26 U.S.C. § 269 — Acquisitions made to evade or avoid in-

Page 1024 TITLE 26—INTERNAL REVENUE CODE § 268 1 So in original. Probably should be followed by ‘‘and’’. that such section shall be applied with respect to the person making the payment described in paragraph (1) in lieu of the controlled for- eign corporation otherwise referred to in such section. (c) Hybrid transaction For purposes of this section, the term ‘‘hybrid transaction’’ means any transaction, series of transactions, agreement, or instrument one or more payments with respect to which are treat- ed as interest or royalties for purposes of this chapter and which are not so treated for pur- poses the tax law of the foreign country of which the recipient of such payment is resident for tax purposes or is subject to tax. (d) Hybrid entity For purposes of this section, the term ‘‘hybrid entity’’ means any entity which is either— (1) treated as fiscally transparent for pur- poses of this chapter but not so treated for purposes of the tax law of the foreign country of which the entity is resident for tax purposes or is subject to tax, or (2) treated as fiscally transparent for pur- poses of such tax law but not so treated for purposes of this chapter. (e) Regulations The Secretary shall issue such regulations or other guidance as may be necessary or appro- priate to carry out the purposes of this section, including regulations or other guidance pro- viding for— (1) rules for treating certain conduit ar- rangements which involve a hybrid trans- action or a hybrid entity as subject to sub- section (a), (2) rules for the application of this section to branches or domestic entities, (3) rules for treating certain structured transactions as subject to subsection (a), (4) rules for treating a tax preference as an exclusion from income for purposes of apply- ing subsection (b)(1) if such tax preference has the effect of reducing the generally applicable statutory rate by 25 percent or more, (5) rules for treating the entire amount of interest or royalty paid or accrued to a related party as a disqualified related party amount if such amount is subject to a participation ex- emption system or other system which pro- vides for the exclusion or deduction of a sub- stantial portion of such amount, (6) rules for determining the tax residence of a foreign entity if the entity is otherwise con- sidered a resident of more than one country or of no country, (7) exceptions from subsection (a) with re- spect to— (A) cases in which the disqualified related party amount is taxed under the laws of a foreign country other than the country of which the related party is a resident for tax purposes, and (B) other cases which the Secretary deter- mines do not present a risk of eroding the Federal tax base,1 (8) requirements for record keeping and in- formation reporting in addition to any re- quirements imposed by section 6038A. (Added Pub. L. 115–97, title I, § 14222(a), Dec. 22, 2017, 131 Stat. 2219.) Statutory Notes and Related Subsidiaries EFFECTIVE DATE Pub. L. 115–97, title I, § 14222(c), Dec. 22, 2017, 131 Stat. 2220, provided that: ‘‘The amendments made by this section [enacting this section] shall apply to taxable years beginning after December 31, 2017.’’ § 268. Sale of land with unharvested crop Where an unharvested crop sold by the tax- payer is considered under the provisions of sec- tion 1231 as ‘‘property used in the trade or busi- ness’’, in computing taxable income no deduc- tion (whether or not for the taxable year of the sale and whether for expenses, depreciation, or otherwise) attributable to the production of such crop shall be allowed. (Aug. 16, 1954, ch. 736, 68A Stat. 80.) § 269. Acquisitions made to evade or avoid in- come tax (a) In general If— (1) any person or persons acquire, directly or indirectly, control of a corporation, or (2) any corporation acquires, directly or in- directly, property of another corporation, not controlled, directly or indirectly, immediately before such acquisition, by such acquiring cor- poration or its stockholders, the basis of which property, in the hands of the acquiring corporation, is determined by reference to the basis in the hands of the transferor corpora- tion, and the principal purpose for which such acqui- sition was made is evasion or avoidance of Fed- eral income tax by securing the benefit of a de- duction, credit, or other allowance which such person or corporation would not otherwise enjoy, then the Secretary may disallow such de- duction, credit, or other allowance. For purposes of paragraphs (1) and (2), control means the own- ership of stock possessing at least 50 percent of the total combined voting power of all classes of stock entitled to vote or at least 50 percent of the total value of shares of all classes of stock of the corporation. (b) Certain liquidations after qualified stock pur- chases (1) In general If— (A) there is a qualified stock purchase by a corporation of another corporation, (B) an election is not made under section 338 with respect to such purchase, (C) the acquired corporation is liquidated pursuant to a plan of liquidation adopted not more than 2 years after the acquisition date, and (D) the principal purpose for such liquida- tion is the evasion or avoidance of Federal income tax by securing the benefit of a de- duction, credit, or other allowance which the acquiring corporation would not other- wise enjoy, then the Secretary may disallow such deduc- tion, credit, or other allowance. Page 1025 TITLE 26—INTERNAL REVENUE CODE § 269A (2) Meaning of terms For purposes of paragraph (1), the terms ‘‘qualified stock purchase’’ and ‘‘acquisition date’’ have the same respective meanings as when used in section 338. (c) Power of Secretary to allow deduction, etc., in part In any case to which subsection (a) or (b) ap- plies the Secretary is authorized— (1) to allow as a deduction, credit, or allow- ance any part of any amount disallowed by such subsection, if he determines that such al- lowance will not result in the evasion or avoidance of Federal income tax for which the acquisition was made; or (2) to distribute, apportion, or allocate gross income, and distribute, apportion, or allocate the deductions, credits, or allowances the ben- efit of which was sought to be secured, be- tween or among the corporations, or prop- erties, or parts thereof, involved, and to allow such deductions, credits, or allowances so dis- tributed, apportioned, or allocated, but to give effect to such allowance only to such extent as he determines will not result in the evasion or avoidance of Federal income tax for which the acquisition was made; or (3) to exercise his powers in part under para- graph (1) and in part under paragraph (2). (Aug. 16, 1954, ch. 736, 68A Stat. 80; Pub. L. 88–272, title II, § 235(c)(2), Feb. 26, 1964, 78 Stat. 126; Pub. L. 94–455, title XIX, §§ 1901(a)(38), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1771, 1834; Pub. L. 98–369, div. A, title VII, § 712(k)(8)(A), (B), July 18, 1984, 98 Stat. 952; Pub. L. 113–295, div. A, title II, § 221(a)(45), Dec. 19, 2014, 128 Stat. 4045.) Editorial Notes AMENDMENTS 2014—Subsec. (a). Pub. L. 113–295 struck out ‘‘or ac- quired on or after October 8, 1940,’’ after ‘‘persons ac- quire,’’ in par. (1) and after ‘‘corporation acquires,’’ in par. (2). 1984—Subsecs. (b), (c). Pub. L. 98–369 added subsec. (b), redesignated former subsec. (b) as (c) and inserted ref- erence to subsec. (b). 1976—Subsecs. (a), (b). Pub. L. 94–455, § 1906(b)(13)(A), struck out ‘‘or his delegate’’ after ‘‘Secretary’’ wher- ever appearing. Subsec. (c). Pub. L. 94–455, § 1901(a)(38), struck out subsec. (c) relating to presumptions in the case of dis- proportionate purchase price. 1964—Subsec. (a). Pub. L. 88–272 substituted ‘‘the Sec- retary or his delegate may disallow such deduction, credit, or other allowance’’ for ‘‘such deduction, credit or other allowance shall not be allowed’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2014 AMENDMENT Amendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title. EFFECTIVE DATE OF 1984 AMENDMENT Pub. L. 98–369, div. A, title VII, § 712(k)(8)(C), July 18, 1984, 98 Stat. 952, provided that: ‘‘The amendments made by this paragraph [amending this section] shall apply to liquidations after October 20, 1983, in taxable years ending after such date.’’ EFFECTIVE DATE OF 1964 AMENDMENT Pub. L. 88–272, title II, § 235(d), Feb. 26, 1964, 78 Stat. 127, provided that: ‘‘The amendments made by sub- sections (a) and (c) [enacting sections 1561 to 1563 of this title and amending this section and sections 441 and 802 of this title] shall apply with respect to taxable years ending after December 31, 1963. The amendment made by subsection (b) [amending section 1551 of this title] shall apply with respect to transfers made after June 12, 1963.’’ § 269A. Personal service corporations formed or availed of to avoid or evade income tax (a) General rule If— (1) substantially all of the services of a per- sonal service corporation are performed for (or on behalf of) 1 other corporation, partnership, or other entity, and (2) the principal purpose for forming, or availing of, such personal service corporation is the avoidance or evasion of Federal income tax by reducing the income of, or securing the benefit of any expense, deduction, credit, ex- clusion, or other allowance for, any employee- owner which would not otherwise be available, then the Secretary may allocate all income, de- ductions, credits, exclusions, and other allow- ances between such personal service corporation and its employee-owners, if such allocation is necessary to prevent avoidance or evasion of Federal income tax or clearly to reflect the in- come of the personal service corporation or any of its employee-owners. (b) Definitions For purposes of this section— (1) Personal service corporation The term ‘‘personal service corporation’’ means a corporation the principal activity of which is the performance of personal services and such services are substantially performed by employee-owners. (2) Employee-owner The term ‘‘employee-owner’’ means any em- ployee who owns, on any day during the tax- able year, more than 10 percent of the out- standing stock of the personal service corpora- tion. For purposes of the preceding sentence, section 318 shall apply, except that ‘‘5 per- cent’’ shall be substituted for ‘‘50 percent’’ in section 318(a)(2)(C). (3) Related persons All related persons (within the meaning of section 144(a)(3)) shall be treated as 1 entity. (Added Pub. L. 97–248, title II, § 250(a), Sept. 3, 1982, 96 Stat. 528; amended Pub. L. 99–514, title XIII, § 1301(j)(4), Oct. 22, 1986, 100 Stat. 2657.) Editorial Notes AMENDMENTS 1986—Subsec. (b)(3). Pub. L. 99–514 substituted ‘‘sec- tion 144(a)(3)’’ for ‘‘section 103(b)(6)(C)’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99–514 applicable to bonds issued after Aug. 15, 1986, except as otherwise provided, see sections 1311 to 1318 of Pub. L. 99–514, set out as an Effective Date; Transitional Rules note under section 141 of this title.