Session 2 Flashcards
§83(a) Property transferred in connection with performance of services.
General Rule
General rule.
If, in connection with the performance of services, property is transferred to any person other than the person for whom such services are performed, the excess of—
83(a)(1) the fair market value of such property (determined without regard to any restriction other than a restriction which by its terms will never lapse) at the first time the rights of the person having the beneficial interest in such property are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier, over
83(a)(2) the amount (if any) paid for such property,
shall be included in the gross income of the person who performed such services in the first taxable year in which the rights of the person having the beneficial interest in such property are transferable or are not subject to a substantial risk of forfeiture, whichever is applicable. The preceding sentence shall not apply if such person sells or otherwise disposes of such property in an arm’s length transaction before his rights in such property become transferable or not subject to a substantial risk of forfeiture.
§83(h) Deduction by Employer
In the case of a transfer of property to which this section applies or a cancellation of a restriction described in subsection (d), there shall be allowed as a deduction under section 162, to the person for whom were performed the services in connection with which such property was transferred, an amount equal to the amount included under subsection (a) , (b), or (d)(2) in the gross income of the person who performed such services. Such deduction shall be allowed for the taxable year of such person in which or with which ends the taxable year in which such amount is included in the gross income of the person who performed such services.
§317(a) Other Definitions
Property
Property.
For purposes of this part, the term “property” means money, securities, and any other property; except that such term does not include stock in the corporation making the distribution (or rights to acquire such stock).
§ 351 Transfer to corporation controlled by transferor.
(a) General rule.
No gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and immediately after the exchange such person or persons are in control (as defined in section 368(c) ) of the corporation.
351(b)Receipt of property.
If subsection (a) would apply to an exchange but for the fact that there is received, in addition to the stock permitted to be received under subsection (a) , other property or money, then—
351(b)(1) gain (if any) to such recipient shall be recognized, but not in excess of—
351(b)(1)(A) the amount of money received, plus
351(b)(1)(B) the fair market value of such other property received; and
351(b)(2) no loss to such recipient shall be recognized.
351(c)Special rules where distribution to shareholders.
351(c)(1)In general.
In determining control for purposes of this section, the fact that any corporate transferor distributes part or all of the stock in the corporation which it receives in the exchange to its shareholders shall not be taken into account.
351(c)(2)Special rule for section 355.
If the requirements of section 355 (or so much of section 356 as relates to section 355 ) are met with respect to a distribution described inparagraph (1) , then, solely for purposes of determining the tax treatment of the transfers of property to the controlled corporation by the distributing corporation, the fact that the shareholders of the distributing corporation dispose of part or all of the distributed stock, or the fact that the corporation whose stock was distributed issues additional stock, shall not be taken into account in determining control for purposes of this section.
351(d)Services, certain indebtedness, and accrued interest not treated as property.
For purposes of this section, stock issued for—
351(d)(1) services,
351(d)(2) indebtedness of the transferee corporation which is not evidenced by a security, or
351(d)(3) interest on indebtedness of the transferee corporation which accrued on or after the beginning of the transferor’s holding period for the debt,
shall not be considered as issued in return for property.
351(e) Exceptions.
This section shall not apply to—
351(e)(1) Transfer of property to an investment company.
A transfer of property to an investment company. For purposes of the preceding sentence, the determination of whether a company is an investment company shall be made—
351(e)(1)(A) by taking into account all stock and securities held by the company, and
351(e)(1)(B) by treating as stocks and securities:
351(e)(1)(B)(i) money,
351(e)(1)(B)(ii) stocks and other equity interests in a corporation, evidences of indebtedness, options, forward or futures contracts, notional principal contracts and derivatives,
351(e)(1)(B)(iii) any foreign currency,
351(e)(1)(B)(iv) any interest in a real estate investment trust, a common trust fund, a regulated investment company, a publicly-traded partnership (as defined in section 7704(b) ) or any other equity interest (other than in a corporation) which pursuant to its terms or any other arrangement is readily convertible into, or exchangeable for, any asset described in any preceding clause, this clause orclause (v) or (viii) ,
351(e)(1)(B)(v) except to the extent provided in regulations prescribed by the Secretary, any interest in a precious metal, unless such metal is used or held in the active conduct of a trade or business after the contribution,
351(e)(1)(B)(vi) except as otherwise provided in regulations prescribed by the Secretary, interests in any entity if substantially all of the assets of such entity consist (directly or indirectly) of any assets described in any preceding clause or clause (viii) ,
351(e)(1)(B)(vii) to the extent provided in regulations prescribed by the Secretary, any interest in any entity not described inclause (vi) , but only to the extent of the value of such interest that is attributable to assets listed in clauses (i) through(v) or clause (viii) , or
351(e)(1)(B)(viii) any other asset specified in regulations prescribed by the Secretary.
The Secretary may prescribe regulations that, under appropriate circumstances, treat any asset described inclauses (i) through (v) as not so listed.
351(e)(2) Title 11 or similar case.
A transfer of property of a debtor pursuant to a plan while the debtor is under the jurisdiction of a court in a title 11 or similar case (within the meaning of section 368(a)(3)(A) ), to the extent that the stock received in the exchange is used to satisfy the indebtedness of such debtor.
351(f) Treatment of controlled corporation.
If—
351(f)(1) property is transferred to a corporation (hereinafter in this subsection referred to as the “controlled corporation”) in an exchange with respect to which gain or loss is not recognized (in whole or in part) to the transferor under this section, and
351(f)(2) such exchange is not in pursuance of a plan of reorganization,
section 311 shall apply to any transfer in such exchange by the controlled corporation in the same manner as if such transfer were a distribution to which subpart A of part I applies.
351(g) Nonqualified preferred stock not treated as stock.
351(g)(1) In general.
In the case of a person who transfers property to a corporation and receives nonqualified preferred stock—
351(g)(1)(A) subsection (a) shall not apply to such transferor, and
351(g)(1)(B) if (and only if) the transferor receives stock other than nonqualified preferred stock—
351(g)(1)(B)(i) subsection (b) shall apply to such transferor; and
351(g)(1)(B)(ii) such nonqualified preferred stock shall be treated as other property for purposes of applying subsection (b) .
351(g)(2) Nonqualified preferred stock.
For purposes of paragraph (1) —
351(g)(2)(A) In general. The term “nonqualified preferred stock” means preferred stock if—
351(g)(2)(A)(i) the holder of such stock has the right to require the issuer or a related person to redeem or purchase the stock,
351(g)(2)(A)(ii) the issuer or a related person is required to redeem or purchase such stock,
351(g)(2)(A)(iii) the issuer or a related person has the right to redeem or purchase the stock and, as of the issue date, it is more likely than not that such right will be exercised, or
351(g)(2)(A)(iv) the dividend rate on such stock varies in whole or in part (directly or indirectly) with reference to interest rates, commodity prices, or other similar indices.
351(g)(2)(B) Limitations. Clauses (i) ,(ii) , and(iii) of subparagraph (A) shall apply only if the right or obligation referred to therein may be exercised within the 20-year period beginning on the issue date of such stock and such right or obligation is not subject to a contingency which, as of the issue date, makes remote the likelihood of the redemption or purchase.
351(g)(2)(C) Exceptions for certain rights or obligations.
351(g)(2)(C)(i) In general. A right or obligation shall not be treated as described in clause (i) ,(ii) , or(iii) of subparagraph (A) if—
351(g)(2)(C)(i)(I) it may be exercised only upon the death, disability, or mental incompetency of the holder, or
351(g)(2)(C)(i)(II) in the case of a right or obligation to redeem or purchase stock transferred in connection with the performance of services for the issuer or a related person (and which represents reasonable compensation), it may be exercised only upon the holder’s separation from service from the issuer or a related person.
351(g)(2)(C)(ii) Exception. Clause (i)(I) shall not apply if the stock relinquished in the exchange, or the stock acquired in the exchange is in—
351(g)(2)(C)(ii)(I) a corporation if any class of stock in such corporation or a related party is readily tradable on an established securities market or otherwise, or
351(g)(2)(C)(ii)(II) any other corporation if such exchange is part of a transaction or series of transactions in which such corporation is to become a corporation described in subclause (I) .
351(g)(3) Definitions.
For purposes of this subsection—
351(g)(3)(A) Preferred stock. The term “preferred stock” means stock which is limited and preferred as to dividends and does not participate in corporate growth to any significant extent. Stock shall not be treated as participating in corporate growth to any significant extent unless there is a real and meaningful likelihood of the shareholder actually participating in the earnings and growth of the corporation. If there is not a real and meaningful likelihood that dividends beyond any limitation or preference will actually be paid, the possibility of such payments will be disregarded in determining whether stock is limited and preferred as to dividends.
351(g)(3)(B) Related person. A person shall be treated as related to another person if they bear a relationship to such other person described in section 267(b) or 707(b) .
351(g)(4) Regulations.
The Secretary may prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection and sections 354(a)(2)(C) ,355(a)(3)(D) , and356(e) . The Secretary may also prescribe regulations, consistent with the treatment under this subsection and such sections, for the treatment of nonqualified preferred stock under other provisions of this title.
351(h) Cross references.
351(h)(1) For special rule where another party to the exchange assumes a liability, see section 357.
351(h)(2) For the basis of stock or property received in an exchange to which this section applies, see sections 358 and 362 .
351(h)(3) For special rule in the case of an exchange described in this section but which results in a gift, see section 2501 and following.
351(h)(4) For special rule in the case of an exchange described in this section but which has the effect of the payment of compensation by the corporation or by a transferor, see section 61(a)(1) .
351(h)(5) For coordination of this section with section 304 , see section 304(b)(3) .
§368 Definitions relating to corporate reorganizations.
(c) Control defined.
Control defined.
For purposes of part I (other than section 304), part II, this part, and part V, 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.
§1001 Determination of amount of and recognition of gain or loss.
1001(a) Computation of gain or loss.
The gain from the sale or other disposition of property shall be the excess of the amount realized therefrom over the adjusted basis provided in section 1011 for determining gain, and the loss shall be the excess of the adjusted basis provided in such section for determining loss over the amount realized.
1001(b) Amount realized.
The amount realized from the sale or other disposition of property shall be the sum of any money received plus the fair market value of the property (other than money) received. In determining the amount realized—
1001(b)(1) there shall not be taken into account any amount received as reimbursement for real property taxes which are treated under section 164(d) as imposed on the purchaser, and
1001(b)(2) there shall be taken into account amounts representing real property taxes which are treated under section 164(d) as imposed on the taxpayer if such taxes are to be paid by the purchaser.
1001(c) Recognition of gain or loss.
Except as otherwise provided in this subtitle, the entire amount of the gain or loss, determined under this section , on the sale or exchange of property shall be recognized.
1001(d) Installment sales.
Nothing in this section shall be construed to prevent (in the case of property sold under contract providing for payment in installments) the taxation of that portion of any installment payment representing gain or profit in the year in which such payment is received.
1001(e) Certain term interests.
1001(e)(1) In general.
In determining gain or loss from the sale or other disposition of a term interest in property, that portion of the adjusted basis of such interest which is determined pursuant to section 1014 , 1015 , or 1041 (to the extent that such adjusted basis is a portion of the entire adjusted basis of the property) shall be disregarded.
1001(e)(2) Term interest in property defined.
For purposes of paragraph (1) , the term “term interest in property” means—
1001(e)(2)(A) a life interest in property,
1001(e)(2)(B) an interest in property for a term of years, or
1001(e)(2)(C) an income interest in a trust.
1001(e)(3) Exception.
Paragraph (1) shall not apply to a sale or other disposition which is a part of a transaction in which the entire interest in property is transferred to any person or persons.
§ 1012 Basis of property—cost.
§ 1012 Basis of property—cost.
1012(a) In general.
The basis of property shall be the cost of such property, except as otherwise provided in this subchapter and subchapters C (relating to corporate distributions and adjustments), K (relating to partners and partnerships), and P (relating to capital gains and losses).
1012(b) Special rule for apportioned real estate taxes.
The cost of real property shall not include any amount in respect of real property taxes which are treated under section 164(d) as imposed on the taxpayer.
1012(c) Determinations by account.
1012(c)(1) In general.
In the case of the sale, exchange, or other disposition of a specified security on or after the applicable date, the conventions prescribed by regulations under this section shall be applied on an account by account basis.
1012(c)(2) Application to certain regulated investment companies.
1012(c)(2)(A) In general. Except as provided in subparagraph (B), any stock for which an average basis method is permissible under this section which is acquired before January 1, 2012, shall be treated as a separate account from any such stock acquired on or after such date.
1012(c)(2)(B) Election for treatment as single account. If a regulated investment company described in subparagraph (A) elects to have this subparagraph apply with respect to one or more of its stock holders—
1012(c)(2)(B)(i) subparagraph (A) shall not apply with respect to any stock in such regulated investment company held by such stockholders, and
1012(c)(2)(B)(ii) all stock in such regulated investment company which is held by such stockholders shall be treated as covered securities described in section 6045(g)(3) without regard to the date of the acquisition of such stock.
A rule similar to the rule of the preceding sentence shall apply with respect to a broker holding such stock as a nominee.
1012(c)(3) Definitions.
For purposes of this section, the terms “specified security” and “applicable date” shall have the meaning given such terms in section 6045(g).
1012(d) Average basis for stock acquired pursuant to a dividend reinvestment plan.
1012(d)(1) In general.
In the case of any stock acquired after December 31, 2011, in connection with a dividend reinvestment plan, the basis of such stock while held as part of such plan shall be determined using one of the methods which may be used for determining the basis of stock in a regulated investment company.
1012(d)(2) Treatment after transfer.
In the case of the transfer to another account of stock to which paragraph (1) applies, such stock shall have a cost basis in such other account equal to its basis in the dividend reinvestment plan immediately before such transfer (properly adjusted for any fees or other charges taken into account in connection with such transfer).
1012(d)(3) Separate accounts; election for treatment as single account.
1012(d)(3)(A) In general. Rules similar to the rules of subsection (c)(2) shall apply for purposes of this subsection .
1012(d)(3)(B) Average basis method. Notwithstanding paragraph (1) , in the case of an election under rules similar to the rules of subsection (c)(2)(B) with respect to stock held in connection with a dividend reinvestment plan, the average basis method is permissible with respect to all such stock without regard to the date of the acquisition of such stock.
§ 1031(a)(2)(B) like-kind exhanges for stocks, bonds, or notes
§ 1031 Exchange of property held for productive use or investment.
1031(a) Nonrecognition of gain or loss from exchanges solely in kind.
1031(a)(2) Exception.
This subsection shall not apply to any exchange of—
1031(a)(2)(B) stocks, bonds, or notes,
§ 1032 Exchange of stock for property
1032(a) Nonrecognition of gain or loss.
No gain or loss shall be recognized to a corporation on the receipt of money or other property 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 respect to a securities futures contract (as defined in section 1234B), to buy or sell its stock (including treasury stock).
1032(b) Basis.
For basis of property acquired by a corporation in certain exchanges for its stock, see section 362 .
61(a)(12) Income from discharge of indebtedness;
§ 61 Gross income defined.
61(a) General definition.
Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:
61(a)(12) Income from discharge of indebtedness;
108(e)(2) Income not realized to extent of lost deductions.
§ 108 Income from discharge of indebtedness
108(e) General rules for discharge of indebtedness (including discharges not in title 11 cases or insolvency).
For purposes of this title—
108(e)(2) Income not realized to extent of lost deductions.
No income shall be realized from the discharge of indebtedness to the extent that payment of the liability would have given rise to a deduction.
108(e)(6) indebtedness contributed to capital.
§ 108 Income from discharge of indebtedness
108(e) General rules for discharge of indebtedness (including discharges not in title 11 cases or insolvency).
For purposes of this title—
108(e)(6) indebtedness contributed to capital.
Except as provided in regulations, for purposes of determining income of the debtor from discharge of indebtedness, if a debtor corporation acquires its indebtedness from a shareholder as a contribution to capital—
108(e)(6)(A) section 118 shall not apply, but
108(e)(6)(B) such corporation shall be treated as having satisfied the indebtedness with an amount of money equal to the shareholder’s adjusted basis in the indebtedness.
108(e)(8) Indebtedness satisfied by corporate stock or partnership interest.
§ 108 Income from discharge of indebtedness
108(e) General rules for discharge of indebtedness (including discharges not in title 11 cases or insolvency).
For purposes of this title—
108(e)(8) Indebtedness satisfied by corporate stock or partnership interest.
For purposes of determining income of a debtor from discharge of indebtedness, if—
108(e)(8)(A) a debtor corporation transfers stock, or
108(e)(8)(B) a debtor partnership transfers a capital or profits interest in such partnership,
to a creditor in satisfaction of its recourse or nonrecourse indebtedness, such corporation or partnership shall be treated as having satisfied the indebtedness with an amount of money equal to the fair market value of the stock or interest. In the case of any partnership, any discharge of indebtedness income recognized under this paragraph shall be included in the distributive shares of taxpayers which were the partners in the partnership immediately before such discharge.
267(a)(1) Deduction for losses disallowed.
§ 267 Losses, expenses, and interest with respect to transactions between related taxpayers.
267(a) In general.
267(a)(1) Deduction for losses disallowed.
No deduction shall be allowed in respect of any loss from the sale or exchange of property, directly or indirectly, between persons specified in any of the paragraphs of subsection (b). The preceding sentence shall not apply to any loss of the distributing corporation (or the distributee) in the case of a distribution in complete liquidation.
1222(3) Long-term capital gain.
§ 1222 Other terms relating to capital gains and losses.
For purposes of this subtitle—
1222(3) Long-term capital gain.
The term “long-term capital gain” means gain from the sale or exchange of a capital asset held for more than 1 year, if and to the extent such gain is taken into account in computing gross income.
