§5881 — Greenmail
Statute Text — 26 U.S.C. §5881
There is hereby imposed on any person who receives greenmail a tax equal to 50 percent of gain or other income of such person by reason of such receipt.
For purposes of this section, the term “greenmail” means any consideration transferred by a corporation (or any person acting in concert with such corporation) to directly or indirectly acquire stock of such corporation from any shareholder if—
such shareholder held such stock (as determined under section 1223) for less than 2 years before entering into the agreement to make the transfer,
at some time during the 2-year period ending on the date of such acquisition—
such shareholder,
any person acting in concert with such shareholder, or
any person who is related to such shareholder or person described in subparagraph (B),
made or threatened to make a public tender offer for stock of such corporation, and
such acquisition is pursuant to an offer which was not made on the same terms to all shareholders.
For purposes of the preceding sentence, payments made in connection with, or in transactions related to, an acquisition shall be treated as paid in such acquisition.
For purposes of this section—
The term “public tender offer” means any offer to purchase or otherwise acquire stock or assets in a corporation if such offer was or would be required to be filed or registered with any Federal or State agency regulating securities.
A person is related to another person if the relationship between such persons would result in the disallowance of losses under section 267 or 707(b).
The tax imposed by this section shall apply whether or not the gain or other income referred to in subsection (a) is recognized.
For purposes of the deficiency procedures of subtitle F, any tax imposed by this section shall be treated as a tax imposed by subtitle A.
Treasury Regulations
-
Treas. Reg. §156.5881-1Imposition of excise tax on greenmail
(a) In general. Section 5881 of the Code imposes a tax equal to 50 percent of the gain or other income realized by any person on the receipt of greenmail, whether or not the gain or other income is recognized.
(b) Transactions occurring on or after March 31, 1988. For transactions occurring on or after March 31, 1988, greenmail is defined as any consideration transferred by a corporation (or any person acting in concert with the corporation) to directly or indirectly acquire stock of the corporation from any shareholder if:
(1) The transferring shareholder has held the stock (as determined under section 1223) for less than two years before entering into the agreement to transfer the stock,
(2) The shareholder, any person acting in concert with the shareholder, or any person related to the shareholder or to a person acting in concert with the shareholder made or threatened to make a public tender offer for stock of the corporation at some time during the two-year period ending on the date of the acquisition of the stock by the corporation, and
(3) The acquisition is pursuant to an offer that was not made on the same terms to all shareholders.
(c) Transactions occurring before March 31, 1988. For transactions occurring before March 31, 1988, greenmail has the same meaning as in paragraph (b) of this section, except that it does not include any consideration transferred by any person acting in concert with the corporation described in that paragraph.
(d) Effective date. Generally, section 5881 of the Code applies to consideration received after December 22, 1987, in taxable years ending after that date. However, section 5881 does not apply to any acquisition of stock pursuant to a written binding contract in effect on December 15, 1987, and at all times thereafter before the acquisition.
-
Treas. Reg. §156.5881-1(a)In general.
In general. Section 5881 of the Code imposes a tax equal to 50 percent of the gain or other income realized by any person on the receipt of greenmail, whether or not the gain or other income is recognized.
-
Treas. Reg. §156.5881-1(b)Transactions occurring on or after March 31, 1988.
Transactions occurring on or after March 31, 1988. For transactions occurring on or after March 31, 1988, greenmail is defined as any consideration transferred by a corporation (or any person acting in concert with the corporation) to directly or indirectly acquire stock of the corporation from any shareholder if:
(1) The transferring shareholder has held the stock (as determined under section 1223) for less than two years before entering into the agreement to transfer the stock,
(2) The shareholder, any person acting in concert with the shareholder, or any person related to the shareholder or to a person acting in concert with the shareholder made or threatened to make a public tender offer for stock of the corporation at some time during the two-year period ending on the date of the acquisition of the stock by the corporation, and
(3) The acquisition is pursuant to an offer that was not made on the same terms to all shareholders.
-
Treas. Reg. §156.5881-1(c)Transactions occurring before March 31, 1988.
Transactions occurring before March 31, 1988. For transactions occurring before March 31, 1988, greenmail has the same meaning as in paragraph (b) of this section, except that it does not include any consideration transferred by any person acting in concert with the corporation described in that paragraph.
-
Treas. Reg. §156.5881-1(d)Effective date.
Effective date. Generally, section 5881 of the Code applies to consideration received after December 22, 1987, in taxable years ending after that date. However, section 5881 does not apply to any acquisition of stock pursuant to a written binding contract in effect on December 15, 1987, and at all times thereafter before the acquisition.
0 Citing Cases
No citing cases found in the corpus.