26 U.S.C. § 1032 — Exchange of stock for property

Page 2273 TITLE 26—INTERNAL REVENUE CODE § 1032 EFFECTIVE DATE OF 1997 AMENDMENT Pub. L. 105–34, title X, § 1052(b), Aug. 5, 1997, 111 Stat. 941, provided that: ‘‘(1) IN GENERAL.—The amendment made by this sec- tion [amending this section] shall apply to transfers after June 8, 1997, in taxable years ending after such date. ‘‘(2) BINDING CONTRACTS.—The amendment made by this section shall not apply to any transfer pursuant to a written binding contract in effect on June 8, 1997, and at all times thereafter before the disposition of prop- erty. A contract shall not fail to meet the requirements of the preceding sentence solely because— ‘‘(A) it provides for a sale in lieu of an exchange, or ‘‘(B) the property to be acquired as replacement property was not identified under such contract be- fore June 9, 1997.’’ EFFECTIVE DATE OF 1990 AMENDMENT Pub. L. 101–508, title XI, § 11701(h), Nov. 5, 1990, 104 Stat. 1388–508, provided that the amendment made by that section is effective with respect to transfers after Aug. 3, 1990. Pub. L. 101–508, title XI, § 11703(d)(2), Nov. 5, 1990, 104 Stat. 1388–517, provided that: ‘‘The amendment made by paragraph (1) [amending this section] shall apply to transfers after July 18, 1984.’’ EFFECTIVE DATE OF 1989 AMENDMENT Pub. L. 101–239, title VII, § 7601(b), Dec. 19, 1989, 103 Stat. 2371, provided that: ‘‘(1) IN GENERAL.—Except as provided in paragraph (2), the amendments made by this section [amending this section] shall apply to transfers after July 10, 1989, in taxable years ending after such date. ‘‘(2) BINDING CONTRACT.—The amendments made by this section shall not apply to any transfer pursuant to a written binding contract in effect on July 10, 1989, and at all times thereafter before the transfer.’’ EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99–514 effective, except as oth- erwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title. EFFECTIVE DATE OF 1984 AMENDMENT Pub. L. 98–369, div. A, title I, § 77(b), July 18, 1984, 98 Stat. 596, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘‘(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendment made by subsection (a) [amending this section] shall apply to transfers made after the date of the enactment of this Act [July 18, 1984] in taxable years ending after such date. ‘‘(2) BINDING CONTRACT EXCEPTION FOR TRANSFER OF PARTNERSHIP INTERESTS.—Paragraph (2)(D) of section 1031(a) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as amended by subsection (a)) shall not apply in the case of any exchange pursuant to a binding contract in effect on March 1, 1984, and at all times thereafter before the exchange. ‘‘(3) REQUIREMENT THAT PROPERTY BE IDENTIFIED WITH- IN 45 DAYS AND THAT EXCHANGE BE COMPLETED WITHIN 180 DAYS.—Paragraph (3) of section 1031(a) of the Internal Revenue Code of 1986 (as amended by subsection (a)) shall apply— ‘‘(A) to transfers after the date of the enactment of this Act [July 18, 1984], and ‘‘(B) to transfers on or before such date of enact- ment if the property to be received in the exchange is not received before January 1, 1987. In the case of any transfer on or before the date of the enactment of this Act which the taxpayer treated as part of a like-kind exchange, the period for assessing any deficiency of tax attributable to the amendment made by subsection (a) [amending this section] shall not expire before January 1, 1988. ‘‘(4) SPECIAL RULE WHERE PROPERTY IDENTIFIED IN BINDING CONTRACT.—If the property to be received in the exchange is identified in a binding contract in ef- fect on June 13, 1984, and at all times thereafter before the transfer, paragraph (3) shall be applied— ‘‘(A) by substituting ‘January 1, 1989’ for ‘January 1, 1987’, and ‘‘(B) by substituting ‘January 1, 1990’ for ‘January 1, 1988’. ‘‘(5) SPECIAL RULE FOR LIKE-KIND EXCHANGE OF PART- NERSHIP INTERESTS.—Paragraph (2)(D) of section 1031(a) of the Internal Revenue Code of 1986 (as amended by subsection (a)) shall not apply to any exchange of an interest as general partner pursuant to a plan of reor- ganization of ownership interest under a contract which took effect on March 29, 1984, and which was exe- cuted on or before March 31, 1984, but only if all the ex- changes contemplated by the reorganization plan are completed on or before December 31, 1984.’’ EFFECTIVE DATE OF 1969 AMENDMENT Pub. L. 91–172, title II, § 212(c)(2), Dec. 30, 1969, 83 Stat. 571, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘‘The amendment made by paragraph (1) [amending this section] shall apply to taxable years to which the Internal Revenue Code of 1986 [formerly I.R.C. 1954] applies.’’ EFFECTIVE DATE OF 1959 AMENDMENT Amendment by Pub. L. 86–346 effective for taxable years ending after Sept. 22, 1959, see section 203 of Pub. L. 86–346, set out as an Effective Date note under sec- tion 1037 of this title. EFFECTIVE DATE OF 1958 AMENDMENT Amendment by Pub. L. 85–866 applicable to taxable years beginning after Dec. 31, 1953, and ending after Aug. 16, 1954, see section 1(c)(1) of Pub. L. 85–866, set out as a note under section 165 of this title. PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989 For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title. § 1032. Exchange of stock for property (a) Nonrecognition of gain or loss No gain or loss shall be recognized to a cor- poration on the receipt of money or other prop- erty in exchange for stock (including treasury stock) of such corporation. No gain or loss shall be recognized by a corporation with respect to any lapse or acquisition of an option, or with re- spect to a securities futures contract (as defined in section 1234B), to buy or sell its stock (includ- ing treasury stock). (b) Basis For basis of property acquired by a corporation in certain exchanges for its stock, see section 362. (Aug. 16, 1954, ch. 736, 68A Stat. 303; Pub. L. 98–369, div. A, title I, § 57(a), July 18, 1984, 98 Stat. 574; Pub. L. 106–554, § 1(a)(7) [title IV, § 401(c)], Dec. 21, 2000, 114 Stat. 2763, 2763A–649.) Editorial Notes AMENDMENTS 2000—Subsec. (a). Pub. L. 106–554 inserted ‘‘, or with respect to a securities futures contract (as defined in section 1234B),’’ after ‘‘an option’’ in second sentence. Page 2274 TITLE 26—INTERNAL REVENUE CODE § 1033 1984—Subsec. (a). Pub. L. 98–369 inserted provision that no gain or loss shall be recognized by a corpora- tion with respect to any lapse or acquisition of an op- tion to buy or sell its stock (including treasury stock). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2000 AMENDMENT Pub. L. 106–554, § 1(a)(7) [title IV, § 401(j)], Dec. 21, 2000, 114 Stat. 2763, 2763A–651, provided that: ‘‘The amend- ments made by this section [enacting section 1234B of this title and amending this section and sections 1091, 1092, 1223, 1233, 1234A, 1256 and 7701 of this title] shall take effect on the date of the enactment of this Act [Dec. 21, 2000].’’ EFFECTIVE DATE OF 1984 AMENDMENT Pub. L. 98–369, div. A, title I, § 57(b), July 18, 1984, 1984, 98 Stat. 574, provided that: ‘‘The amendment made by subsection (a) [amending this section] shall apply to options acquired or lapsed after the date of the enact- ment of this Act [July 18, 1984] in taxable years ending after such date.’’ § 1033. Involuntary conversions (a) General rule If property (as a result of its destruction in whole or in part, theft, seizure, or requisition or condemnation or threat or imminence thereof) is compulsorily or involuntarily converted— (1) Conversion into similar property Into property similar or related in service or use to the property so converted, no gain shall be recognized. (2) Conversion into money Into money or into property not similar or related in service or use to the converted prop- erty, the gain (if any) shall be recognized ex- cept to the extent hereinafter provided in this paragraph: (A) Nonrecognition of gain If the taxpayer during the period specified in subparagraph (B), for the purpose of re- placing the property so converted, purchases other property similar or related in service or use to the property so converted, or pur- chases stock in the acquisition of control of a corporation owning such other property, at the election of the taxpayer the gain shall be recognized only to the extent that the amount realized upon such conversion (re- gardless of whether such amount is received in one or more taxable years) exceeds the cost of such other property or such stock. Such election shall be made at such time and in such manner as the Secretary may by regulations prescribe. For purposes of this paragraph— (i) no property or stock acquired before the disposition of the converted property shall be considered to have been acquired for the purpose of replacing such converted property unless held by the taxpayer on the date of such disposition; and (ii) the taxpayer shall be considered to have purchased property or stock only if, but for the provisions of subsection (b) of this section, the unadjusted basis of such property or stock would be its cost within the meaning of section 1012. (B) Period within which property must be re- placed The period referred to in subparagraph (A) shall be the period beginning with the date of the disposition of the converted property, or the earliest date of the threat or immi- nence of requisition or condemnation of the converted property, whichever is the earlier, and ending— (i) 2 years after the close of the first tax- able year in which any part of the gain upon the conversion is realized, or (ii) subject to such terms and conditions as may be specified by the Secretary, at the close of such later date as the Sec- retary may designate on application by the taxpayer. Such application shall be made at such time and in such manner as the Secretary may by regulations pre- scribe. (C) Time for assessment of deficiency attrib- utable to gain upon conversion If a taxpayer has made the election pro- vided in subparagraph (A), then— (i) the statutory period for the assess- ment of any deficiency, for any taxable year in which any part of the gain on such conversion is realized, attributable to such gain shall not expire prior to the expira- tion of 3 years from the date the Secretary is notified by the taxpayer (in such man- ner as the Secretary may by regulations prescribe) of the replacement of the con- verted property or of an intention not to replace, and (ii) such deficiency may be assessed be- fore the expiration of such 3–year period notwithstanding the provisions of section 6212(c) or the provisions of any other law or rule of law which would otherwise pre- vent such assessment. (D) Time for assessment of other deficiencies attributable to election If the election provided in subparagraph (A) is made by the taxpayer and such other property or such stock was purchased before the beginning of the last taxable year in which any part of the gain upon such conver- sion is realized, any deficiency, to the extent resulting from such election, for any taxable year ending before such last taxable year may be assessed (notwithstanding the provi- sions of section 6212(c) or 6501 or the provi- sions of any other law or rule of law which would otherwise prevent such assessment) at any time before the expiration of the period within which a deficiency for such last tax- able year may be assessed. (E) Definitions For purposes of this paragraph— (i) Control The term ‘‘control’’ means the ownership of stock possessing at least 80 percent of the total combined voting power of all classes of stock entitled to vote and at least 80 percent of the total number of shares of all other classes of stock of the corporation.