§4501 — Repurchase of corporate stock
1 citing cases
Statute Text — 26 U.S.C. §4501
There is hereby imposed on each covered corporation a tax equal to 1 percent of the fair market value of any stock of the corporation which is repurchased by such corporation during the taxable year.
For purposes of this section, the term “covered corporation” means any domestic corporation the stock of which is traded on an established securities market (within the meaning of section 7704(b)(1)).
For purposes of this section—
The term “repurchase” means—
a redemption within the meaning of section 317(b) with regard to the stock of a covered corporation, and
any transaction determined by the Secretary to be economically similar to a transaction described in subparagraph (A).
The acquisition of stock of a covered corporation by a specified affiliate of such covered corporation, from a person who is not the covered corporation or a specified affiliate of such covered corporation, shall be treated as a repurchase of the stock of the covered corporation by such covered corporation.
For purposes of this section, the term “specified affiliate” means, with respect to any corporation—
any corporation more than 50 percent of the stock of which is owned (by vote or by value), directly or indirectly, by such corporation, and
any partnership more than 50 percent of the capital interests or profits interests of which is held, directly or indirectly, by such corporation.
The amount taken into account under subsection (a) with respect to any stock repurchased by a covered corporation shall be reduced by the fair market value of any stock issued by the covered corporation during the taxable year, including the fair market value of any stock issued or provided to employees of such covered corporation or employees of a specified affiliate of such covered corporation during the taxable year, whether or not such stock is issued or provided in response to the exercise of an option to purchase such stock.
In the case of an acquisition of stock of an applicable foreign corporation by a specified affiliate of such corporation (other than a foreign corporation or a foreign partnership (unless such partnership has a domestic entity as a direct or indirect partner)) from a person who is not the applicable foreign corporation or a specified affiliate of such applicable foreign corporation, for purposes of this section—
such specified affiliate shall be treated as a covered corporation with respect to such acquisition,
such acquisition shall be treated as a repurchase of stock of a covered corporation by such covered corporation, and
the adjustment under subsection (c)(3) shall be determined only with respect to stock issued or provided by such specified affiliate to employees of the specified affiliate.
In the case of a repurchase of stock of a covered surrogate foreign corporation by such covered surrogate foreign corporation, or an acquisition of stock of a covered surrogate foreign corporation by a specified affiliate of such corporation, for purposes of this section—
the expatriated entity with respect to such covered surrogate foreign corporation shall be treated as a covered corporation with respect to such repurchase or acquisition,
such repurchase or acquisition shall be treated as a repurchase of stock of a covered corporation by such covered corporation, and
the adjustment under subsection (c)(3) shall be determined only with respect to stock issued or provided by such expatriated entity to employees of the expatriated entity.
For purposes of this subsection—
The term “applicable foreign corporation” means any foreign corporation the stock of which is traded on an established securities market (within the meaning of section 7704(b)(1)).
The term “covered surrogate foreign corporation” means any surrogate foreign corporation (as determined under section 7874(a)(2)(B) by substituting “September 20, 2021” for “March 4, 2003” each place it appears) the stock of which is traded on an established securities market (within the meaning of section 7704(b)(1)), but only with respect to taxable years which include any portion of the applicable period with respect to such corporation under section 7874(d)(1).
The term “expatriated entity” has the meaning given such term by section 7874(a)(2)(A).
Subsection (a) shall not apply—
to the extent that the repurchase is part of a reorganization (within the meaning of section 368(a)) and no gain or loss is recognized on such repurchase by the shareholder under chapter 1 by reason of such reorganization,
in any case in which the stock repurchased is, or an amount of stock equal to the value of the stock repurchased is, contributed to an employer-sponsored retirement plan, employee stock ownership plan, or similar plan,
in any case in which the total value of the stock repurchased during the taxable year does not exceed $1,000,000,
under regulations prescribed by the Secretary, in cases in which the repurchase is by a dealer in securities in the ordinary course of business,
to repurchases by a regulated investment company (as defined in section 851) or a real estate investment trust, or
to the extent that the repurchase is treated as a dividend for purposes of this title.
The Secretary shall prescribe such regulations and other guidance as are necessary or appropriate to carry out, and to prevent the avoidance of, the purposes of this section, including regulations and other guidance—
to prevent the abuse of the exceptions provided by subsection (e),
to address special classes of stock and preferred stock, and
for the application of the rules under subsection (d).
Treasury Regulations
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Treas. Reg. §58.4501-0Table of contents
This section lists the major captions that appear in §§ 58.4501-1 through 58.4501-7.
(a) Excise tax imposed.
(b) Definitions.
(1) Acquisitive reorganization.
(2) Applicable percentage.
(3) Cessation date.
(4) Clawback.
(5) Code.
(6) Controlled corporation.
(7) Covered corporation.
(8) Covered holder.
(9) Covered non-stock instrument.
(10) De minimis exception.
(11) Distributing corporation.
(12) E reorganization.
(13) Economically similar transaction.
(14) Employee.
(15) Employer-sponsored retirement plan.
(16) Established securities market.
(17) F reorganization.
(18) Forfeiture.
(19) Gross repurchase amount.
(20) Initiation date.
(21) IRS.
(22) Netting rule.
(23) Non-RIC '40 Act fund.
(24) Non-stock instrument.
(25) Recapitalizing corporation.
(26) REIT.
(27) Reorganization exception.
(28) Repurchase.
(29) RIC.
(30) SEC.
(31) Section 317(b) redemption.
(32) Specified affiliate.
(33) Split-off.
(34) Stock.
(35) Stock repurchase excise tax.
(36) Stock repurchase excise tax base.
(37) Stock repurchase excise tax regulations.
(38) Taxable year.
(39) Treasury stock.
(c) No application for any purposes of chapter 1 of the Code.
(d) Status as a domestic or foreign corporation.
(e) F reorganizations.
(a) Scope.
(b) Computation of excise tax liability.
(1) Imposition of tax.
(2) De minimis exception.
(c) Stock repurchase excise tax base.
(1) In general.
(2) Taxable year determination.
(3) Repurchases before January 1, 2023.
(d) Duration of covered corporation status.
(1) Initiation date.
(2) Cessation date.
(3) Inbound and outbound F reorganizations.
(e) Repurchase.
(1) Overview.
(2) Scope of repurchase.
(3) Certain section 317(b) redemptions that are not repurchases.
(4) Economically similar transactions.
(5) Transactions that are not repurchases.
(f) Specified affiliates.
(1) Acquisitions of stock of a covered corporation by a specified affiliate treated as a repurchase.
(2) Determination of specified affiliate status.
(g) Date of repurchase.
(1) General rule.
(2) Regular-way sale.
(h) Fair market value of repurchased stock.
(1) In general.
(2) Stock traded on an established securities market.
(3) Stock not traded on an established securities market.
(4) Market price of stock denominated in non-U.S. currency.
(a) Scope.
(b) Reduction of covered corporation's stock repurchase excise tax base.
(1) In general.
(2) Coordination of exceptions.
(c) Reorganization exception.
(d) Stock contributions to an employer-sponsored retirement plan.
(1) Reductions in computing covered corporation's stock repurchase excise tax base.
(2) Classes of stock contributed to an employer-sponsored retirement plan.
(3) Same class of stock repurchased and contributed.
(4) Different class of stock repurchased and contributed.
(5) Timing of contributions.
(6) Contributions before January 1, 2023.
(e) Repurchases or acquisitions by a dealer in securities in the ordinary course of business.
(1) In general.
(2) Applicability.
(f) Repurchases by a RIC or a REIT.
(g) Repurchase treated as a dividend.
(1) In general.
(2) Rebuttable presumption of no dividend equivalence.
(3) Sufficient evidence requirement.
(4) Documentation of sufficient evidence.
(h) Repurchases by a non-RIC '40 Act fund.
(a) Scope.
(b) Issuances and provisions of stock that are a reduction in computing the stock repurchase excise tax base.
(1) General rule.
(2) Stock issued or provided outside period of covered corporation status.
(3) Issuances or provisions before January 1, 2023.
(c) Stock issued or provided in connection with the performance of services.
(1) In general.
(2) Sale of shares to cover exercise price and withholding.
(d) Date of issuance.
(1) In general.
(2) Stock issued or provided in connection with the performance of services.
(e) Fair market value of issued or provided stock.
(1) In general.
(2) Stock traded on an established securities market.
(3) Stock not traded on an established securities market.
(4) Market price of stock denominated in non-U.S. currency.
(5) Stock issued or provided in connection with the performance of services.
(f) Issuances that are disregarded for purposes of applying the netting rule.
(1) Distributions by a covered corporation of its own stock.
(2) Issuances to a specified affiliate.
(3) Issuances in an E reorganization or an F reorganization.
(4) Deemed issuances under section 304(a)(1).
(5) Deemed issuance of a fractional share.
(6) Issuance by a covered corporation that is a dealer in securities.
(7) Issuance by the target corporation in a reverse triangular merger.
(8) Issuance as part of a section 1036(a) exchange.
(9) Issuance as part of a distribution under section 355.
(10) Stock contributions to an employer-sponsored retirement plan.
(11) Net exercises and share withholding.
(12) Settlement other than in stock.
(13) Instrument not in the legal form of stock.
(a) Scope.
(b) In general.
(1) Example 1: Redemption of preferred stock not subject to an exception.
(2) Example 2: Debt-for-debt exchange.
(3) Example 3: Valuation of repurchase.
(4) Example 4: Acquisition partially funded by the target corporation.
(5) Example 5: Pro rata stock split.
(6) Example 6: Acquisition of a target corporation in an acquisitive reorganization.
(7) Example 7: E reorganization.
(8) Example 8: E reorganization with non-qualifying property.
(9) Example 9: Cash paid in lieu of fractional shares.
(10) Example 10: F reorganization.
(11) Example 11: Section 355 split-off.
(12) Example 12: Section 355 split-off as part of a D reorganization.
(13) Example 13: Section 355 spin-off.
(14) Example 14: Section 355 spin-off as part of a D reorganization.
(15) Example 15: Repurchase pursuant to an accelerated share repurchase agreement.
(16) Example 16: Distribution in complete liquidation of a covered corporation.
(17) Example 17: Complete liquidation of a covered corporation to which sections 331 and 332(a) both apply.
(18) Example 18: Acquisition by disregarded entity.
(19) Example 19: Multiple repurchases and contributions of same class of stock.
(20) Example 20: Multiple repurchases and contributions of different classes of stock.
(21) Example 21: Treatment of contributions after the taxable year.
(22) Example 22: Becoming a covered corporation.
(23) Example 23: Actual pro rata redemption in partial liquidation.
(24) Example 24: Constructive redemption in partial liquidation.
(25) Example 25: Non-pro rata redemption in partial liquidation.
(26) Example 26: Physical settlement of call option contract.
(27) Example 27: Net cash settlement of call option contract.
(28) Example 28: Physical settlement of put option contract.
(29) Example 29: Net cash settlement of put option contract.
(30) Example 30: Indirect ownership.
(31) Example 31: Restricted stock provided to a service provider.
(32) Example 32: Restricted stock provided to a service provider with section 83(b) election.
(33) Example 33: Forfeiture of restricted stock provided to a service provider with section 83(b) election.
(34) Example 34: Vested stock provided to a service provider with share withholding.
(35) Example 35: Stock option net exercise.
(36) Example 36: Net share settlement not in connection with performance of services.
(37) Example 37: Broker-assisted net exercise.
(38) Example 38: Stock provided by a specified affiliate to an employee.
(39) Example 39: Stock provided by a specified affiliate to a non-employee.
(40) Example 40: Corporation treated as a domestic corporation under section 7874(b).
(a) In general.
(b) Exceptions.
(1) Applicability date for certain rules.
(2) Early application.
(c) Special rules for acquisitions or repurchases of stock of certain foreign corporations.
(a) Scope.
(b) Definitions.
(1) Application of definitions in § 58.4501-1(b).
(2) Section 4501(d) definitions.
(c) Computation of section 4501(d) excise tax liability for a section 4501(d) covered corporation.
(1) Imposition of tax.
(2) Section 4501(d) de minimis exception.
(3) Section 4501(d) excise tax base.
(4) Section 4501(d)(1) repurchases or section 4501(d)(2) repurchases before January 1, 2023.
(d) Section 4501(d)(2) coordination rules.
(1) Coordination rule for section 4501(d)(1) repurchases and section 4501(d)(2) repurchases.
(2) Coordination rule for multiple section 4501(d) covered corporations.
(e) Status as applicable foreign corporation or covered surrogate foreign corporation.
(1) Initiation date.
(2) Cessation date.
(3) Rules regarding F reorganizations.
(f) Status as an applicable specified affiliate or a specified affiliate of a covered surrogate foreign corporation.
(1) Timing of determination.
(2) Determination of indirect ownership.
(g) Foreign partnerships that are applicable specified affiliates.
(1) In general.
(2) Direct or indirect partner.
(3) Control of a foreign corporation.
(4) Indirect interests held through applicable foreign corporations.
(5) De minimis domestic entity (direct or indirect) partner.
(h) CSFC repurchase.
(1) Overview.
(2) Scope of CSFC repurchases.
(3) Certain section 317(b) redemptions that are not CSFC repurchases.
(4) Section 4501(d) economically similar transactions.
(5) Transactions that are not CSFC repurchases.
(i) [Reserved]
(j) Date of section 4501(d)(1) repurchase or section 4501(d)(2) repurchase.
(1) General rule.
(2) Regular-way sale.
(k) Fair market value of stock of an applicable foreign corporation or a covered surrogate foreign corporation that is repurchased or acquired.
(1) In general.
(2) Stock traded on an established securities market.
(3) Stock not traded on an established securities market.
(4) Market price of stock denominated in non-U.S. currency.
(l) Section 4501(d) exceptions.
(1) In general.
(2) Section 4501(d) reorganization exception.
(3) Stock contributions to an employer-sponsored retirement plan.
(4) Repurchases or acquisitions by a dealer in securities in the ordinary course of business.
(5) Repurchases by a RIC or REIT.
(6) CSFC repurchase treated as a dividend.
(7) Repurchases by a non-RIC '40 Act fund.
(m) Application of section 4501(d) netting rule.
(1) In general.
(2) Stock issued or provided outside period of applicable foreign corporation or covered surrogate foreign corporation status.
(3) Issuances or provisions before January 1, 2023.
(4) Stock Issued or provided in connection with the performance of services.
(5) Date of issuance or provision for section 4501(d) netting rule.
(6) Fair market value of stock of an applicable foreign corporation or a covered surrogate foreign corporation that is issued or provided to employees.
(7) Issuances that are disregarded for purposes of applying the section 4501(d) netting rule.
(n) Section 4501(d)(1) examples.
(1) Example 1: Section 4501(d) netting rule with respect to a single applicable specified affiliate.
(2) Example 2: Section 4501(d) netting rule with respect to multiple applicable specified affiliates.
(3) Example 3: Foreign partnership that is an applicable specified affiliate.
(4) Example 4: Foreign partnership that is not an applicable specified affiliate.
(5) Example 5: Foreign partnership that is directly owned by foreign corporations and is an applicable specified affiliate.
(o) Section 4501(d)(2) examples.
(1) Example 1: Section 4501(d) netting rule with respect to an expatriated entity.
(2) Example 2: Section 4501(d)(2) repurchase from the covered surrogate foreign corporation or another specified affiliate of the covered surrogate foreign corporation.
(3) Example 3: Liability with respect to multiple expatriated entities.
(p) Applicability dates.
(1) In general.
(2) Transition rule for foreign partnership de minimis rule.
(3) Early application.
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Treas. Reg. §58.4501-0(a)Scope.
Scope.
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Treas. Reg. §58.4501-0(b)Definitions.
Definitions.
(1) Application of definitions in § 58.4501-1(b).
(2) Section 4501(d) definitions.
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Treas. Reg. §58.4501-0(c)Computation of section 4501(d) excise tax liability for a section 4501(d) covered corporation.
Computation of section 4501(d) excise tax liability for a section 4501(d) covered corporation.
(1) Imposition of tax.
(2) Section 4501(d) de minimis exception.
(3) Section 4501(d) excise tax base.
(4) Section 4501(d)(1) repurchases or section 4501(d)(2) repurchases before January 1, 2023.
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Treas. Reg. §58.4501-0(d)Section 4501(d)(2) coordination rules.
Section 4501(d)(2) coordination rules.
(1) Coordination rule for section 4501(d)(1) repurchases and section 4501(d)(2) repurchases.
(2) Coordination rule for multiple section 4501(d) covered corporations.
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Treas. Reg. §58.4501-0(e)Status as applicable foreign corporation or covered surrogate foreign corporation.
Status as applicable foreign corporation or covered surrogate foreign corporation.
(1) Initiation date.
(2) Cessation date.
(3) Rules regarding F reorganizations.
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Treas. Reg. §58.4501-0(f)Status as an applicable specified affiliate or a specified affiliate of a covered surrogate foreign corporation.
Status as an applicable specified affiliate or a specified affiliate of a covered surrogate foreign corporation.
(1) Timing of determination.
(2) Determination of indirect ownership.
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Treas. Reg. §58.4501-0(g)Foreign partnerships that are applicable specified affiliates.
Foreign partnerships that are applicable specified affiliates.
(1) In general.
(2) Direct or indirect partner.
(3) Control of a foreign corporation.
(4) Indirect interests held through applicable foreign corporations.
(5) De minimis domestic entity (direct or indirect) partner.
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Treas. Reg. §58.4501-0(h)CSFC repurchase.
CSFC repurchase.
(1) Overview.
(2) Scope of CSFC repurchases.
(3) Certain section 317(b) redemptions that are not CSFC repurchases.
(4) Section 4501(d) economically similar transactions.
(5) Transactions that are not CSFC repurchases.
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Treas. Reg. §58.4501-0(i)§58.4501-0(i)
[Reserved]
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Treas. Reg. §58.4501-0(j)Date of section 4501(d)(1) repurchase or section 4501(d)(2) repurchase.
Date of section 4501(d)(1) repurchase or section 4501(d)(2) repurchase.
(1) General rule.
(2) Regular-way sale.
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Treas. Reg. §58.4501-0(k)Fair market value of stock of an applicable foreign corporation or a covered surrogate foreign corporation that is repurchased or acquired.
Fair market value of stock of an applicable foreign corporation or a covered surrogate foreign corporation that is repurchased or acquired.
(1) In general.
(2) Stock traded on an established securities market.
(3) Stock not traded on an established securities market.
(4) Market price of stock denominated in non-U.S. currency.
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Treas. Reg. §58.4501-0(l)Section 4501(d) exceptions.
Section 4501(d) exceptions.
(1) In general.
(2) Section 4501(d) reorganization exception.
(3) Stock contributions to an employer-sponsored retirement plan.
(4) Repurchases or acquisitions by a dealer in securities in the ordinary course of business.
(5) Repurchases by a RIC or REIT.
(6) CSFC repurchase treated as a dividend.
(7) Repurchases by a non-RIC '40 Act fund.
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Treas. Reg. §58.4501-0(m)Application of section 4501(d) netting rule.
Application of section 4501(d) netting rule.
(1) In general.
(2) Stock issued or provided outside period of applicable foreign corporation or covered surrogate foreign corporation status.
(3) Issuances or provisions before January 1, 2023.
(4) Stock Issued or provided in connection with the performance of services.
(5) Date of issuance or provision for section 4501(d) netting rule.
(6) Fair market value of stock of an applicable foreign corporation or a covered surrogate foreign corporation that is issued or provided to employees.
(7) Issuances that are disregarded for purposes of applying the section 4501(d) netting rule.
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Treas. Reg. §58.4501-0(n)Section 4501(d)(1) examples.
Section 4501(d)(1) examples.
(1) Example 1: Section 4501(d) netting rule with respect to a single applicable specified affiliate.
(2) Example 2: Section 4501(d) netting rule with respect to multiple applicable specified affiliates.
(3) Example 3: Foreign partnership that is an applicable specified affiliate.
(4) Example 4: Foreign partnership that is not an applicable specified affiliate.
(5) Example 5: Foreign partnership that is directly owned by foreign corporations and is an applicable specified affiliate.
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Treas. Reg. §58.4501-0(o)Section 4501(d)(2) examples.
Section 4501(d)(2) examples.
(1) Example 1: Section 4501(d) netting rule with respect to an expatriated entity.
(2) Example 2: Section 4501(d)(2) repurchase from the covered surrogate foreign corporation or another specified affiliate of the covered surrogate foreign corporation.
(3) Example 3: Liability with respect to multiple expatriated entities.
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Treas. Reg. §58.4501-0(p)Applicability dates.
Applicability dates.
(1) In general.
(2) Transition rule for foreign partnership de minimis rule.
(3) Early application.
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Treas. Reg. §58.4501-1Excise tax on stock repurchases
(a) Excise tax imposed. Section 4501(a) of the Code imposes a stock repurchase excise tax on each covered corporation equal to the applicable percentage of the fair market value of any stock of the corporation that is repurchased by the corporation during the taxable year. This section and § 58.4501-2 provide generally applicable definitions and operating rules regarding the application of the stock repurchase excise tax and the computation of the stock repurchase excise tax liability of a covered corporation. Section 58.4501-3 provides rules regarding the application of the exceptions in section 4501(e) (other than the de minimis exception described in section 4501(e)(3), which is addressed in § 58.4501-2(b)(2)) and related exceptions. Section 58.4501-4 provides rules regarding the application of section 4501(c)(3). Section 58.4501-5 provides examples that illustrate the application of section 4501 and the stock repurchase excise tax regulations. Section 58.4501-6 provides applicability dates for the stock repurchase excise tax regulations (other than § 58.4501-7). For special rules and examples regarding the application of section 4501(d) to acquisitions or repurchases of stock of certain foreign corporations, see § 58.4501-7.
(b) Definitions. The following definitions apply for purposes of this section and §§ 58.4501-2 through 58.4501-6, and, to the extent provided in § 58.4501-7(b), for purposes of § 58.4501-7:
(1) Acquisitive reorganization. The term acquisitive reorganization means a transaction that qualifies as a reorganization under—
(i) Section 368(a)(1)(A) of the Code, including by reason of section 368(a)(2)(D) or (a)(2)(E);
(ii) Section 368(a)(1)(C);
(iii) Section 368(a)(1)(D), if the reorganization satisfies the requirements of section 354(b)(1) of the Code; or
(iv) Section 368(a)(1)(G), if the reorganization satisfies the requirements of section 354(b)(1).
(2) Applicable percentage. The term applicable percentage means the percentage provided in section 4501(a).
(3) Cessation date. The term cessation date means the date on which all stock of a covered corporation ceases to be traded on an established securities market.
(4) Clawback. The term clawback means a surrender of stock pursuant to a contractual provision that requires an employee to return vested stock.
(5) Code. The term Code means the Internal Revenue Code.
(6) Controlled corporation. The term controlled corporation has the meaning given the term in section 355(a)(1)(A) of the Code.
(7) Covered corporation. The term covered corporation means any domestic corporation (including within the meaning of paragraph (d) of this section) the stock of which is traded on an established securities market.
(8) Covered holder. The term covered holder has the meaning given the term in § 58.4501-4(f)(13)(ii)(C).
(9) Covered non-stock instrument. The term covered non-stock instrument has the meaning given the term in § 58.4501-4(f)(13)(ii)(B).
(10) De minimis exception. The term de minimis exception has the meaning given the term in § 58.4501-2(b)(2)(i).
(11) Distributing corporation. The term distributing corporation has the meaning given the term in section 355(a)(1)(A).
(12) E reorganization. The term E reorganization means a transaction that qualifies as a reorganization under section 368(a)(1)(E).
(13) Economically similar transaction. The term economically similar transaction means a transaction described in § 58.4501-2(e)(4).
(14) Employee. The term employee means an employee as defined in section 3401(c) of the Code and § 31.3401(c)-1 of this chapter, or a former employee, of a covered corporation or a specified affiliate of the covered corporation (as appropriate).
(15) Employer-sponsored retirement plan—(i) In general. The term employer-sponsored retirement plan means a plan that includes a trust that is qualified under section 401(a) of the Code and maintained by a covered corporation or a specified affiliate of the covered corporation.
(ii) ESOPs included. For the purposes of these regulations, the term employer-sponsored retirement plan includes an employee stock ownership plan defined in section 4975(e)(7) of the Code (ESOP) that is maintained by a covered corporation or a specified affiliate of the covered corporation.
(16) Established securities market. The term established securities market has the meaning given the term in § 1.7704-1(b) of this chapter.
(17) F reorganization. The term F reorganization means a transaction that qualifies as a reorganization under section 368(a)(1)(F).
(18) Forfeiture. The term forfeiture means a surrender of stock to the issuing corporation for no consideration.
(19) Gross repurchase amount. The term gross repurchase amount has the meaning given the term in § 58.4501-2(c)(1)(i).
(20) Initiation date. The term initiation date means the date on which stock of a corporation begins to be traded on an established securities market.
(21) IRS. The term IRS means the Internal Revenue Service.
(22) Netting rule. The term netting rule has the meaning given the term in § 58.4501-4(a).
(23) Non-RIC '40 Act fund. The term non-RIC '40 Act fund has the meaning given the term in § 58.4501-3(h).
(24) Non-stock instrument. The term non-stock instrument has the meaning given the term in § 58.4501-4(f)(13)(ii)(A).
(25) Recapitalizing corporation. The term recapitalizing corporation means the corporation recapitalizing its stock in an E reorganization.
(26) REIT. The term REIT has the meaning given the term real estate investment trust in section 856(a) of the Code.
(27) Reorganization exception. The term reorganization exception means the exception provided in § 58.4501-3(c).
(28) Repurchase. The term repurchase has the meaning given the term in § 58.4501-2(e)(2).
(29) RIC. The term RIC has the meaning given the term regulated investment company in section 851 of the Code.
(30) SEC. The term SEC means the U.S. Securities and Exchange Commission.
(31) Section 317(b) redemption. The term section 317(b) redemption means a redemption within the meaning of section 317(b) of the Code with regard to the stock of a covered corporation.
(32) Specified affiliate. The term specified affiliate means, with regard to any corporation—
(i) Any corporation more than 50 percent of the stock of which is owned (by vote or by value), directly or indirectly, by the corporation; and
(ii) Any partnership more than 50 percent of the capital interests or profits interests of which is held, directly or indirectly, by the corporation.
(33) Split-off. The term split-off means a distribution qualifying under section 355 (or so much of section 356 of the Code as relates to section 355) by a distributing corporation pursuant to which the shareholders of the distributing corporation exchange stock of the distributing corporation for stock of the controlled corporation and, if applicable, other property (including securities of the controlled corporation) or money.
(34) Stock—(i) In general. Except as provided in paragraph (b)(34)(ii) or (iii) of this section, the term stock means any instrument issued by a corporation that is stock (including treasury stock) or that is treated as stock for Federal tax purposes at the time of issuance, regardless of whether the instrument is traded on an established securities market.
(ii) Additional tier 1 capital. The term stock does not include preferred stock that—
(A) Qualifies as additional tier 1 capital (within the meaning of 12 CFR 3.20(c), 217.20(c), 217.608(a)(2), 324.20(c), or 628.20(c)); and
(B) Does not qualify as common equity tier 1 capital (within the meaning of 12 CFR 3.20(b), 217.20(b), 217.608(a)(3), 324.20(b), or 628.20(b)).
(iii) Section 1504(a)(4) stock. The term stock does not include preferred stock described in section 1504(a)(4) of the Code.
(35) Stock repurchase excise tax. The term stock repurchase excise tax means the excise tax imposed by section 4501(a) on each covered corporation equal to the applicable percentage of the fair market value of any stock of the corporation that is repurchased by the corporation during the taxable year.
(36) Stock repurchase excise tax base. The term stock repurchase excise tax base has the meaning given the term in § 58.4501-2(c)(1).
(37) Stock repurchase excise tax regulations. The term stock repurchase excise tax regulations means—
(i) Subparts A and B of this part; and
(ii) Section 1.1275-6(f)(12)(iii) of this chapter (providing that the integration of a qualifying debt instrument with a hedge pursuant to § 1.1275-6 of this chapter is not taken into account in determining whether and when stock is repurchased or issued).
(38) Taxable year. The term taxable year has the meaning given the term in section 7701(a)(23) of the Code.
(39) Treasury stock. The term treasury stock means treasury stock within the meaning of section 317(b).
(c) No application for any purposes of chapter 1 of the Code. The rules of this part have no application for purposes of chapter 1 of the Code.
(d) Status as a domestic or foreign corporation. If a corporation is, or is treated as, a domestic corporation for purposes of the Code or for purposes that include chapter 37 of the Code, then the corporation is a domestic corporation for purposes of the stock repurchase excise tax regulations. A corporation that is not a domestic corporation for purposes of the stock repurchase excise tax regulations is a foreign corporation for such purposes.
(e) F reorganizations. For purposes of the stock repurchase excise tax regulations, the transferor corporation and the resulting corporation (each as defined in § 1.368-2(m)(1) of this chapter) in an F reorganization are treated as the same corporation.
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Treas. Reg. §58.4501-1(a)Excise tax imposed.
Excise tax imposed. Section 4501(a) of the Code imposes a stock repurchase excise tax on each covered corporation equal to the applicable percentage of the fair market value of any stock of the corporation that is repurchased by the corporation during the taxable year. This section and § 58.4501-2 provide generally applicable definitions and operating rules regarding the application of the stock repurchase excise tax and the computation of the stock repurchase excise tax liability of a covered corporation. Section 58.4501-3 provides rules regarding the application of the exceptions in section 4501(e) (other than the de minimis exception described in section 4501(e)(3), which is addressed in § 58.4501-2(b)(2)) and related exceptions. Section 58.4501-4 provides rules regarding the application of section 4501(c)(3). Section 58.4501-5 provides examples that illustrate the application of section 4501 and the stock repurchase excise tax regulations. Section 58.4501-6 provides applicability dates for the stock repurchase excise tax regulations (other than § 58.4501-7). For special rules and examples regarding the application of section 4501(d) to acquisitions or repurchases of stock of certain foreign corporations, see § 58.4501-7.
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Treas. Reg. §58.4501-1(b)Definitions.
Definitions. The following definitions apply for purposes of this section and §§ 58.4501-2 through 58.4501-6, and, to the extent provided in § 58.4501-7(b), for purposes of § 58.4501-7:
(1) Acquisitive reorganization. The term acquisitive reorganization means a transaction that qualifies as a reorganization under—
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Treas. Reg. §58.4501-1(c)No application for any purposes of chapter 1 of the Code.
No application for any purposes of chapter 1 of the Code. The rules of this part have no application for purposes of chapter 1 of the Code.
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Treas. Reg. §58.4501-1(d)Status as a domestic or foreign corporation.
Status as a domestic or foreign corporation. If a corporation is, or is treated as, a domestic corporation for purposes of the Code or for purposes that include chapter 37 of the Code, then the corporation is a domestic corporation for purposes of the stock repurchase excise tax regulations. A corporation that is not a domestic corporation for purposes of the stock repurchase excise tax regulations is a foreign corporation for such purposes.
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Treas. Reg. §58.4501-1(e)F reorganizations.
F reorganizations. For purposes of the stock repurchase excise tax regulations, the transferor corporation and the resulting corporation (each as defined in § 1.368-2(m)(1) of this chapter) in an F reorganization are treated as the same corporation.
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Treas. Reg. §58.4501-1(i)§58.4501-1(i)
Subparts A and B of this part; and
(ii) Section 1.1275-6(f)(12)(iii) of this chapter (providing that the integration of a qualifying debt instrument with a hedge pursuant to § 1.1275-6 of this chapter is not taken into account in determining whether and when stock is repurchased or issued).
(38) Taxable year. The term taxable year has the meaning given the term in section 7701(a)(23) of the Code.
(39) Treasury stock. The term treasury stock means treasury stock within the meaning of section 317(b).
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Treas. Reg. §58.4501-2General rules regarding excise tax on stock repurchases
(a) Scope. This section provides general rules regarding the application of the stock repurchase excise tax and the computation of the stock repurchase excise tax liability of a covered corporation. Paragraphs (b) and (c) of this section provide rules for computing a covered corporation's stock repurchase excise tax liability. Paragraph (d) of this section provides rules for determining whether a corporation is a covered corporation. Paragraph (e) of this section provides rules for determining whether a transaction is a repurchase. Paragraph (f) of this section provides rules for acquisitions of stock of a covered corporation by a specified affiliate of the covered corporation. Paragraph (g) of this section provides rules for determining when stock is repurchased. Paragraph (h) of this section provides rules for determining the fair market value of repurchased stock.
(b) Computation of excise tax liability—(1) Imposition of tax. Except as provided in paragraph (b)(2) of this section (regarding the de minimis exception), the amount of stock repurchase excise tax imposed by section 4501(a) on a covered corporation for a taxable year equals the product obtained by multiplying—
(i) The applicable percentage; by
(ii) The stock repurchase excise tax base of the covered corporation for the taxable year determined in accordance with paragraph (c)(1) of this section.
(2) De minimis exception—(i) In general. A covered corporation is not subject to the stock repurchase excise tax with regard to a taxable year if, during that taxable year, the aggregate fair market value of the stock described in paragraphs (b)(2)(i)(A) and (B) of this section does not exceed $1,000,000 (de minimis exception):
(A) The stock of the covered corporation that is repurchased by the covered corporation (as determined under paragraph (e) of this section).
(B) The stock of the covered corporation that is acquired by a specified affiliate of the covered corporation (as determined under paragraph (f) of this section).
(ii) Determination. A determination of whether the de minimis exception applies with regard to a taxable year is made before applying—
(A) Any exception under § 58.4501-3; and
(B) Any adjustments pursuant to the netting rule under § 58.4501-4.
(c) Stock repurchase excise tax base—(1) In general. With regard to a covered corporation, the term stock repurchase excise tax base means the dollar amount (not less than zero) that is obtained by—
(i) Determining (in accordance with paragraphs (e) through (h) of this section) the aggregate fair market value of the stock of the covered corporation that is repurchased by the covered corporation or acquired by a specified affiliate of the covered corporation during the covered corporation's taxable year (gross repurchase amount);
(ii) Reducing the gross repurchase amount by the fair market value of the stock of the covered corporation repurchased by the covered corporation or acquired by a specified affiliate of the covered corporation during the covered corporation's taxable year to the extent the repurchase or acquisition qualifies for an exception in accordance with § 58.4501-3; and then
(iii) Further reducing the gross repurchase amount by the aggregate fair market value of stock of the covered corporation issued by the covered corporation or provided by a specified affiliate of the covered corporation during the covered corporation's taxable year under the netting rule in accordance with § 58.4501-4.
(2) Taxable year determination—(i) In general. The determinations under paragraph (c)(1)(i) of this section are made separately for each covered corporation and for each taxable year of the covered corporation.
(ii) No carrybacks or carryforwards. Reductions under paragraphs (c)(1)(ii) and (iii) of this section in excess of the gross repurchase amount may not be carried forward or backward to preceding or succeeding taxable years of the covered corporation.
(3) Repurchases before January 1, 2023. Stock of a covered corporation repurchased by the covered corporation or acquired by a specified affiliate of the covered corporation before January 1, 2023 (as determined under paragraphs (e) through (g) of this section) is neither—
(i) Included in the stock repurchase excise tax base of the covered corporation; nor
(ii) Taken into account in determining the applicability of the de minimis exception.
(d) Duration of covered corporation status—(1) Initiation date. A corporation becomes a covered corporation at the beginning of the corporation's initiation date (that is, the date on which stock of the corporation begins to be traded on an established securities market).
(2) Cessation date. A corporation ceases to be a covered corporation at the end of the corporation's cessation date (that is, the date on which all stock of the corporation ceases to be traded on an established securities market).
(3) Inbound and outbound F reorganizations—(i) Inbound F reorganization. In the case of a foreign corporation that transfers its assets or that is treated as transferring its assets to a domestic corporation in an F reorganization (as described in § 1.367(b)-2(f) of this chapter), the corporation is not treated as a domestic corporation until the day after the reorganization.
(ii) Outbound F reorganization. In the case of a domestic corporation that transfers its assets or that is treated as transferring its assets to a foreign corporation in an F reorganization (as described in § 1.367(a)-1(e) of this chapter), the corporation is not treated as a foreign corporation until the day after the reorganization.
(e) Repurchase—(1) Overview. This paragraph (e) provides rules for determining whether a transaction is a repurchase. Paragraph (e)(2) of this section provides a general rule regarding the scope of the term repurchase for purposes of the stock repurchase excise tax. Paragraph (e)(3) of this section provides an exclusive list of transactions that are section 317(b) redemptions but are not repurchases. Paragraph (e)(4) of this section provides an exclusive list of transactions that are economically similar transactions. Paragraph (e)(5) of this section provides a non-exclusive list of transactions that are not repurchases.
(2) Scope of repurchase. A repurchase means solely—
(i) A section 317(b) redemption, except as provided in paragraph (e)(3) of this section; or
(ii) An economically similar transaction described in paragraph (e)(4) of this section.
(3) Certain section 317(b) redemptions that are not repurchases. This paragraph (e)(3) provides an exclusive list of section 317(b) redemptions that are not repurchases for purposes of the stock repurchase excise tax regulations.
(i) Section 304(a)(1) transactions—(A) Rule regarding deemed distributions. The deemed distribution by an acquiring corporation (within the meaning of section 304(a)(1) of the Code) that is a covered corporation in redemption of stock of the acquiring corporation (resulting from the application of section 304(a)(1) to an acquisition of stock by such acquiring corporation), regardless of whether section 302(a) or (d) of the Code applies to the acquiring corporation's deemed distribution in redemption of its stock.
(B) Rule regarding deemed issuances. For the rule addressing the treatment of any stock deemed to be issued by the acquiring corporation as a result of the application of section 304(a)(1), see § 58.4501-4(f)(4).
(ii) Leveraged buyouts and take-private transactions. A redemption by a covered corporation that occurs as part of a transaction in which the covered corporation ceases to be a covered corporation.
(iii) Stock issued prior to August 16, 2022. A redemption by a covered corporation of stock of the covered corporation issued prior to August 16, 2022, if, at the time such stock was issued and continuing until the time of the redemption, the stock was subject to—
(A) Mandatory redemption by the covered corporation; or
(B) A unilateral put option by the holder of such stock.
(iv) Payment by a covered corporation of cash in lieu of fractional shares. A payment by a covered corporation of cash in lieu of a fractional share of the covered corporation's stock, if—
(A) The payment is carried out as part of a transaction that qualifies as a reorganization under section 368(a) of the Code or a distribution to which section 355 of the Code applies, or pursuant to the settlement of an option or a similar financial instrument (for example, a convertible debt instrument or convertible preferred share);
(B) The cash received by the shareholder entitled to the fractional share is not separately bargained-for consideration (that is, the cash paid by the covered corporation in lieu of the fractional share represents a mere rounding off of the shares issued in the exchange or settlement);
(C) The payment is carried out solely for administrative convenience (and, therefore, solely for non-tax reasons); and
(D) The amount of cash paid to the shareholder in lieu of a fractional share does not exceed the fair market value of one full share of the class of stock of the covered corporation with respect to which the payment of cash in lieu of a fractional share is made.
(4) Economically similar transactions. This paragraph (e)(4) provides an exclusive list of transactions that are economically similar to section 317(b) redemptions solely for purposes of the stock repurchase excise tax (that is, economically similar transactions) and, therefore, are taken into account as repurchases for purposes of the stock repurchase excise tax regulations.
(i) E reorganizations—(A) In general. Except as provided in paragraph (e)(4)(i)(B) of this section, in the case of an E reorganization in which the recapitalizing corporation is a covered corporation, solely the recapitalizing corporation's acquisition of its stock pursuant to the plan of reorganization in exchange for property that is not permitted to be received by the recapitalizing corporation's shareholders under section 354 of the Code without the recognition of gain.
(B) Exception. Paragraph (e)(4)(i)(A) of this section does not apply to the extent that—
(1) The distribution of such property is treated as a distribution with respect to the recapitalizing corporation's stock under § 1.301-1(j) of this chapter; or
(2) The exchange is with respect to preferred stock with dividends in arrears that is treated under § 1.305-7(c)(2) or 1.368-2(e)(5) of this chapter as a deemed distribution to which sections 301 and 305(b)(4) of the Code apply.
(ii) Split-offs. In the case of a split-off by a distributing corporation that is a covered corporation, the acquisition by the distributing corporation of its stock in exchange for property.
(iii) Certain forfeitures and clawbacks of stock—(A) In general. In the case of a forfeiture or clawback of stock of a covered corporation pursuant to a legal or contractual obligation, the forfeiture to or clawback by the covered corporation or a specified affiliate of the covered corporation (as appropriate) on the date of forfeiture or clawback (as appropriate) if the stock was treated as issued or provided under § 58.4501-4(b) and the forfeiture or clawback of the stock (as appropriate) is described in paragraph (e)(4)(iii)(B), (C), or (D) of this section.
(B) Stock subject to post-closing price adjustments. The stock was issued pursuant to an acquisition of a target entity or its business, and the forfeiture of the stock was in accordance with the terms of the documents governing the transaction (for example, to compensate the acquiring corporation for breaches of representations or warranties made by the target entity, or because the business of the target entity did not achieve certain performance benchmarks agreed upon in the transaction documents).
(C) Stock for which a section 83(b) election was made. The stock was subject to a substantial risk of forfeiture within the meaning of section 83(a) of the Code on the date the stock was issued or provided, the service provider made a valid election under section 83(b) with regard to the stock, and the forfeiture resulted from the service provider failing to meet the vesting condition.
(D) Clawbacks. On the date the stock was issued or provided, the stock was subject to a clawback agreement, and a clawback of the stock resulted from the occurrence of an event specified in the clawback agreement.
(5) Transactions that are not repurchases. This paragraph (e)(5) provides a non-exclusive list of transactions each of which is not a repurchase for purposes of the stock repurchase excise tax regulations.
(i) Complete liquidations. A distribution by a covered corporation—
(A) In complete liquidation of the covered corporation to which section 331 or 332(a) (or both) applies;
(B) Pursuant to a resolution or plan of dissolution of the covered corporation that is reported on an original (but not a supplemented or an amended) IRS Form 966, Corporate Dissolution or Liquidation (or any successor form); or
(C) Pursuant to a deemed dissolution of the covered corporation (for instance, pursuant to a deemed liquidation under § 301.7701-3 of this chapter).
(ii) Distributions during taxable year of complete liquidation or dissolution. A distribution by a covered corporation during a taxable year of the covered corporation, if the covered corporation—
(A) Completely liquidates during the taxable year (that is, has a final distribution during the taxable year in a complete liquidation to which section 331 or 332(a) (or both) applies);
(B) Dissolves during the taxable year pursuant to a resolution or plan of dissolution as reported on an original (but not a supplemented or an amended) IRS Form 966, Corporate Dissolution or Liquidation (or any successor form); or
(C) Is deemed to dissolve during the taxable year (for instance, pursuant to a deemed liquidation under § 301.7701-3 of this chapter).
(iii) Divisive transactions under section 355 other than split-offs—(A) In general. Subject to paragraph (e)(5)(iii)(B) of this section, a distribution by a distributing corporation that is a covered corporation of stock of a controlled corporation qualifying under section 355 that is not a split-off.
(B) Exception regarding non-qualifying property in spin-offs. A distribution by a distributing corporation that is a covered corporation of other property or money in exchange for stock of the distributing corporation is a repurchase by the distributing corporation if it occurs in pursuance of a transaction qualifying under section 355 in which the distribution by the distributing corporation of stock of the controlled corporation is with respect to stock of the distributing corporation.
(iv) Non-redemptive distributions subject to section 301(c)(2) or (3). A distribution to which section 301 applies by a covered corporation to a distributee, if the distribution—
(A) Is subject to section 301(c)(2) or (3); and
(B) The distributee does not exchange stock of the covered corporation (and is not treated as exchanging stock of the covered corporation for Federal income tax purposes).
(v) Acquisitive reorganizations. In the case of an acquisitive reorganization in which the target corporation is a covered corporation, the acquisition by the target corporation of its stock pursuant to the plan of reorganization in exchange for property that is permitted to be received by the target corporation's shareholders under section 354 or 356 of the Code.
(vi) Net cash settlement of an option contract or other derivative financial instrument—(A) In general. Subject to paragraph (e)(5)(vi)(B) of this section, the net cash settlement of an option contract or other derivative financial instrument with respect to stock of a covered corporation.
(B) Exception regarding net cash settlement of an option contract or other derivative financial instrument treated as stock. The net cash settlement of an instrument in the legal form of an option contract or other derivative financial instrument that is treated as stock of a covered corporation for Federal tax purposes at the time of issuance is a repurchase.
(vii) Repurchases from a specified affiliate. The acquisition by a covered corporation of its stock from a specified affiliate of the covered corporation if the specified affiliate's acquisition of such stock of the covered corporation was treated as a repurchase under paragraph (f)(1) of this section.
(f) Specified affiliates—(1) Acquisitions of stock of a covered corporation by a specified affiliate treated as a repurchase. If a specified affiliate of a covered corporation acquires stock of the covered corporation from a person that is not the covered corporation or another specified affiliate of the covered corporation, the acquisition is treated as a repurchase of the stock of the covered corporation by the covered corporation.
(2) Determination of specified affiliate status—(i) Timing of determination. A covered corporation must determine whether another corporation or partnership is a specified affiliate of the covered corporation at the time the stock of the covered corporation is acquired or provided by the other corporation or partnership for purposes of computing the stock repurchase excise tax with regard to the covered corporation.
(ii) Indirect ownership. For purposes of determining whether a corporation or a partnership is a specified affiliate of a covered corporation, the covered corporation is treated as indirectly owning stock in the corporation or holding capital or profits interests in the partnership in the percentage equal to the covered corporation's proportionate percentage of stock owned, or capital or profits interests held, through other entities.
(g) Date of repurchase—(1) General rule. In general, stock of a covered corporation is treated as repurchased by the covered corporation or acquired by a specified affiliate of the covered corporation on the date on which ownership of the stock transfers to the covered corporation or specified affiliate (as appropriate) for Federal income tax purposes.
(2) Regular-way sale. A regular-way sale of stock of a covered corporation (that is, a transaction in which a trade order is placed on the trade date, and settlement of the transaction, including payment and delivery of the stock, occurs a standardized period of time, as set by a regulator, after the trade date) is treated as a repurchase by the covered corporation or an acquisition by a specified affiliate of the covered corporation on the trade date.
(h) Fair market value of repurchased stock—(1) In general. The fair market value of stock of a covered corporation that is repurchased by the covered corporation or acquired by a specified affiliate of the covered corporation is the market price of the stock on the date the stock is repurchased or acquired (as determined under paragraph (g) of this section). That is, if the price at which the repurchased or acquired stock is purchased differs from the market price of the stock on the date the stock is repurchased or acquired, the fair market value of the stock is the market price on the date the stock is repurchased or acquired.
(2) Stock traded on an established securities market—(i) In general. If stock of a covered corporation that is repurchased by the covered corporation or acquired by a specified affiliate of the covered corporation is traded on an established securities market, the covered corporation must determine the market price of the repurchased or acquired stock by applying one of the methods provided in paragraph (h)(2)(ii) of this section. For purposes of this paragraph (h)(2), repurchased or acquired stock of a covered corporation is treated as traded on an established securities market if any stock of the same class and issue of stock is so traded, regardless of whether the shares repurchased or acquired are so traded.
(ii) Acceptable methods. The following are acceptable methods for determining the market price of repurchased or acquired stock of a covered corporation traded on an established securities market:
(A) The daily volume-weighted average price as determined on the date the stock is repurchased by the covered corporation or acquired by a specified affiliate of the covered corporation.
(B) The closing price on the date the stock is repurchased by the covered corporation or acquired by a specified affiliate of the covered corporation.
(C) The average of the high and low prices on the date the stock is repurchased by the covered corporation or acquired by a specified affiliate of the covered corporation.
(D) The trading price at the time the stock is repurchased by the covered corporation or acquired by a specified affiliate of the covered corporation.
(iii) Date of repurchase not a trading day. For purposes of each method provided in paragraph (h)(2)(ii) of this section, if the date the stock of a covered corporation is repurchased by the covered corporation or acquired by a specified affiliate of the covered corporation is not a trading day, the date on which the market price is determined is the immediately preceding trading day.
(iv) Consistency requirement—(A) Solely one method permitted for determining market price of repurchased or acquired stock. The market price of repurchased or acquired stock of a covered corporation that is traded on an established securities market must be determined by consistently applying one (but not more than one) of the methods provided in paragraph (h)(2)(ii) of this section to all stock of the covered corporation repurchased by the covered corporation or acquired by a specified affiliate of the covered corporation throughout the covered corporation's taxable year.
(B) Application to netting rule. The method used by the covered corporation under paragraph (h)(2)(iv)(A) of this section must be consistently applied to determine the market price of all stock of the covered corporation issued or provided throughout the covered corporation's taxable year for purposes of the netting rule under § 58.4501-4 except with respect to the determination of the fair market value of stock of a covered corporation that the covered corporation issues, or that a specified affiliate of the covered corporation provides, in connection with the performance of services. See § 58.4501-4(e).
(v) Stock traded on multiple exchanges—(A) In general. A covered corporation the stock of which is traded on multiple established securities markets must determine the market price of the stock of the covered corporation by reference to trading on the established securities market in the country in which the covered corporation is organized, including a regional established securities market that trades in that country.
(B) Stock traded on multiple exchanges in country where covered corporation is organized. If a covered corporation's stock is traded on multiple established securities markets in the country in which the covered corporation is organized, the covered corporation must determine the market price of the stock by reference to trading on the established securities market in that country with the highest trading volume in that stock in the prior taxable year.
(C) Other cases in which stock is traded on multiple exchanges. If stock of a covered corporation is traded on multiple established securities markets and neither paragraph (h)(2)(v)(A) nor (B) of this section applies, the covered corporation must determine the market price of the stock in a manner that is reasonable and consistent under the facts and circumstances.
(3) Stock not traded on an established securities market—(i) General rule. If repurchased or acquired stock of a covered corporation is not traded on an established securities market, the market price of the stock is determined as of the date the stock is repurchased by the covered corporation or acquired by a specified affiliate of the covered corporation under the principles of § 1.409A-1(b)(5)(iv)(B)(1) of this chapter.
(ii) Consistency requirement—(A) Solely one method permitted for determining market price of repurchased or acquired stock. The valuation method for determining the market price of repurchased or acquired stock of a covered corporation that is not traded on an established securities market must be used for all repurchases of stock of the covered corporation or acquisitions by a specified affiliate of the covered corporation of the same class throughout the covered corporation's taxable year, unless the application of that method to a particular repurchase or acquisition would be unreasonable under the facts and circumstances as of the valuation date within the meaning of § 1.409A-1(b)(5)(iv)(B)(1) of this chapter.
(B) Application to netting rule. The method used by the covered corporation under paragraph (h)(3)(ii)(A) of this section must be consistently applied to determine the market price of all stock of the covered corporation of the same class issued throughout the covered corporation's taxable year for purposes of the netting rule under § 58.4501-4 except with respect to the determination of the market price of stock of the covered corporation that is issued or provided in connection with the performance of services or if the application of that method to a particular issuance in connection with the performance of services would be unreasonable under the facts and circumstances as of the valuation date.
(4) Market price of stock denominated in non-U.S. currency. The market price of any stock of a covered corporation that is denominated in a currency other than the U.S. dollar is converted into U.S. dollars at the spot rate (as defined in § 1.988-1(d)(1) of this chapter) on the date the stock is repurchased by the covered corporation or acquired by a specified affiliate of the covered corporation.