26 U.S.C. § 1058 — Transfers of securities under certain

Page 2295 TITLE 26—INTERNAL REVENUE CODE § 1059 1 So in original. Probably should be followed by a comma. § 631(e)(13), Oct. 22, 1986, 100 Stat. 2275, related to basis limitation for player contracts transferred in connec- tion with the sale of a franchise. A prior section 1056 was renumbered section 1062 of this title. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF REPEAL Repeal applicable to property acquired after Oct. 22, 2004, see section 886(c)(1) of Pub. L. 108–357, set out as an Effective Date of 2004 Amendment note under sec- tion 197 of this title. [§ 1057. Repealed. Pub. L. 105–34, title XI, § 1131(c)(2), Aug. 5, 1997, 111 Stat. 980] Section, added Pub. L. 94–455, title X, § 1015(c), Oct. 4, 1976, 90 Stat. 1618, related to election to treat transfer to foreign trust, etc., as taxable exchange. A prior section 1057 was renumbered section 1062 of this title. § 1058. Transfers of securities under certain agreements (a) General rule In the case of a taxpayer who transfers securi- ties (as defined in section 1236(c)) pursuant to an agreement which meets the requirements of sub- section (b), no gain or loss shall be recognized on the exchange of such securities by the taxpayer for an obligation under such agreement, or on the exchange of rights under such agreement by that taxpayer for securities identical to the se- curities transferred by that taxpayer. (b) Agreement requirements In order to meet the requirements of this sub- section, an agreement shall— (1) provide for the return to the transferor of securities identical to the securities trans- ferred; (2) require that payments shall be made to the transferor of amounts equivalent to all in- terest, dividends, and other distributions which the owner of the securities is entitled to receive during the period beginning with the transfer of the securities by the transferor and ending with the transfer of identical securities back to the transferor; (3) not reduce the risk of loss or opportunity for gain of the transferor of the securities in the securities transferred; and (4) meet such other requirements as the Sec- retary may by regulation prescribe. (c) Basis Property acquired by a taxpayer described in subsection (a), in a transaction described in that subsection, shall have the same basis as the property transferred by that taxpayer. (Added Pub. L. 95–345, § 2(d)(1), Aug. 15, 1978, 92 Stat. 482.) Editorial Notes PRIOR PROVISIONS A prior section 1058 was renumbered section 1062 of this title. Statutory Notes and Related Subsidiaries EFFECTIVE DATE Section applicable with respect to amounts received after Dec. 31, 1976, as payments with respect to securi- ties loans (as defined in section 512(a)(5) of this title), and transfers of securities, under agreements described in this section, occurring after such date, see section 2(e) of Pub. L. 95–345, set out as an Effective Date of 1978 Amendment note under section 509 of this title. § 1059. Corporate shareholder’s basis in stock re- duced by nontaxed portion of extraordinary dividends (a) General rule If any corporation receives any extraordinary dividend with respect to any share of stock and such corporation has not held such stock for more than 2 years before the dividend announce- ment date— (1) Reduction in basis The basis of such corporation in such stock shall be reduced (but not below zero) by the nontaxed portion of such dividends. (2) Amounts in excess of basis If the nontaxed portion of such dividends ex- ceeds such basis, such excess shall be treated as gain from the sale or exchange of such stock for the taxable year in which the ex- traordinary dividend is received. (b) Nontaxed portion For purposes of this section— (1) In general The nontaxed portion of any dividend is the excess (if any) of— (A) the amount of such dividend, over (B) the taxable portion of such dividend. (2) Taxable portion The taxable portion of any dividend is— (A) the portion of such dividend includible in gross income, reduced by (B) the amount of any deduction allowable with respect to such dividend under section 243 1 245, or 245A. (c) Extraordinary dividend defined For purposes of this section— (1) In general The term ‘‘extraordinary dividend’’ means any dividend with respect to a share of stock if the amount of such dividend equals or ex- ceeds the threshold percentage of the tax- payer’s adjusted basis in such share of stock. (2) Threshold percentage The term ‘‘threshold percentage’’ means— (A) 5 percent in the case of stock which is preferred as to dividends, and (B) 10 percent in the case of any other stock. (3) Aggregation of dividends (A) Aggregation within 85-day period All dividends— (i) which are received by the taxpayer (or a person described in subparagraph (C)) with respect to any share of stock, and (ii) which have ex-dividend dates within the same period of 85 consecutive days, shall be treated as 1 dividend.