US Code

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

26 U.S.C. § 311

Taxability of corporation on distribution

(a)

General rule

Except as provided in subsection (b), no gain or loss shall be recognized to a corporation on the distribution (not in complete liquidation) with respect to its stock of—
(1)
its stock (or rights to acquire its stock), or
(2)
property.
(b)

Distributions of appreciated property

(1)

In general

If—
(A)
a corporation distributes property (other than an obligation of such corporation) to a shareholder in a distribution to which subpart A applies, and
(B)
the fair market value of such property exceeds its adjusted basis (in the hands of the distributing corporation),
then gain shall be recognized to the distributing corporation as if such property were sold to the distributee at its fair market value.
(2)

Treatment of liabilities

Rules similar to the rules of section 336(b) shall apply for purposes of this subsection.

(3)

Special rule for certain distributions of partnership or trust interests

If the property distributed consists of an interest in a partnership or trust, the Secretary may by regulations provide that the amount of the gain recognized under paragraph (1) shall be computed without regard to any loss attributable to property contributed to the partnership or trust for the principal purpose of recognizing such loss on the distribution.

Aug. 16, 1954, ch. 73668A Stat. 94Pub. L. 91–172, title IX, § 905(a)83 Stat. 713Pub. L. 94–452, § 2(b)90 Stat. 1511Pub. L. 94–455, title XIX, § 1901(a)(42)(A)90 Stat. 1771Pub. L. 95–600, title VII, § 703(j)(2)(A)92 Stat. 2941Pub. L. 96–471, § 2(b)(1)94 Stat. 2253Pub. L. 97–248, title II, § 223(a)96 Stat. 483Pub. L. 98–369, div. A, title I, § 54(a)98 Stat. 568Pub. L. 99–514, title VI, § 631(c)100 Stat. 2272Pub. L. 100–647, title I102 Stat. 3401(, ; , (b)(1), , , 714; , , ; , (B)(i), (C), , ; , (B), , ; , , ; , , ; , title VII, § 712(j), , , 948; , , ; , §§ 1006(e)(8)(B), (21)(B), 1018(d)(5)(E), , , 3403, 3580.)

Editorial Notes

Amendments

Pub. L. 100–647, § 1018(d)(5)(E)1988—Subsec. (a). , substituted “distribution (not in complete liquidation) with respect to its stock” for “distribution, with respect to its stock,”.

Pub. L. 100–647, § 1006(e)(21)(B)Subsec. (b)(2). , substituted “liabilities” for “liabilities in excess of basis” in heading.

Pub. L. 100–647, § 1006(e)(8)(B)Subsec. (b)(3). , added par. (3).

Pub. L. 99–5141986— amended section generally, substituting provisions relating to distributions of appreciated property for provisions relating to LIFO inventory, liability in excess of basis, and appreciated property used to redeem stock.

Pub. L. 98–369, § 54(a)(3)1984—Subsec. (d). , substituted “Distributions of appreciated property” for “Appreciated property used to redeem stock” in heading.

Pub. L. 98–369, § 54(a)(1)Subsec. (d)(1). , substituted “This subsection shall be applied after the applications of subsections (b) and (c)” for “Subsections (b) and (c) shall not apply to any distribution to which this subsection applies” in provisions following subpar. (B).

Pub. L. 98–369, § 54(a)(1)Subsec. (d)(1)(A). , struck out “of part or all of his stock in such corporation” before “and”.

Pub. L. 98–369, § 54(a)(2)(A)Subsec. (d)(2)(A). , substituted provisions relating to a distribution which is made with respect to qualified stock if section 302(b)(4) applies to such distribution or such distribution is a qualified distribution for provisions which had related to a distribution to a corporate shareholder if the basis of the property distributed was determined under section 301(d)(2).

Pub. L. 98–369, § 54(a)(2)(A)Subsec. (d)(2)(B) to (F). , (B), redesignated subpars. (C) to (F) as (B) to (E), respectively, and struck out former subpar. (B) which related to distributions to which section 302(b)(4) applied and which were made with respect to qualified stock.

Pub. L. 98–369, § 712(j)Subsec. (e)(1)(C). , added subpar. (C).

Pub. L. 98–369, § 54(a)(2)(C)Subsec. (e)(3). , added par. (3).

Pub. L. 97–248, § 223(a)(1)1982—Subsec. (d)(2)(A). , substituted reference to a distribution to a corporate shareholder if the basis of the property distributed is determined under section 301(d)(2) for reference to a distribution in complete redemption of all of the stock of a shareholder who, at all times within the 12-month period ending on the date of such distribution owned at least 10 percent in value of the outstanding stock of the distributing corporation, but only if the redemption qualified under section 302(b)(3) (determined without the application of section 302(c)(2)(A)(ii)).

Pub. L. 97–248, § 223(a)(1)Subsec. (d)(2)(B). , substituted reference to a distribution to which section 302(b)(4) applies and which is made with respect to qualified stock for reference to a distribution of stock or an obligation of a corporation, which was engaged in at least one trade or business, which had not received property constituting a substantial part of its assets from the distributing corporation, in a transaction to which section 351 applied or as a contribution to capital, within the 5-year period ending on the date of the distribution, and at least 50 percent in value of the outstanding stock of which was owned by the distributing corporation at any time within the 9-year period ending one year before the date of the distribution.

Pub. L. 97–248, § 223(a)(1)15 U.S.C. 1–715 U.S.C. 12–27Subsec. (d)(2)(C). , substituted reference to a distribution of stock or an obligation of a corporation if the requirements of subsec. (e)(2) of this section are met with respect to the distribution for reference to a distribution of stock or securities pursuant to the terms of a final judgment rendered by a court with respect to the distributing corporation in a court proceeding under the Sherman Act () or the Clayton Act (), or both, to which the United States was a party, but only if the distribution of such stock or securities in redemption of the distributing corporation’s stock was in furtherance of the purposes of the judgment.

Pub. L. 97–248, § 223(a)(3)section 501(a) of this titlesection 1101 of this titleSubsec. (d)(2)(G). , struck out subpar. (G) which provided that a distribution of stock to a distributee which is not an organization exempt from tax under , if with respect to such distributee, subsec. (a)(1) or (b)(1) of applied to such distribution.

Pub. L. 97–248, § 223(a)(2)Subsec. (e). , added subsec. (e).

Pub. L. 96–4711980—Subsec. (a). substituted “section 453B” for “Section 453(d)”.

Pub. L. 95–6001978—Subsec. (d)(2)(G), (H). redesignated subpar. (H) as (G).

Pub. L. 94–455, § 1901(a)1976—Subsec. (d)(1)(B). (42)(A), substituted “then a gain shall be recognized” for “then again shall be recognized”.

Pub. L. 94–452Pub. L. 94–45526 Stat. 20915 U.S.C. 1–738 Stat. 73015 U.S.C. 12–27Subsec. (d)(2). and § 1901(a)(42)(B)(i), (C), struck out subpar. (C) relating to certain distributions before , struck out “;” before “)” and “;” before “)” in subpar. (D), added subpar. (H), and redesignated subpars. (D) to (G), as so amended, as subpars. (C) to (F), respectively.

Pub. L. 91–172, § 905(b)(1)1969—Subsec. (a). , inserted reference to subsec. (d).

Pub. L. 91–172, § 905(a)Subsec. (d). , added subsec. (d).

Statutory Notes and Related Subsidiaries

Effective Date of 1988 Amendment

Pub. L. 100–647Pub. L. 99–514section 1019(a) of Pub. L. 100–647section 1 of this titleAmendment by 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 .

Effective Date of 1986 Amendment

Pub. L. 99–514section 338 of this titlesection 633 of Pub. L. 99–514section 336 of this titleAmendment by applicable to any distribution in complete liquidation, and any sale or exchange, made by a corporation after , unless such corporation is completely liquidated before , any transaction described in for which the acquisition date occurs after , and any distribution, not in complete liquidation, made after , with exceptions and special and transitional rules, see , set out as an Effective Date note under .

Effective Date of 1984 Amendment

Pub. L. 98–369, div. A, title I, § 54(d)98 Stat. 569Pub. L. 99–514, § 2100 Stat. 2095Pub. L. 100–647, title I, § 1018(d)(1)102 Stat. 3578

“(1)

Subsection (a).—

Except as otherwise provided in this subsection, the amendments made by subsection (a) [amending this section] shall apply to distributions declared on or after , in taxable years ending after such date.
“(2)

Subsection (b).—

section 301 of this titleThe amendment made by subsection (b) [amending ] shall apply to distributions after the date of the enactment of this Act [] in taxable years ending after such date.
“(3)

Exception for distributions before , to 80-percent corporate shareholders.—

“(A)

In general .—

The amendments made by subsection (a) shall not apply to any distribution before , to an 80-percent corporate shareholder if the basis of the property distributed is determined under section 301(d)(2) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954].
“(B)

percent corporate shareholder 80-.—

The term ‘80-percent corporate shareholder’ means, with respect to any distribution, any corporation which owns—
“(i)
stock in the corporation making the distribution possessing at least 80 percent of the total combined voting power of all classes of stock entitled to vote, and
“(ii)
at least 80 percent of the total number of shares of all other classes of stock of the distributing corporation (except nonvoting stock which is limited and preferred as to dividends).
“(C)

Special rule for affiliated group filing consolidated return .—

For purposes of this paragraph and paragraph (4), all members of the same affiliated group (as defined in section 1504 of the Internal Revenue Code of 1986) which file a consolidated return for the taxable year which includes the date of the distribution shall be treated as 1 corporation.
“(D)

Special rule for certain distributions before .—

“(i)

In general .—

Pub. L. 99–514section 301 of this titleIn the case of a transaction to which this subparagraph applies, subparagraph (A) shall be applied by substituting ‘1988’ for ‘1985’ and the amendments made by subtitle D of title VI of the Tax Reform Act of 1986 [sections 631 to 634 of , enacting sections 336 and 337 of this title, amending this section and sections 26, 312, 332, 334, 338, 341, 346, 367, 453, 453B, 467, 852, 897, 1056, 1248, 1255, 1276, 1363, 1366, 1374, and 1375 of this title, repealing sections 333, 336, and 337 of this title, and enacting provisions set out as a note under ] shall not apply.
“(ii)

Transaction to which subparagaphapplies [sic] .—

This subparagraph appies [applies] to a transaction in which a Delaware corporation which was incorporated on , and which was acquired by the transferee on , transfers to the transferee stock in a corporation—
“(I)
with respect to which such Delaware corporation is a 100-percent corporate shareholder, and
“(II)
which is a Tennessee corporation which was incorporated on ,, [sic] and which is a successor to an Indiana corporation which was incorporated on , and acquired by the transferee on December 9 [10], 1968.
“(4)

Exception for certain distributions where tender offer commenced on .—

“(A)

In general .—

The amendments made by subsection (a) shall not apply to any distribution made before , if—
“(i)
such distribution consists of qualified stock held (directly or indirectly) on , by the distributing corporation,
“(ii)
control of the distributing corporation (as defined in section 368(c) of the Internal Revenue Code of 1986) is acquired other than in a tax-free transaction after , but before ,
“(iii)
a tender offer for the shares of the distributing corporation was commenced on , and was amended on , and
“(iv)
the distributing corporation and the distributee corporation are members of the same affiliated group (as defined in section 1504 of such Code) which filed a consolidated return for the taxable year which includes the date of the distribution.
If the common parent of any affiliated group filing a consolidated return meets the requirements of clauses (ii) and (iii), each other member of such group shall be treated as meeting such requirements.
“(B)

Qualified stock .—

For purposes of subparagraph (A), the term ‘qualified stock’ means any stock in a corporation which on , was a member of the same affiliated group as the distributing corporation and which filed a consolidated return with the distributing corporation for the taxable year which included .
“(5)

Exception for certain distributions.—

“(A)

In general .—

The amendments made by this section [amending this section and sections 301 and 1223 of this title] shall not apply to distributions before , if—
“(i)
the distribution consists of property held on (or property acquired thereafter in the ordinary course of a trade or business) by—
“(I)
the controlled corporation, or
“(II)
any subsidiary controlled corporation,
“(ii)
a group of 1 or more shareholders (acting in concert)—
“(I)
acquired, during the 1-year period ending on , at least 10 percent of the outstanding stock of the controlled corporation,
“(II)
held at least 10 percent of the outstanding stock of the common parent on , and
“(III)
submitted a proposal for distributions of interests in a royalty trust from the common parent or the controlled corporation, and
“(iii)
the common parent acquired control of the controlled corporation during the 1-year period ending on .
“(B)

Definitions .—

For purposes of this paragraph—
“(i)
The term ‘common parent’ has the meaning given such term by section 1504(a) of the Internal Revenue Code of 1986.
“(ii)
The term ‘controlled corporation’ means a corporation with respect to which 50 percent or more of the outstanding stock of its common parent is tendered for pursuant to a tender offer outstanding on .
“(iii)
The term ‘subsidiary controlled corporation’ means any corporation with respect to which the controlled corporation has control (within the meaning of section 368(c) of such Code) on .
“(6)

Exception for certain distribution of partnership interests .—

The amendments made by this section shall not apply to any distribution before , of an interest in a partnership the interests of which were being traded on a national securities exchange on , if—
“(A)
such interest was owned by the distributing corporation (or any member of an affiliated group within the meaning of section 1504(a) of such Code of which the distributing corporation was a member) on ,
“(B)
the distributing corporation (or any such affiliated member) owned more than 80 percent of the interests in such partnership on , and
“(C)
more than 10 percent of the interests in such partnership was offered for sale to the public during the 1-year period ending on .”
, , , as amended by , title XVIII, § 1804(b)(3), , , 2799; –(3), , , provided that:

section 712(j) 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 1982 Amendment; Exceptions

Pub. L. 97–248, title II, § 223(b)96 Stat. 484Pub. L. 97–448, title III, § 306(a)(7)96 Stat. 2402Pub. L. 99–514, § 2100 Stat. 2095

“(1)

In general .—

Except as otherwise provided in this subsection, the amendments made by this section [amending this section] shall apply to distributions after .
“(2)

Distributions pursuant to ruling requests before .—

In the case of a ruling request under section 311(d)(2)(A) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as in effect before the amendments made by this section) made before , the amendments made by this section [amending this section] shall not apply to distributions made—
“(A)
pursuant to a ruling granted pursuant to such request, and
“(B)
either before , or within 90 days after the date of such ruling.
“(3)

Distributions pursuant to final judgments of court .—

In the case of a final judgment described in section 311(d)(2)(C) of such Code (as in effect before the amendments made by this section) rendered before , the amendments made by this section [amending this section] shall not apply to distributions made before , pursuant to such judgment.
“(4)

Certain distributions with respect to stock acquired before may 1982 .—

The amendments made by this section [amending this section] shall not apply to distributions—
“(A)
which meet the requirements of section 311(d)(2)(A) of such Code (as in effect on the day before the date of the enactment of this Act []),
“(B)
which are made on or before , and
“(C)
which are made with respect to stock acquired after 1980 and before May 1982.
“(5)

Distributions of timberland with respect to stock of forest products company .—

If—
“(A)
a forest products company distributes timberland to a shareholder in redemption of the common and preferred stock in such corporation held by such shareholder,
“(B)
section 311(d)(2)(A) of the Internal Revenue Code of 1986 (as in effect before the amendments made by this section) would have applied to such distributions, and
“(C)
such distributions are made pursuant to 1 of 2 options contained in a contract between such company and such shareholder which is binding on , and at all times thereafter,
then such distributions of timberland having an aggregate fair market value on , not in excess of $10,000,000 shall be treated as distributions to which section 311(d)(2)(A) of such Code (as in effect before the date of the enactment of this Act [] applies.”
, , , as amended by , , ; , , , provided that:

Effective Date of 1980 Amendment

Pub. L. 96–471section 6(a)(1) of Pub. L. 96–471section 453 of this titleFor effective date of amendment by , see , set out as an Effective Date note under .

Effective Date of 1978 Amendment

Pub. L. 95–600, title VII, § 703(j)(2)(C)92 Stat. 2941

“The amendments made by this paragraph [amending this section] shall take effect as if included in section 2(b) of the Bank Holding Company Tax Act of 1976 [amending this section].”
, , , provided that:

Effective Date of 1976 Amendment

Pub. L. 94–455section 1901(d) of Pub. L. 94–455section 2 of this titleAmendment by section 1901(a)(42)(A), (C) of effective for taxable years beginning after , see , set out as a note under .

Pub. L. 94–455, title XIX, § 1901(a)(42)(B)(ii)90 Stat. 1771

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

Pub. L. 94–452, § 2(d)(4)90 Stat. 1512

“The amendment made by subsection (b) [amending this section] shall take effect on , with respect to distributions after , in taxable years ending after .”
, , , provided that:

Effective Date of 1969 Amendment

Pub. L. 91–172, title IX, § 905(c)83 Stat. 714Pub. L. 91–67584 Stat. 2059

“(1)
Except as provided in paragraphs (2), (3), (4), and (5), the amendments made by subsections (a) and (b) [amending this section and sections 301 and 312 of this title] shall apply with respect to distributions after .
“(2)
The amendments made by subsections (a) and (b) shall not apply to a distribution before , pursuant to the terms of—
“(A)
a written contract which was binding on the distributing corporation on , and at all times thereafter before the distribution,
“(B)
an offer made by the distributing corporation before ,
“(C)
an offer made in accordance with a request for a ruling filed by the distributing corporation with the Internal Revenue Service before , or
“(D)
an offer made in accordance with a registration statement filed with the Securities and Exchange Commission before .
For purposes of subparagraphs (B), (C), and (D), an offer shall be treated as an offer only if it was in writing and not revocable by its express terms.
“(3)
The amendments made by subsections (a) and (b) shall not apply to a distribution by a corporation of specific property in redemption of stock outstanding on , if—
“(A)
every holder of such stock on such date had the right to demand redemption of his stock in such specific property, and
“(B)
the corporation had such specific property on hand on such date in a quantity sufficient to redeem all of such stock.
For purposes of the preceding sentence, stock shall be considered to have been outstanding on , if it could have been acquired on such date through the exercise of an existing right of conversion contained in other stock held on such date.
“(4)
The amendments made by subsections (a) and (b) shall not apply to a distribution by a corporation of property (held on , by the distributing corporation or a corporation which was a wholly owned subsidiary of the distributing corporation on such date) in redemption of stock outstanding on , which is redeemed and canceled before , if—
“(A)
such redemption is pursuant to a resolution adopted before , by the Board of Directors authorizing the redemption of a specific amount of stock constituting more than 10 percent of the outstanding stock of the corporation at the time of the adoption of such resolution; and
“(B)
more than 40 percent of the stock authorized to be redeemed pursuant to such resolution was redeemed before , and more than one-half of the stock so redeemed was redeemed with property other than money.
“(5)
The amendments made by subsections (a) and (b) shall not apply to a distribution of stock, by a corporation organized prior to , for the principal purpose of providing an equity participation plan for employees of the corporation whose stock is being distributed (hereinafter referred to as the ‘employer corporation’) if—
“(A)
the stock being distributed was owned by the distributing corporation on ,
“(B)
the stock being redeemed was acquired before , pursuant to such equity participation plan by the shareholder presenting such stock for redemption (or by a predecessor of such shareholder),
“(C)
the employment of the shareholder presenting the stock for redemption (or the predecessor of such shareholder) by the employer corporation commenced before ,
“(D)
at least 90 percent in value of the assets of the distributing corporation on , consisted of common stock of the employer corporation, and
“(E)
at least 50 percent of the outstanding voting stock of the employer corporation is owned by the distributing corporation at any time within the nine-year period ending one year before the date of such distribution.”
, , , as amended by , , , provided that: