§337 — Nonrecognition for property distributed to parent in complete liquidation of subsidiary

162 cases·47 followed·35 distinguished·1 criticized·79 cited—29% support

Statute Text — 26 U.S.C. §337

(a)In general

No gain or loss shall be recognized to the liquidating corporation on the distribution to the 80-percent distributee of any property in a complete liquidation to which section 332 applies.

(b)Treatment of indebtedness of subsidiary, etc.

(1)Indebtedness of subsidiary to parent

If—

(A)

a corporation is liquidated in a liquidation to which section 332 applies, and

(B)

on the date of the adoption of the plan of liquidation, such corporation was indebted to the 80-percent distributee,

for purposes of this section and section 336, any transfer of property to the 80-percent distributee in satisfaction of such indebtedness shall be treated as a distribution to such distributee in such liquidation.

(2)Treatment of tax-exempt distributee

(A)In general

Except as provided in subparagraph (B), paragraph (1) and subsection (a) shall not apply where the 80-percent distributee is an organization (other than a cooperative described in section 521) which is exempt from the tax imposed by this chapter.

(B)Exception where property will be used in unrelated business

(i)In general

Subparagraph (A) shall not apply to any distribution of property to an organization described in section 511(a)(2) if, immediately after such distribution, such organization uses such property in an activity the income from which is subject to tax under section 511(a).

(ii)Later disposition or change in use

If any property to which clause (i) applied is disposed of by the organization acquiring such property, notwithstanding any other provision of law, any gain (not in excess of the amount not recognized by reason of clause (i)) shall be included in such organization’s unrelated business taxable income. For purposes of the preceding sentence, if such property ceases to be used in an activity referred to in clause (i), such organization shall be treated as having disposed of such property on the date of such cessation.

For purposes of this section, the term “80-percent distributee” means only the corporation which meets the 80-percent stock ownership requirements specified in section 332(b). For purposes of this section, the determination of whether any corporation is an 80-percent distributee shall be made without regard to any consolidated return regulation.

(d)Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of the amendments made by subtitle D of title VI of the Tax Reform Act of 1986, including—

(1)

regulations to ensure that such purposes may not be circumvented through the use of any provision of law or regulations (including the consolidated return regulations and part III of this subchapter) or through the use of a regulated investment company, real estate investment trust, or tax-exempt entity, and

(2)

regulations providing for appropriate coordination of the provisions of this section with the provisions of this title relating to taxation of foreign corporations and their shareholders.

Treasury Regulations

Treas. Reg. §Treas. Reg. §1.337-1 Nonrecognition for property distributed to parent in complete liquidation of subsidiary
Treas. Reg. §Treas. Reg. §1.337-1(a) General rule.
Treas. Reg. §Treas. Reg. §1.337-1(b) Applicability date.

162 Citing Cases

Association Cable TV, Incorporated, Petitioner T.C. Memo. 1995-596 · 1995

- 2 - The issues for decision are whether petitioner is taxable on a gain on the sale of assets or whether it adopted a plan of complete liquidation on or before the sale date of the assets in accordance with the requirements of section 337 and whether petitioner is liable for the additions to tax determined by respondent.

Jimmy D. Morris, Transferee, Petitioner T.C. Memo. 2000-381 · 2000

On its 1988 Federal income tax return, ACT took the position that the $405,776 gain it realized on the sale of its assets to JSL was nontaxable pursuant to section 337 because ACT had adopted a plan of complete liquidation on or before the sale date of the assets.

Marcus R. Messman, Petitioner T.C. Memo. 1998-26 · 1998

On March 31, 1983, TMC Resources was liquidated pursuant to section 337 with all of its assets and liabilities distributed to petitioners, its four equal shareholders.

Anthony M. Kissling & Suzanne R. Kissling, Petitioners · 2020

City Code section 337-3 creates a Preservation Board ofeleven members--though two seats have remained empty for many years--nine ofwhich are appointed by the City's Common Council and the Mayor, and two ofwhich are representatives ofthe Buffalo and Erie County Historical Society and the Landmark Society of Niagara Frontier.

Charles E. Bercy, Deceased, Elaine Bercy, Successor in Interest, and Elaine Bercy, Petitioners · 2019

337 (West 2019) (requiring that an action upon an obligation or liability be brought within four years). Respondent contends that Mr. Bercy's security interest in Girari's assets, though unperfected, attached to the proceeds ofthe asset sale. And he contends that this security interest gave Mr. Bercy, under California law, "absolute priority o

Shea Homes, LP, J F Shea, LP, f.k.a. J F Shea, LLC, Tax Matters Partner, Petitioners · 2014

337.15(a), (g) (West 2006); Colo. Rev. Stat. sec. 13-80-104(1)(a) (2013). The California statute defines "substantial completion" to mean the first occurrence of: "(1) The date offinal inspection by the applicable public agency. (2) The date ofrecordation ofa valid notice ofcompletion. (3) The date ofuse or occupation ofthe improvement. (4) On

Shea Homes, Inc. And Subsidiaries, Petitioner · 2014

Vistancia, LLC, Shea Homes Southwest, Inc., Tax Matters Partner, Petitioners · 2014

Franklin W. Briggs, Petitioner T.C. Memo. 2000-380 · 2000

1995-596, we held that ACT acted with fraudulent intent in representing falsely to the Internal.Revenue Service that it had adopted a formal plan of liquidation under section 337, attaching false minutes to its return and treating the sale of its assets as nontaxable on its Federal corporate income tax return.

Margaret Hancock, Petitioner T.C. Memo. 1999-336 · 1999

On that date, Hancock Enterprises adopted a plan of liquidation under section 337 (as then in effect), filed final corporate tax returns, and distributed the 48 remaining lots to the trust.

Jeff A. Wiltzius, Transferee, Petitioner T.C. Memo. 1997-117 · 1997

House of Babes reported on its 1986 corporate income tax return that it was undergoing a complete liquidation under section 337 and that all of its assets were to be distributed to its shareholders within 12 months.

Ivan A. & Judith L. Jasko, Petitioner 107 T.C. No. 3 · 1996

373 (1960), where legal expenses of collecting insurance proceeds on a building, destroyed by fire during a section 337 liquidation, were denied.

Earle E. Murphy, Petitioner T.C. Memo. 1996-59 · 1996

These statements were entitled "Statement Re Liquidation Under IRC Section 337" and contained the following representations: (1) A statement that the board of directors adopted a resolution recommending the complete liquidation and dissolution of each corporation in accordance with "the Plan"; (2) a statement authorizing and directing the holding of a special meeting of the shareholders to vote on the Plan; (3) a

Jasko v. Commissioner 107 T.C. 30 · 1996

373 (1960), where legal expenses of collecting insurance proceeds on a building, destroyed by fire during a section 337 liquidation, were denied.

Pope & Talbot, Inc. v. Commissioner 104 T.C. 574 · 1995

— Except as otherwise provided in this section or section 337, gain or loss shall be recognized to a liquidating corporation on the distribution of property in complete liquidation as if such property were sold to the distributee at its fair market value.

Rojas v. Commissioner 90 T.C. 1090 · 1988

Atlas Tool Co. v. Commissioner 70 T.C. 86 · 1978

Storz v. Commissioner 68 T.C. 84 · 1977

Estate of Munter v. Commissioner 63 T.C. 663 · 1975

Telephone Answering Service Co. v. Commissioner 63 T.C. 423 · 1974

Kamis Engineering Co. v. Commissioner 60 T.C. 763 · 1973

Adams v. Commissioner 58 T.C. 41 · 1972

Leisure Time Enterprises, Inc. v. Commissioner 56 T.C. 1180 · 1971

Anderson v. Commissioner 56 T.C. 1370 · 1971

A. T. Newell Realty Co. v. Commissioner 53 T.C. 130 · 1969

Gutierrez v. Commissioner 53 T.C. 394 · 1969

Messer v. Commissioner 52 T.C. 440 · 1969

O.B.M., Inc. v. Commissioner 52 T.C. 619 · 1969

Coast Coil Co. v. Commissioner 50 T.C. 528 · 1968

Bird Management, Inc. v. Commissioner 48 T.C. 586 · 1967

John Town, Inc. v. Commissioner 46 T.C. 107 · 1966

Schick v. Commissioner 45 T.C. 368 · 1966

Wilson v. Commissioner 46 T.C. 334 · 1966

Verito v. Commissioner 43 T.C. 429 · 1965

Berghash v. Commissioner 43 T.C. 743 · 1965

Argus, Inc. v. Commissioner 45 T.C. 63 · 1965

United States Holding Co. v. Commissioner 44 T.C. 323 · 1965

Van Heusden v. Commissioner 44 T.C. 491 · 1965

Fibel v. Commissioner 44 T.C. 647 · 1965

44 West 3rd Street Corp. v. Commissioner 39 T.C. 809 · 1963

J. C. Penney Co. v. Commissioner 37 T.C. 1013 · 1962

Southwest Properties, Inc. v. Commissioner 38 T.C. 97 · 1962

Adams v. Commissioner 38 T.C. 549 · 1962

Sproul Realty Co. v. Commissioner 38 T.C. 844 · 1962

Family Record Plan, Inc. v. Commissioner 36 T.C. 305 · 1961

Kuckenberg v. Commissioner 35 T.C. 473 · 1960

Alvord v. Commissioner 32 T.C. 1 · 1959

West Seattle National Bank of Seattle v. Commissioner 33 T.C. 341 · 1959

Freudmann v. Commissioner 10 T.C. 775 · 1948

Buckeye Union Casualty Co. v. Commissioner 54 T.C. 13 · 1970

Shelton v. Commissioner 105 T.C. 114 · 1995

Sim-Air, USA, Ltd. v. Commissioner 98 T.C. 187 · 1992

Kean v. Commissioner 91 T.C. 575 · 1988

Rotolo v. Commissioner 88 T.C. 1500 · 1987

Estate of Jephson v. Commissioner 87 T.C. 297 · 1986

Allan v. Commissioner 86 T.C. 655 · 1986

Estate of Bickmeyer v. Commissioner 84 T.C. 170 · 1985

New Mexico Timber Co. v. Commissioner 84 T.C. 1290 · 1985

Serianni v. Commissioner 80 T.C. 1090 · 1983

Klein v. Commissioner 75 T.C. 298 · 1980

W. & B. Liquidating Corp. v. Commissioner 71 T.C. 493 · 1979

Estate of Pfeifer v. Commissioner 69 T.C. 294 · 1977

Manassas Airport Industrial Park, Inc. v. Commissioner 66 T.C. 566 · 1976

Sanderling, Inc. v. Commissioner 66 T.C. 743 · 1976

Estate of Sidles v. Commissioner 65 T.C. 873 · 1976

John T. Stewart III Trust v. Commissioner 63 T.C. 682 · 1975

Brooks v. Commissioner 63 T.C. 1 · 1974

Marshall v. Commissioner 60 T.C. 242 · 1973

F.T.S. Associates, Inc. v. Commissioner 58 T.C. 207 · 1972

Vern Realty, Inc. v. Commissioner 58 T.C. 1005 · 1972

Of Course, Inc. v. Commissioner 59 T.C. 146 · 1972

International Trading Co. v. Commissioner 57 T.C. 455 · 1971

Honigman v. Commissioner 55 T.C. 1067 · 1971

Sieh v. Commissioner 56 T.C. 1386 · 1971

Callan v. Commissioner 54 T.C. 1514 · 1970

Pastene v. Commissioner 52 T.C. 647 · 1969

Rushing v. Commissioner 52 T.C. 888 · 1969

Clayton v. Commissioner 52 T.C. 911 · 1969

Keck v. Commissioner 49 T.C. 313 · 1968

Hollywood Baseball Ass'n v. Commissioner 49 T.C. 338 · 1968

Anders v. Commissioner 48 T.C. 815 · 1967

Estate of Miller v. Commissioner 43 T.C. 760 · 1965

Twentieth Century-Fox Film Corp. v. Commissioner 45 T.C. 137 · 1965

Beauchamp & Brown Groves Co. v. Commissioner 44 T.C. 117 · 1965

James Armour, Inc. v. Commissioner 43 T.C. 295 · 1964

Hollywood Baseball Ass'n v. Commissioner 42 T.C. 234 · 1964

Alameda Realty Corp. v. Commissioner 42 T.C. 273 · 1964

Pridemark, Inc. v. Commissioner 42 T.C. 510 · 1964

Macabe Co. v. Commissioner 42 T.C. 1105 · 1964

Badger Materials, Inc. v. Commissioner 40 T.C. 725 · 1963

Howell v. Commissioner 40 T.C. 940 · 1963

City Bank of Washington v. Commissioner 38 T.C. 713 · 1962

Handelman v. Commissioner 36 T.C. 560 · 1961

Virginia Ice & Freezing Corp. v. Commissioner 30 T.C. 1251 · 1958

Katisha Ednacot v. Mesa Medical Group, PLLC · Cir.

Janpol v. Commissioner 101 T.C. 518 · 1993

Burton v. Commissioner 99 T.C. 622 · 1992

American Offshore, Inc. v. Commissioner 97 T.C. 579 · 1991

Burrill v. Commissioner 93 T.C. 643 · 1989

Flying Tigers Oil Co. v. Commissioner 92 T.C. 1261 · 1989

Esmark, Inc. v. Commissioner 90 T.C. 171 · 1988

Citizens & Southern Corp. & Subsidiaries v. Commissioner 91 T.C. 463 · 1988

Knowlton v. Commissioner 84 T.C. 160 · 1985

Banc One Corp. v. Commissioner 84 T.C. 476 · 1985

Hongkong & Shanghai Banking Corp. v. Commissioner 85 T.C. 701 · 1985

Estate of Regester v. Commissioner 83 T.C. 1 · 1984

Furstenberg v. Commissioner 83 T.C. 755 · 1984

Estate of Applestein v. Commissioner 80 T.C. 331 · 1983

Mariani Frozen Foods, Inc. v. Commissioner 81 T.C. 448 · 1983

Bolker v. Commissioner 81 T.C. 782 · 1983

Vaughn v. Commissioner 81 T.C. 893 · 1983

Estate of Jephson v. Commissioner 81 T.C. 999 · 1983

Commercial Security Bank v. Commissioner 77 T.C. 145 · 1981

State v. Commissioner 77 T.C. 656 · 1981

Braddock Land Co. v. Commissioner 75 T.C. 324 · 1980

Buffalo Tool & Die Manufacturing Co. v. Commissioner 74 T.C. 441 · 1980

Bush Bros. & Co. v. Commissioner 73 T.C. 424 · 1979

Van Raden v. Commissioner 71 T.C. 1083 · 1979

Estate of Piper v. Commissioner 72 T.C. 1062 · 1979

Rosen v. Commissioner 71 T.C. 226 · 1978

Weaver v. Commissioner 71 T.C. 443 · 1978

Schwartz v. Commissioner 69 T.C. 877 · 1978

Allstate Savings & Loan Ass'n v. Commissioner 68 T.C. 310 · 1977

Stern v. Commissioner 66 T.C. 91 · 1976

Allen v. Commissioner 66 T.C. 340 · 1976

Kronenberg v. Commissioner 64 T.C. 428 · 1975

George L. Riggs, Inc. v. Commissioner 64 T.C. 474 · 1975

L. C. Bohart Plumbing & Heating Co. v. Commissioner 64 T.C. 602 · 1975

Tennessee Carolina Transportation, Inc. v. Commissioner 65 T.C. 440 · 1975

Cohen v. Commissioner 63 T.C. 527 · 1975

Mele v. Commissioner 61 T.C. 358 · 1973

Kinsey v. Commissioner 58 T.C. 259 · 1972

Estate of Lammerts v. Commissioner 54 T.C. 420 · 1970

Realty Loan Corp. v. Commissioner 54 T.C. 1083 · 1970

Estate of Glass v. Commissioner 55 T.C. 543 · 1970

Hine v. Commissioner 54 T.C. 1552 · 1970

Lansing Broadcasting Co. v. Commissioner 52 T.C. 299 · 1969

Dodson v. Commissioner 52 T.C. 544 · 1969

Abegg v. Commissioner 50 T.C. 145 · 1968

Waltham Netoco Theatres, Inc. v. Commissioner 49 T.C. 399 · 1968

Bijou Park Properties, Inc. v. Commissioner 47 T.C. 207 · 1966

South Texas Rice Warehouse Co. v. Commissioner 43 T.C. 540 · 1965

Comtel Corp. v. Commissioner 45 T.C. 294 · 1965

Luff Co. v. Commissioner 44 T.C. 532 · 1965

J. E. Hawes Corp. v. Commissioner 44 T.C. 705 · 1965

Smith Leasing Co. v. Commissioner 43 T.C. 37 · 1964

Royal Oak Apartments, Inc. v. Commissioner 43 T.C. 243 · 1964

Estate of Schmidt v. Commissioner 42 T.C. 1130 · 1964

Townsend v. Commissioner 37 T.C. 830 · 1962

Mills v. Commissioner 39 T.C. 393 · 1962

James M. Pierce Corp. v. Commissioner 38 T.C. 643 · 1962

Philbrick v. Commissioner 38 T.C. 666 · 1962

F. C. Publication Liquidating Corp. v. Commissioner 36 T.C. 836 · 1961

Mountain Water Co. v. Commissioner 35 T.C. 418 · 1960

Kent Manufacturing Corp. v. Commissioner 33 T.C. 930 · 1960

Estate of McIntosh v. Commissioner 25 T.C. 794 · 1956

Marsman v. Commissioner 18 T.C. 1 · 1952

Clark v. Commissioner 19 T.C. 48 · 1952

Joan Carol Corp. v. Commissioner 13 T.C. 83 · 1949

Tammy Berera v. Mesa Medical Group, PLLC 779 F.3d 352 · Cir.

Charles Francisco Cecilia Francisco v. United States 267 F.3d 303 · Cir.

Cunningham v. Cornell University 86 F.4th 961 · Cir.