301-302 Flashcards
301(a)
(a) In general
Except as otherwise provided in this chapter, a distribution of property (as defined in section 317(a)) made by a corporation to a shareholder with respect to its stock shall be treated in the manner provided in subsection (c).
301(b)
Amount distributed
(1) General rule
the amount of any distribution shall be the amount of money received, plus the fair market value of the other property received.
(2) Reduction for liabilities
shall be reduced (but not below zero) by—
(A) the amount of any liability of the corporation assumed by the shareholder in connection with the distribution, and
(B) the amount of any liability to which the property received by the shareholder is subject immediately before, and immediately after, the distribution.
(3) Determination of fair market value
For purposes of this section, fair market value shall be determined as of the date of the distribution.
301(c)
(c) Amount taxable
(1) Amount constituting dividend
That portion of the distribution which is a dividend (as defined in section 316) shall be included in gross income.
(2) Amount applied against basis
That portion of the distribution which is not a dividend shall be applied against and reduce the adjusted basis of the stock.
(3) Amount in excess of basis
(A) In general
Except as provided in subparagraph (B), that portion of the distribution which is not a dividend, to the extent that it exceeds the adjusted basis of the stock, shall be treated as gain from the sale or exchange of property.
301(d)
(d) Basis
The basis of property received in a distribution to which subsection (a) applies shall be the fair market value of such property.
301(e)
(e) Special rule for certain distributions received by 20 percent corporate shareholder
Section 301(e) provides that, solely for purpose of determining the taxable income of any 20% corporate shareholder, §312 (except for subsections (k) and (n)), is applied with respect to the distributing corporation. The application of this section results in a reduction of the distributing corporation’s E&P, which has the effect of reducing the dividend reported by some corporate shareholders, triggering §301(c)(2) (basis reduction in the distributing corporation’s stock) and §301(c)(3) (gain recognition).
https://www.thefreelibrary.com/Sec.+301(e)+-+some+unusual+consequences.-a063366842
301 Decision tree
- What’s the amount - distribution + FMV of property - liabilities (corp and prop)
- If EP —> dividend, then ROB, then gain on sale or exchange
- If 20% corp reduce EP
Subchapter C Part I Subpart A
Sub C - Corporate Distributions & Adjustments Sections 301- 385
Part I - Distributions by Corporations 301-318
Subpart A - Effects on Recipients 301-307
302(a)
(a) General rule
If a corporation redeems its stock (within the meaning of section 317(b)), and if paragraph (1), (2), (3), (4), or (5) of subsection (b) applies, such redemption shall be treated as a distribution in part or full payment in exchange for the stock.
302(b) title
(b) Redemptions treated as exchanges
302(b)(1)
(1) Redemptions not equivalent to dividends
Subsection (a) shall apply if the redemption is not essentially equivalent to a dividend.
302(b)(2) - (A) - (D)
(2) Substantially disproportionate redemption of stock
(A) In general - (a) applies if substantially disproportionate
(B) Limitation - does not apply unless SH immediately after redemption owns less than 50% off all classes of stock entitled to vote
(C) Definitions - substantially disproportionate if
(i) immediately after redemption, ratio of SH voting stock to corp voting stock is less than 80% of (ii) same ratio before redemption. Well not apply unless common stock (voting or non voting) meets the 80% requirement.
(D) Series of redemptions - will not apply to plan with purpose of redemption in aggregate not substantially disproportionate
302(b)(3)
(3) Termination of shareholder’s interest
Subsection (a) shall apply if the redemption is in complete redemption of all of the stock of the corporation owned by the shareholder.
302(b)(4)
(4) Redemption from noncorporate shareholder in partial liquidation
Subsection (a) shall apply to a distribution if such distribution is—
(A) in redemption of stock held by a shareholder who is not a corporation, and
(B) in partial liquidation of the distributing corporation.
302(b)(5)
(5) Redemptions by certain regulated investment companies
Except to the extent provided in regulations prescribed by the Secretary, subsection (a) shall apply to any distribution in redemption of stock of a publicly offered regulated investment company (within the meaning of section 67(c)(2)(B)) if—
(A) such redemption is upon the demand of the stockholder, and
(B) such company issues only stock which is redeemable upon the demand of the stockholder.
301 Roadmap
(a) in general
(b) amount distributed
(c) amount taxable
(d) basis
(e) special rule for certain distributions received by 20% corporate shareholders
(f) special rules
