54(b), 61(d), redesignated former subsec. (e) successively as subsec. (f) and as subsec. (g).

Pub. L. 98–369, § 712(i)(1)Subsec. (g)(2). , substituted “complete liquidation” for “partial or complete liquidation” in subsec. (e)(2), which became subsec. (g)(2).

Pub. L. 95–628, § 3(a)1978—Subsec. (b)(1)(B)(ii). , substituted “amount of gain recognized to the distributing corporation on the distribution” for “amount of gain to the distributing corporation which is recognized under subsection (b), (c), or (d) of section 311, under section 341(f), or under section 617(d)(1), 1245(a), 1250(a), 1251(c), 1252(a), or 1254(a)”.

Pub. L. 95–628, § 3(b)Subsec. (d)(2)(B). , substituted “amount of gain recognized to the distributing corporation on the distribution” for “amount of gain to the distributing corporation which is recognized under subsection (b), (c), or (d) of section 311, under section 341(f), or under section 617(d)(1), 1245(a), 1250(a), 1251(c), 1252(a), or 1254(a)”.

Pub. L. 94–455, § 205(c)(1)(B)1976—Subsec. (b)(1)(B)(ii). , substituted “1252(a), or 1254(a)” for “or 1252(a)”.

Pub. L. 94–455, § 1906(b)(13)(A)Subsec. (b)(1)(C). , struck out “or his delegate” after “Secretary”.

Pub. L. 94–455, § 205(c)(1)(C)Subsec. (d)(2)(B). , substituted “1252(a), or 1254(a)” for “or 1252(a)”.

Pub. L. 94–455, § 1901(a)(41)Subsec. (e). , (b)(32)(A), redesignated subsec. (g) as (e). Former subsec. (e), which related to exceptions for certain distributions by personal service corporations, was struck out.

Pub. L. 94–455, § 1901(b)(32)(A)Subsec. (f). , struck out subsec. (f) which related to special rules for distribution of antitrust stock to corporations.

Pub. L. 94–455, § 1901(b)(32)(A)Subsec. (g). , redesignated subsec. (g) as (e).

Pub. L. 92–178, § 312(a)(1)1971—Subsec. (b)(1)(B). , substituted “corporation, unless subparagraph (D) applies” for “corporation” where first appearing.

Pub. L. 92–178, § 312(a)(2)Subsec. (b)(1)(D). , added subpar. (D).

Pub. L. 92–178, § 312(a)(3)Subsec. (d)(2). , substituted “corporation, unless paragraph (3) applies” for “corporation” where first appearing.

Pub. L. 92–178, § 312(a)(4)Subsec. (d)(3), (4). , added par. (3) and redesignated former par. (3) as (4).

Pub. L. 91–1721969—Subsec. (b)(1)(B)(ii). , §§ 211(b)(1), 905(b)(2), substituted “1250(a), 1251(c), or 1252(a)” for “or 1250(a)” and inserted reference to section 311(a).

Pub. L. 91–172Subsec. (d)(2)(B). , §§ 211(b)(2), 905(b)(2), substituted “1250(a), 1251(c), or 1252(a)”, for “or 1250(a)” and inserted reference to section 311(a).

Pub. L. 89–5701966—Subsec. (b)(1)(B)(ii). included reference to section 617(d)(1).

Pub. L. 89–809Subsec. (b)(1)(C). substituted “gross income which is effectively connected with the conduct of a trade or business within the United States” for “gross income from sources within the United States” in cl. (i), “gross income which is not effectively connected with the conduct of a trade or business within the United States” for “gross income from sources without the United States” in cl. (ii), and inserted text following cl. (ii) setting out the treatment to be accorded gross income for any period before the first taxable year beginning after .

Pub. L. 89–570Subsec. (d)(2)(B). included reference to section 617(d)(1).

Pub. L. 88–4841964—Subsec. (b). included amount of gain recognized under section 341(f).

Pub. L. 88–272 inserted reference to section 1250(a).

Pub. L. 88–484Subsec. (d). included amount of gain recognized under section 341(f).

Pub. L. 88–272 inserted reference to section 1250(a).

Pub. L. 87–834, § 13(f)(2)1962—Subsec. (b)(1)(B). , substituted “subsection (b) or (c) of section 311 or under section 1245(a)” for “subsection (b) or (c) of section 311”.

Pub. L. 87–834, § 5(a)Subsec. (b)(1)(C). , added subpar. (C).

Pub. L. 87–834, § 13(f)(2)Subsec. (d)(2). , substituted “subsection (b) or (c) of section 311 or under section 1245(a)” for “subsection (b) or (c) of section 311”.

Pub. L. 87–834, § 5(b)Subsec. (d)(3). , added par. (3).

Pub. L. 87–403Subsecs. (f), (g). added subsec. (f) and redesignated former subsec. (f) as (g).

Statutory Notes and Related Subsidiaries

Effective Date of 2014 Amendment

Pub. L. 113–295section 247 of this titlePub. L. 113–295section 221(a)(41)(K) of Pub. L. 113–295section 172 of this titleAmendment by not applicable to preferred stock issued before (determined in the same manner as under as in effect before its repeal by ), see , set out as a note under .

section 221(a) of Pub. L. 113–295Pub. L. 113–295section 221(b) of Pub. L. 113–295section 1 of this titleExcept as otherwise provided in , amendment by effective , subject to a savings provision, see , set out as a note under .

Effective Date of 2003 Amendment

Pub. L. 108–27section 302(f) of Pub. L. 108–27section 1 of this titleAmendment by applicable, except as otherwise provided, to taxable years beginning after , see , set out as an Effective and Termination Dates of 2003 Amendment note under .

Effective Date of 1988 Amendment

Pub. L. 100–647Pub. L. 99–514section 1019(a) of Pub. L. 100–647section 1 of this titleAmendment by section 1006(e)(10)–(12) of effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, , to which such amendment relates, see , set out as a note under .

section 2004(j)(3)(B) of Pub. L. 100–647Pub. L. 100–203, title Xsection 2004(u) of Pub. L. 100–647section 56 of this titleAmendment by effective, except as otherwise provided, as if included in the provisions of the Revenue Act of 1987, , to which such amendment relates, see , set out as a note under .

Effective Date of 1987 Amendment

Pub. L. 100–203, title X, § 10222(b)(2)101 Stat. 1330–411Pub. L. 100–647, title II, § 2004(j)(4)102 Stat. 3605

“(A)

In general .—

The amendment made by paragraph (1) [amending this section] shall apply to distributions after . For purposes of applying such amendment to any such distribution—
“(i)
for purposes of determining earnings and profits, such amendment shall be deemed to be in effect for all periods whether before, on, or after , but
“(ii)
such amendment shall not affect the determination of whether any distribution on or before , is a dividend and the amount of any reduction in accumulated earnings and profits on account of any such distribution.
“(B)

Exception .—

The amendment made by paragraph (1) shall not apply for purposes of determining gain or loss on any disposition of stock after , and before , if such disposition is pursuant to a written binding contract, governmental order, letter of intent or preliminary agreement, or stock acquisition agreement, in effect on or before .”
, , , as amended by , , , provided that:

Effective Date of 1986 Amendment

Pub. L. 99–514, title VI, § 612(c)100 Stat. 2251

section 116 of this titlesection 584 of this title“The amendments made by this section [amending this section and sections 584, 642, 643, 702, 854, and 857 of this title, repealing , and enacting provisions set out as a note under ] shall apply to taxable years beginning after .”
, , , provided that:

section 1804(f)(2)(B) of Pub. L. 99–514Pub. L. 98–369, div. Asection 1881 of Pub. L. 99–514section 48 of this titleAmendment by effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, , to which such amendment relates, see , set out as a note under .

Effective Date of 1984 Amendment

section 54(b) of Pub. L. 98–369section 54(d)(2) of Pub. L. 98–369section 311 of this titleAmendment by applicable to distributions after , in taxable years ending after , see , set out as a note under .

Pub. L. 98–369, div. A, title I, § 61(e)(4)98 Stat. 583

“The amendment made by subsection (d) [amending this section] shall apply to distributions after the date of the enactment of this Act [] in taxable years ending after such date.”
, , , provided that:

section 712(i)(1) of Pub. L. 98–369Pub. L. 97–248section 715 of Pub. L. 98–369section 31 of this titleAmendment by effective as if included in the provision of the Tax Equity and Fiscal Responsibility Act of 1982, , to which such amendment relates, see , set out as a note under .

Effective Date of 1978 Amendment

Pub. L. 95–628, § 3(d)92 Stat. 3628

section 312 of this title“The amendments made by this section [amending this section and ] shall apply to distributions made after the date of the enactment of this Act [].”
, , , provided that:

Effective Date of 1976 Amendment

Pub. L. 94–455section 205(e) of Pub. L. 94–455section 1254 of this titleAmendment by section 205(c)(1)(B), (C) of effective for taxable years ending after , see , set out as an Effective Date note under .

Pub. L. 94–455section 1901(d) of Pub. L. 94–455section 2 of this titleAmendment by section 1901(a)(41), (b)(32)(A) of effective for taxable years beginning after , see , set out as a note under .

Effective Date of 1971 Amendment

Pub. L. 92–178, title III, § 312(b)85 Stat. 526

“The amendments made by subsection (a) [amending this section] shall apply with respect to distributions made after .”
, , , provided that:

Effective Date of 1969 Amendment

Pub. L. 91–172, title II, § 211(c)83 Stat. 570

section 1251 of this title“The amendments made by this section [enacting and amending this section and sections 312, 341, 453, and 751 of this title] shall apply to taxable years beginning after .”
, , , provided that:

section 905(b)(2) of Pub. L. 91–172section 905(c) of Pub. L. 91–172section 311 of this titleAmendment by effective with respect to distributions made after , see , set out as a note under .

Effective Date of 1966 Amendment

Pub. L. 89–809section 104(n) of Pub. L. 89–809section 11 of this titleAmendment by applicable with respect to taxable years beginning after , see , set out as a note under .

Pub. L. 89–570section 3 of Pub. L. 89–570section 617 of this titleAmendment by applicable to taxable years ending after , but only in respect of expenditures paid or incurred after such date, see , set out as an Effective Date note under .

Effective Date of 1964 Amendment

Pub. L. 88–484, § 278 Stat. 597

“The amendments made by the first section of this Act [amending this section and sections 312, 341, and 453 of this title] shall apply with respect to transactions after the date of the enactment of this Act [] in taxable years ending after such date.”
, , , provided that:

Pub. L. 88–272section 231(c) of Pub. L. 88–272section 1250 of this titleAmendment by applicable to dispositions after , in taxable years ending after such date, see , set out as an Effective Date note under .

Effective Date of 1962 Amendments

Pub. L. 87–834, § 5(d)76 Stat. 977

section 245 of this title“The amendments made by this section [amending this section and ] shall apply to distributions made after .”
, , , provided that:

section 13(f)(2) of Pub. L. 87–834section 13(g) of Pub. L. 87–834section 1245 of this titleAmendment by applicable to taxable years beginning after , see , set out as an Effective Date note under .

Pub. L. 87–403, § 2(b)76 Stat. 6

“The amendments made by this section [amending this section] shall apply only with respect to distributions made after the date of the enactment of this Act [].”
, , , provided that:

Study of Corporate Provisions

Pub. L. 99–514, title VI, § 634100 Stat. 2282Pub. L. 101–508, title XI, § 11831(b)104 Stat. 1388–559, , , directed Secretary of the Treasury or his delegate to conduct a study of proposals to reform the provisions of subchapter C of chapter 1 of the Internal Revenue Code of 1986, and not later than (due date extended to , by , , ), to submit to Committee on Ways and Means of House of Representatives and Committee on Finance of Senate a report on the study conducted (together with such recommendations he deemed advisable).

Plan Amendments Not Required Until January 1, 1989

Pub. L. 99–514section 1140 of Pub. L. 99–514section 401 of this titleFor provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after , see , as amended, set out as a note under .