26 U.S.C. § 1037 — Certain exchanges of United States obli-

Page 2281 TITLE 26—INTERNAL REVENUE CODE § 1037 1 See References in Text note below. Subsec. (a)(4). Pub. L. 109–280, § 844(b)(4), added par. (4). Subsec. (b)(2). Pub. L. 109–280, § 844(b)(1), inserted at end ‘‘For purposes of the preceding sentence, a contract shall not fail to be treated as an annuity contract sole- ly because a qualified long-term care insurance con- tract is a part of or a rider on such contract.’’ Subsec. (b)(3). Pub. L. 109–280, § 844(b)(2), inserted at end ‘‘For purposes of the preceding sentence, a contract shall not fail to be treated as a life insurance contract solely because a qualified long-term care insurance contract is a part of or a rider on such contract.’’ 1997—Subsecs. (c), (d). Pub. L. 105–34 added subsec. (c) and redesignated former subsec. (c) as (d). 1986—Subsec. (b)(1). Pub. L. 99–514 struck out ‘‘subject to tax under subchapter L’’ after ‘‘with an insurance company’’. 1984—Subsec. (b)(1). Pub. L. 98–369, § 224(a), which di- rected the substitution of ‘‘an insurance company sub- ject to tax under subchapter L’’ for ‘‘a life insurance company as defined in section 801’’, was executed by making such substitution for ‘‘a life insurance com- pany as defined in section 816’’ to reflect the probable intent of Congress and the earlier amendment by Pub. L. 98–369, § 211(b)(15), which substituted ‘‘as defined in section 816’’ for ‘‘as defined in section 801’’. Pub. L. 98–369, § 211(b)(15), substituted ‘‘section 816’’ for ‘‘section 801’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2006 AMENDMENT Amendment by Pub. L. 109–280 applicable to contracts issued after Dec. 31, 1996, but only with respect to tax- able years beginning after Dec. 31, 2009, and to ex- changes occurring after Dec. 31, 2009, see section 844(g)(1), (2) of Pub. L. 109–280, set out as a note under section 72 of this title. 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 Amendment by section 211(b)(5) of Pub. L. 98–369 ap- plicable to taxable years beginning after Dec. 31, 1983, see section 215 of Pub. L. 98–369, set out as an Effective Date note under section 801 of this title. Pub. L. 98–369, div. A, title II, § 224(b), July 18, 1984, 98 Stat. 776, provided that: ‘‘The amendment made by sub- section (a) [amending this section] shall apply to all ex- changes whether before, on, or after the date of the en- actment of this Act [July 18, 1984].’’ 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. § 1036. Stock for stock of same corporation (a) General rule No gain or loss shall be recognized if common stock in a corporation is exchanged solely for common stock in the same corporation, or if preferred stock in a corporation is exchanged solely for preferred stock in the same corpora- tion. (b) Nonqualified preferred stock not treated as stock For purposes of this section, nonqualified pre- ferred stock (as defined in section 351(g)(2)) shall be treated as property other than stock. (c) Cross references (1) For rules relating to recognition of gain or loss where an exchange is not solely in kind, see sub- sections (b) and (c) of section 1031. (2) For rules relating to the basis of property ac- quired in an exchange described in subsection (a), see subsection (d) of section 1031. (Aug. 16, 1954, ch. 736, 68A Stat. 309; Pub. L. 105–34, title X, § 1014(e)(3), Aug. 5, 1997, 111 Stat. 921.) Editorial Notes AMENDMENTS 1997—Subsecs. (b), (c). Pub. L. 105–34 added subsec. (b) and redesignated former subsec. (b) as (c). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1997 AMENDMENT Amendment by Pub. L. 105–34 applicable, with certain exceptions, to transactions after June 8, 1997, see sec- tion 1014(f) of Pub. L. 105–34, set out as a note under section 351 of this title. § 1037. Certain exchanges of United States obli- gations (a) General rule When so provided by regulations promulgated by the Secretary in connection with the issue of obligations of the United States, no gain or loss shall be recognized on the surrender to the United States of obligations of the United States issued under chapter 31 of title 31 in ex- change solely for other obligations issued under such chapter. (b) Application of original issue discount rules (1) Exchanges involving obligations issued at a discount In any case in which gain has been realized but not recognized because of the provisions of subsection (a) (or so much of section 1031(b) as relates to subsection (a) of this section), to the extent such gain is later recognized by reason of a disposition or redemption of an obligation received in an exchange subject to such provi- sions, the first sentence of section 1271(c)(2) 1 shall apply to such gain as though the obliga- tion disposed of or redeemed were the obliga- tion surrendered to the Government in the ex- change rather than the obligation actually disposed of or redeemed. For purposes of this paragraph and subpart A of part V of sub- chapter P, if the obligation surrendered in the exchange is a nontransferable obligation de- scribed in subsection (a) or (c) of section 454— (A) the aggregate amount considered, with respect to the obligation surrendered, as or- dinary income shall not exceed the dif- ference between the issue price and the stat- ed redemption price which applies at the time of the exchange, and Page 2282 TITLE 26—INTERNAL REVENUE CODE § 1038 (B) the issue price of the obligation re- ceived in the exchange shall be considered to be the stated redemption price of the obliga- tion surrendered in the exchange, increased by the amount of other consideration (if any) paid to the United States as a part of the exchange. (2) Exchanges of transferable obligations issued at not less than par In any case in which subsection (a) (or so much of section 1031(b) or (c) as relates to sub- section (a) of this section) has applied to the exchange of a transferable obligation which was issued at not less than par for another transferable obligation, the issue price of the obligation received from the Government in the exchange shall be considered for purposes of applying subpart A of part V of subchapter P to be the same as the issue price of the obli- gation surrendered to the Government in the exchange, increased by the amount of other consideration (if any) paid to the United States as a part of the exchange. (c) Cross references (1) For rules relating to the recognition of gain or loss in a case where subsection (a) would apply ex- cept for the fact that the exchange was not made solely for other obligations of the United States, see subsections (b) and (c) of section 1031. (2) For rules relating to the basis of obligations of the United States acquired in an exchange for other obligations described in subsection (a), see sub- section (d) of section 1031. (Added Pub. L. 86–346, title II, § 201(a), Sept. 22, 1959, 73 Stat. 622; amended Pub. L. 94–455, title XIX, § 1901(a)(130), (b)(3)(I), Oct. 4, 1976, 90 Stat. 1786, 1793; Pub. L. 97–452, § 2(c)(3), Jan. 12, 1983, 96 Stat. 2478; Pub. L. 98–369, div. A, title I, § 42(a)(11), July 18, 1984, 98 Stat. 557.) Editorial Notes REFERENCES IN TEXT Section 1271(c), referred to in subsec. (b)(1), was re- pealed and section 1271(d) redesignated section 1271(c) by Pub. L. 115–141, div. U, title IV, § 401(c)(1)(A)(i), Mar. 23, 2018, 132 Stat. 1205. AMENDMENTS 1984—Subsec. (b). Pub. L. 98–369, § 42(a)(11)(C), sub- stituted ‘‘original issue discount rules’’ for ‘‘section 1232’’ in heading. Subsec. (b)(1). Pub. L. 98–369, § 42(a)(11)(A), (B), sub- stituted ‘‘section 1271(c)(2)’’ for ‘‘section 1232(a)(2)(B)’’, and ‘‘subpart A of part V of subchapter P’’ for ‘‘section 1232’’. Subsec. (b)(2). Pub. L. 98–369, § 42(a)(11)(B), substituted ‘‘subpart A of part V of subchapter P’’ for ‘‘section 1232’’. 1983—Subsec. (a). Pub. L. 97–452 substituted ‘‘chapter 31 of title 31’’ and ‘‘chapter’’ for ‘‘the Second Liberty Bond Act’’ and ‘‘Act’’, respectively. 1976—Subsec. (b)(1). Pub. L. 94–455 substituted in in- troductory provisions ‘‘section 1232(a)(2)(B)’’ for ‘‘sec- tion 1232(a)(2)(A)’’ and in subpar. (A) ‘‘ordinary in- come’’ for ‘‘gain from the sale or exchange of property which is not a capital asset’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98–369 applicable to taxable years ending after July 18, 1984, see section 44 of Pub. L. 98–369, set out as an Effective Date note under sec- tion 1271 of this title. EFFECTIVE DATE OF 1976 AMENDMENT Amendment by Pub. L. 94–455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title. EFFECTIVE DATE Pub. L. 86–346, title II, § 203, Sept. 22, 1959, 73 Stat. 624, provided that: ‘‘The amendments made by this title [enacting this section and amending section 1031 of this title and section 742a of former Title 31, Money and Fi- nance] shall be effective for taxable years ending after the date of enactment of this Act [Sept. 22, 1959].’’ § 1038. Certain reacquisitions of real property (a) General rule If— (1) a sale of real property gives rise to in- debtedness to the seller which is secured by the real property sold, and (2) the seller of such property reacquires such property in partial or full satisfaction of such indebtedness, then, except as provided in subsections (b) and (d), no gain or loss shall result to the seller from such reacquisition, and no debt shall become worthless or partially worthless as a result of such reacquisition. (b) Amount of gain resulting (1) In general In the case of a reacquisition of real prop- erty to which subsection (a) applies, gain shall result from such reacquisition to the extent that— (A) the amount of money and the fair mar- ket value of other property (other than obli- gations of the purchaser) received, prior to such reacquisition, with respect to the sale of such property, exceeds (B) the amount of the gain on the sale of such property returned as income for periods prior to such reacquisition. (2) Limitation The amount of gain determined under para- graph (1) resulting from a reacquisition during any taxable year beginning after the date of the enactment of this section shall not exceed the amount by which the price at which the real property was sold exceeded its adjusted basis, reduced by the sum of— (A) the amount of the gain on the sale of such property returned as income for periods prior to the reacquisition of such property, and (B) the amount of money and the fair mar- ket value of other property (other than obli- gations of the purchaser received with re- spect to the sale of such property) paid or transferred by the seller in connection with the reacquisition of such property. For purposes of this paragraph, the price at which real property is sold is the gross sales price reduced by the selling commissions, legal fees, and other expenses incident to the sale of such property which are properly taken into account in determining gain or loss on such sale.