§358 — Basis to distributees
14 cases·3 followed·1 distinguished·10 cited—21% support
Statute Text — 26 U.S.C. §358
In the case of an exchange to which section 351, 354, 355, 356, or 361 applies—
The basis of the property permitted to be received under such section without the recognition of gain or loss shall be the same as that of the property exchanged—
decreased by—
the fair market value of any other property (except money) received by the taxpayer,
the amount of any money received by the taxpayer, and
the amount of loss to the taxpayer which was recognized on such exchange, and
increased by—
the amount which was treated as a dividend, and
the amount of gain to the taxpayer which was recognized on such exchange (not including any portion of such gain which was treated as a dividend).
The basis of any other property (except money) received by the taxpayer shall be its fair market value.
Under regulations prescribed by the Secretary, the basis determined under subsection (a)(1) shall be allocated among the properties permitted to be received without the recognition of gain or loss.
In the case of an exchange to which section 355 (or so much of section 356 as relates to section 355) applies, then in making the allocation under paragraph (1) of this subsection, there shall be taken into account not only the property so permitted to be received without the recognition of gain or loss, but also the stock or securities (if any) of the distributing corporation which are retained, and the allocation of basis shall be made among all such properties.
For purposes of this section, a distribution to which section 355 (or so much of section 356 as relates to section 355) applies shall be treated as an exchange, and for such purposes the stock and securities of the distributing corporation which are retained shall be treated as surrendered, and received back, in the exchange.
Where, as part of the consideration to the taxpayer, another party to the exchange assumed a liability of the taxpayer, such assumption shall, for purposes of this section, be treated as money received by the taxpayer on the exchange.
Paragraph (1) shall not apply to the amount of any liability excluded under section 357(c)(3).
This section shall not apply to property acquired by a corporation by the exchange of its stock or securities (or the stock or securities of a corporation which is in control of the acquiring corporation) as consideration in whole or in part for the transfer of the property to it.
For purposes of this section, the property permitted to be received under section 361 without the recognition of gain or loss shall be treated as consisting only of stock or securities in another corporation a party to the reorganization.
In the case of a distribution to which section 355 (or so much of section 356 as relates to section 355) applies and which involves the distribution of stock from 1 member of an affiliated group (as defined in section 1504(a) without regard to subsection (b) thereof) to another member of such group, the Secretary may, notwithstanding any other provision of this section, provide adjustments to the adjusted basis of any stock which—
is in a corporation which is a member of such group, and
is held by another member of such group,
to appropriately reflect the proper treatment of such distribution.
If, after application of the other provisions of this section to an exchange or series of exchanges, the basis of property to which subsection (a)(1) applies exceeds the fair market value of such property, then such basis shall be reduced (but not below such fair market value) by the amount (determined as of the date of the exchange) of any liability—
which is assumed by another person as part of the exchange, and
with respect to which subsection (d)(1) does not apply to the assumption.
Except as provided by the Secretary, paragraph (1) shall not apply to any liability if—
the trade or business with which the liability is associated is transferred to the person assuming the liability as part of the exchange, or
substantially all of the assets with which the liability is associated are transferred to the person assuming the liability as part of the exchange.
For purposes of this subsection, the term “liability” shall include any fixed or contingent obligation to make payment, without regard to whether the obligation is otherwise taken into account for purposes of this title.
Treasury Regulations
- Treas. Reg. §Treas. Reg. §1.358-1 Basis to distributees
- Treas. Reg. §Treas. Reg. §1.358-1(a) In the case of an exchange to which section 354 or 355 applies in which, under the law applicable to the year in which the exchange is made, only nonrecognition property is received, immediately after the transaction, the sum of the basis of all of the stock and securities received in the transaction shall be the same as the basis of all the stock and securities in such corporation surrendered in the transaction, allocated in the manner described in § 1.
- Treas. Reg. §Treas. Reg. §1.358-1(b) §1.358-1(b)
- Treas. Reg. §Treas. Reg. §1.358-1(c) This section applies to exchanges and distributions of stock and securities occurring on or after January 23, 2006.
- Treas. Reg. §Treas. Reg. §1.358-2 Allocation of basis among nonrecognition property
- Treas. Reg. §Treas. Reg. §1.358-2(a) Allocation of basis in exchanges or distributions to which section 354, 355, or 356 applies.
- Treas. Reg. §Treas. Reg. §1.358-2(b) Allocation of basis in exchanges to which section 351 or 361 applies.
- Treas. Reg. §Treas. Reg. §1.358-2(c) Examples.
- Treas. Reg. §Treas. Reg. §1.358-2(d) Effective/applicability date.
- Treas. Reg. §Treas. Reg. §1.358-2(v) If a shareholder or security holder receives shares of stock or securities of more than one class, or receives “other property” or money in addition to stock or securities in a distribution under the terms of section 355 (or so much of section 356 as relates to section 355), then, to the extent the terms of the distribution specify that shares of stock or securities of a particular class or “other property” or money is received with respect to a particular share of stock or security of the distr
- Treas. Reg. §Treas. Reg. §1.358-3 Treatment of assumption of liabilities
- Treas. Reg. §Treas. Reg. §1.358-3(a) For purposes of section 358, where a party to the exchange assumes a liability of a distributee or acquires from him property subject to a liability, the amount of such liability is to be treated as money received by the distributee upon the exchange, whether or not the assumption of liabilities resulted in a recognition of gain or loss to the taxpayer under the law applicable to the year in which the exchange was made.
- Treas. Reg. §Treas. Reg. §1.358-3(b) §1.358-3(b)
- Treas. Reg. §Treas. Reg. §1.358-4 Exceptions
- Treas. Reg. §Treas. Reg. §1.358-4(a) Plan of reorganization adopted after October 22, 1968.
- Treas. Reg. §Treas. Reg. §1.358-4(b) Plan of reorganization adopted before October 23, 1968.
- Treas. Reg. §Treas. Reg. §1.358-5 Special rules for assumption of liabilities
- Treas. Reg. §Treas. Reg. §1.358-5(a) In general.
- Treas. Reg. §Treas. Reg. §1.358-5(b) Effective/Applicability date.
- Treas. Reg. §Treas. Reg. §1.358-6 Stock basis in certain triangular reorganizations
- Treas. Reg. §Treas. Reg. §1.358-6(a) Scope.
- Treas. Reg. §Treas. Reg. §1.358-6(b) Triangular reorganizations—(1) Nomenclature.
- Treas. Reg. §Treas. Reg. §1.358-6(c) General rules.
- Treas. Reg. §Treas. Reg. §1.358-6(d) Special rule for consideration not provided by P—(1) In general.
- Treas. Reg. §Treas. Reg. §1.358-6(e) Cross-references—(1) Triangular reorganizations involving members of a consolidated group.
14 Citing Cases
Section 351(h)(2) contains a cross reference to section 358 to determine “the basis of stock or property received in an exchange to which this section applies.” In pertinent part section 358(a)(1) provides that the “basis of the property permitted to be received under .
358.170 (West 1988). Petitioners' argument would be colorable ifeither the temporary or final regulations under section 752 determined Mr. Kohn's share ofMazur & Raben's liabilities, as the bulk ofMazur & Raben's debts were incurred before Mr. Kohn's admittance to the partnership. However, because the liabilities at issue were incurred before
State Bar Ass'n Tax Section, "Report on Final Regulations Regarding Allocation ofBasis Under Section 358 and Related Matters", Doc 2007-27372; 2007 TNT 241-18 (Dec.