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26 U.S.C. § 357 — Assumption of liability
Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** Except as provided in subsections (b) and (c), if—
(1) the taxpayer receives property which would be permitted to be received under section 351 or 361 without the recognition of gain if it were the sole consideration, and
(2) as part of the consideration, another party to the exchange assumes a liability of the taxpayer,
then such assumption shall not be treated as money or other property, and shall not prevent the exchange from being within the provisions of section 351 or 361, as the case may be.
**(b) Tax avoidance purpose**
(1) **In general** — If, taking into consideration the nature of the liability and the circumstances in the light of which the arrangement for the assumption was made, it appears that the principal purpose of the taxpayer with respect to the assumption described in subsection (a)—
(A) was a purpose to avoid Federal income tax on the exchange, or
(B) if not such purpose, was not a bona fide business purpose,
then such assumption (in the total amount of the liability assumed pursuant to such exchange) shall, for purposes of section 351 or 361 (as the case may be), be considered as money received by the taxpayer on the exchange.
(2) **Burden of proof** — In any suit or proceeding where the burden is on the taxpayer to prove such assumption is not to be treated as money received by the taxpayer, such burden shall not be considered as sustained unless the taxpayer sustains such burden by the clear preponderance of the evidence.
**(c) Liabilities in excess of basis**
(1) **In general** — In the case of an exchange—
(A) to which section 351 applies, or
(B) to which section 361 applies by reason of a plan of reorganization within the meaning of section 368(a)(1)(D) with respect to which stock or securities of the
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Source location: Title 26, Chapter 1, § 357; chapter-001-normal-taxes-and-surtaxes.md
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**(a) General rule** Except as provided in subsections (b) and (c), if—
(1) the taxpayer receives property which would be permitted to be received under section 351 or 361 without the recognition of gain if it were the sole consideration, and
(2) as part of the consideration, another party to the exchange assumes a liability of the taxpayer,
then such assumption shall not be treated as money or other property, and shall not prevent the exchange from being within the provisions of section 351 or 361, as the case may be.
**(b) Tax avoidance purpose**
(1) **In general** — If, taking into consideration the nature of the liability and the circumstances in the light of which the arrangement for the assumption was made, it appears that the principal purpose of the taxpayer with respect to the assumption described in subsection (a)—
(A) was a purpose to avoid Federal income tax on the exchange, or
(B) if not such purpose, was not a bona fide business purpose,
then such assumption (in the total amount of the liability assumed pursuant to such exchange) shall, for purposes of section 351 or 361 (as the case may be), be considered as money received by the taxpayer on the exchange.
(2) **Burden of proof** — In any suit or proceeding where the burden is on the taxpayer to prove such assumption is not to be treated as money received by the taxpayer, such burden shall not be considered as sustained unless the taxpayer sustains such burden by the clear preponderance of the evidence.
**(c) Liabilities in excess of basis**
(1) **In general** — In the case of an exchange—
(A) to which section 351 applies, or
(B) to which section 361 applies by reason of a plan of reorganization within the meaning of section 368(a)(1)(D) with respect to which stock or securities of the corporation to which the assets are transferred are distributed in a transaction which qualifies under section 355,
if the sum of the amount of the liabilities assumed exceeds the total of the adjusted basis of the property transferred pursuant to such exchange, then such excess shall be considered as a gain from the sale or exchange of a capital asset or of property which is not a capital asset, as the case may be.
(2) **Exceptions** — Paragraph (1) shall not apply to any exchange—
(A) to which subsection (b)(1) of this section applies, or
(B) which is pursuant to a plan of reorganization within the meaning of section 368(a)(1)(G) where no former shareholder of the transferor corporation receives any consideration for his stock.
(3) **Certain liabilities excluded**
(A) *In general* — If a taxpayer transfers, in an exchange to which section 351 applies, a liability the payment of which either—
(i) would give rise to a deduction, or
(ii) would be described in section 736(a),
then, for purposes of paragraph (1), the amount of such liability shall be excluded in determining the amount of liabilities assumed.
(B) *Exception* — Subparagraph (A) shall not apply to any liability to the extent that the incurrence of the liability resulted in the creation of, or an increase in, the basis of any property.
**(d) Determination of amount of liability assumed**
(1) **In general** — For purposes of this section, section 358(d), section 358(h), section 361(b)(3), section 362(d), section 368(a)(1)(C), and section 368(a)(2)(B), except as provided in regulations—
(A) a recourse liability (or portion thereof) shall be treated as having been assumed if, as determined on the basis of all facts and circumstances, the transferee has agreed to, and is expected to, satisfy such liability (or portion), whether or not the transferor has been relieved of such liability; and
(B) except to the extent provided in paragraph (2), a nonrecourse liability shall be treated as having been assumed by the transferee of any asset subject to such liability.
(2) **Exception for nonrecourse liability** — The amount of the nonrecourse liability treated as described in paragraph (1)(B) shall be reduced by the lesser of—
(A) the amount of such liability which an owner of other assets not transferred to the transferee and also subject to such liability has agreed with the transferee to, and is expected to, satisfy; or
(B) the fair market value of such other assets (determined without regard to section 7701(g)).
(3) **Regulations** — The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection and section 362(d). The Secretary may also prescribe regulations which provide that the manner in which a liability is treated as assumed under this subsection is applied, where appropriate, elsewhere in this title.
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Allowance of credit**
(1) **In general** — In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to the credit percentage of so much of the taxpayer’s earned income for the taxable year as does not exceed the earned income amount.
(2) **Limitation** — The amount of the credit allowable to a taxpayer under paragraph (1) for any taxable year shall not exceed the excess (if any) of—
(A) the credit percentage of the earned income amount, over
(B) the phaseout percentage of so much of the adjusted gross income (or, if greater, the earned income) of the taxpayer for the taxable year as exceeds the phaseout amount.
**(b) Percentages and amounts** For purposes of subsection (a)—
(1) **Percentages** — The credit percentage and the phaseout percentage shall be determined as follows: In the case of an eligible individual with:The credit percentage is:Thephaseoutpercentageis: 1 qualifying child3415.98 2 qualifying children4021.06 3 or more qualifying children4521.06 No qualifying children7.65 7.65
(2) **Amounts**
(A) *In general* — Subject to subparagraph (B), the earned income amount and the phaseout amount shall be determined as follows: In the case of an eligible individual with:The earned income amount is:Thephaseoutamount is: 1 qualifying child$6,330$11,610 2 or more qualifying children$8,890$11,610 No qualifying children$4,220 $5,280
(B) *Joint returns* — In the case of a joint return filed by an eligible individual and such individual’s spouse, the phaseout amount determined under subparagraph (A) shall be increased by $5,000.
**(c) Definitions and special rules** For purposes of this section—
(1) **Eligible individual**
(A) *In general* — The term “e
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** No gain or loss shall be recognized to a corporation if such corporation is a party to a reorganization and exchanges property, in pursuance of the plan of reorganization, solely for stock or securities in another corporation a party to the reorganization.
**(b) Exchanges not solely in kind**
(1) **Gain** — If subsection (a) would apply to an exchange but for the fact that the property received in exchange consists not only of stock or securities permitted by subsection (a) to be received without the recognition of gain, but also of other property or money, then—
(A) *Property distributed* — If the corporation receiving such other property or money distributes it in pursuance of the plan of reorganization, no gain to the corporation shall be recognized from the exchange, but
(B) *Property not distributed* — If the corporation receiving such other property or money does not distribute it in pursuance of the plan of reorganization, the gain, if any, to the corporation shall be recognized.
The amount of gain recognized under subparagraph (B) shall not exceed the sum of the money and the fair market value of the other property so received which is not so distributed.
(2) **Loss** — If subsection (a) would apply to an exchange but for the fact that the property received in exchange consists not only of property permitted by subsection (a) to be received without the recognition of gain or loss, but also of other property or money, then no loss from the exchange shall be recognized.
(3) **Treatment of transfers to creditors** — For purposes of paragraph (1), any transfer of the other property or money received in the exchange by the corporation to its creditors in connection with the reorganization shall be treated as a distribution in pursuanc
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** In the case of an exchange to which section 351, 354, 355, 356, or 361 applies—
(1) **Nonrecognition property** — 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—
(A) decreased by—
(i) the fair market value of any other property (except money) received by the taxpayer,
(ii) the amount of any money received by the taxpayer, and
(iii) the amount of loss to the taxpayer which was recognized on such exchange, and
(B) increased by—
(i) the amount which was treated as a dividend, and
(ii) 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).
(2) **Other property** — The basis of any other property (except money) received by the taxpayer shall be its fair market value.
**(b) Allocation of basis**
(1) **In general** — 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.
(2) **Special rule for section 355** — 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.
**(c) Section 355 transactions which are not exchanges** For purposes of this section, a distribution to whic
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Limitation based on amount of tax** The aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the sum of—
(1) the taxpayer’s regular tax liability for the taxable year reduced by the foreign tax credit allowable under section 27, and
(2) the tax imposed by section 55(a) for the taxable year.
**(b) Regular tax liability** For purposes of this part—
(1) **In general** — The term “regular tax liability” means the tax imposed by this chapter for the taxable year.
(2) **Exception for certain taxes** — For purposes of paragraph (1), any tax imposed by any of the following provisions shall not be treated as tax imposed by this chapter:
(A) section 55 (relating to minimum tax),
(B) section 59A (relating to base erosion and anti-abuse tax),
(C) subsection (m)(5)(B), (q), (t), or (v) of section 72 (relating to additional taxes on certain distributions),
(D) section 143(m) (relating to recapture of proration of Federal subsidy from use of mortgage bonds and mortgage credit certificates),
(E) section 530(d)(4) (relating to additional tax on certain distributions from Coverdell education savings accounts),
(F) section 531 (relating to accumulated earnings tax),
(G) section 541 (relating to personal holding company tax),
(H) section 1351(d)(1) (relating to recoveries of foreign expropriation losses),
(I) section 1374 (relating to tax on certain built-in gains of S corporations),
(J) section 1375 (relating to tax imposed when passive investment income of corporation having subchapter C earnings and profits exceeds 25 percent of gross receipts),
(K) subparagraph (A) of section 7518(g)(6) (relating to nonqualified withdrawals from capital construction funds taxed at highest marginal rate),
(L) sections 87
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** No gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and immediately after the exchange such person or persons are in control (as defined in section 368(c)) of the corporation.
**(b) Receipt of property** If subsection (a) would apply to an exchange but for the fact that there is received, in addition to the stock permitted to be received under subsection (a), other property or money, then—
(1) gain (if any) to such recipient shall be recognized, but not in excess of—
(A) the amount of money received, plus
(B) the fair market value of such other property received; and
(2) no loss to such recipient shall be recognized.
**(c) Special rules where distribution to shareholders**
(1) **In general** — In determining control for purposes of this section, the fact that any corporate transferor distributes part or all of the stock in the corporation which it receives in the exchange to its shareholders shall not be taken into account.
(2) **Special rule for section 355** — If the requirements of section 355 (or so much of section 356 as relates to section 355) are met with respect to a distribution described in paragraph (1), then, solely for purposes of determining the tax treatment of the transfers of property to the controlled corporation by the distributing corporation, the fact that the shareholders of the distributing corporation dispose of part or all of the distributed stock, or the fact that the corporation whose stock was distributed issues additional stock, shall not be taken into account in determining control for purposes of this section.
**(d) Services, certain indebtedness, and accrued interest not treated as property** For purposes o
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Exclusion from gross income**
(1) **In general** — Gross income does not include any amount which (but for this subsection) would be includible in gross income by reason of the discharge (in whole or in part) of indebtedness of the taxpayer if—
(A) the discharge occurs in a title 11 case,
(B) the discharge occurs when the taxpayer is insolvent,
(C) the indebtedness discharged is qualified farm indebtedness,
(D) in the case of a taxpayer other than a C corporation, the indebtedness discharged is qualified real property business indebtedness, or
(E) the indebtedness discharged is qualified principal residence indebtedness which is discharged—
(i) before January 1, 2026, or
(ii) subject to an arrangement that is entered into and evidenced in writing before January 1, 2026.
(2) **Coordination of exclusions**
(A) *Title 11 exclusion takes precedence* — Subparagraphs (B), (C), (D), and (E) of paragraph (1) shall not apply to a discharge which occurs in a title 11 case.
(B) *Insolvency exclusion takes precedence over qualified farm exclusion and qualified real property business exclusion* — Subparagraphs (C) and (D) of paragraph (1) shall not apply to a discharge to the extent the taxpayer is insolvent.
(C) *Principal residence exclusion takes precedence over insolvency exclusion unless elected otherwise* — Paragraph (1)(B) shall not apply to a discharge to which paragraph (1)(E) applies unless the taxpayer elects to apply paragraph (1)(B) in lieu of paragraph (1)(E).
(3) **Insolvency exclusion limited to amount of insolvency** — In the case of a discharge to which paragraph (1)(B) applies, the amount excluded under paragraph (1)(B) shall not exceed the amount by which the taxpayer is insolvent.
**(b) Reduction of tax attributes**
(
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Federal law — U.S. Code and appendices · legal_authorities
Page 1135
TITLE 26—INTERNAL REVENUE CODE
§ 357
tion 1014(f) of Pub. L. 105–34, set out as a note under
section 351 of this title.
EFFECTIVE DATE OF 1982 AMENDMENT
Pub. L. 97–248, title II, § 227(c)(2), Sept. 3, 1982, 96 Stat.
492, provided that: ‘‘The amendment made by sub-
section (b) [amending this section] shall apply to dis-
tributions after August 31, 1982, in taxable years ending
after such date.’’
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by Pub. L. 94–253 applicable to taxable
years ending after Mar. 31, 1976, see section 2 of Pub. L.
94–253, set out as a note under section 354 of this title.
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L.
101–508 be construed to affect treatment of certain
transactions occurring, property acquired, or items of
income, loss, deduction, or credit taken into account
prior to Nov. 5, 1990, for purposes of determining liabil-
ity for tax for periods ending after Nov. 5, 1990, see sec-
tion 11821(b) of Pub. L. 101–508, set out as a note under
section 45K of this title.
§ 357. Assumption of liability
(a) General rule
Except as provided in subsections (b) and (c),
if—
(1) the taxpayer receives property which
would be permitted to be received under sec-
tion 351 or 361 without the recognition of gain
if it were the sole consideration, and
(2) as part of the consideration, another
party to the exchange assumes a liability of
the taxpayer,
then such assumption shall not be treated as
money or other property, and shall not prevent
the exchange from being within the provisions
of section 351 or 361, as the case may be.
(b) Tax avoidance purpose
(1) In general
If, taking into consideration the nature of
the liability and the circumstances in the
light of which the arrangement for the as-
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