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TITLE 26-INTERNAL REVENUE CODE on the distribution of property in partial or complete liquidation. (Aug. 16, 1954, ch. 736, 68A Stat. 106.) SECTION REFEURRD TO IN OTHER SECTIONS This section is referred to in section 995 of this title. § 337. Gain or loss on sales or exchanges in connec- tion with certain liquidations (a) General rule If, within the 12-month period beginning on the date on which a corporation adopts a plan of complete liquidation, all of the assets of the corporation are distributed in complete liquida- tion, less assets retained to meet claims, then no gain or loss shall be recognized to such cor- poration from the sale or exchange by It of property within such 12-month period. (b) Property defined (1) In general For purposes of subsection (a), the term "property" does not include- (A) stock in trade of the corporation, or other property of a kind which would prop- erly be included in the inventory of the cor- poration if on hand at the close of the tax- able year, and property held by the corpo- ration primarily for sale to customers in the ordinary course of Its trade or business, (B) installment obligations acquired in re- spect of the sale or exchange (without regard to whether such sale or exchange oc- curred before, on, or after the date of the adoption of the plan referred to in subsec- tion (a)) of stock in trade or other property described in subparagraph (A) of this para- graph, and (C) installment obligations acquired in re- spect of property (other than property de- scribed in subparagraph (A)) sold or ex- changed before the date of the adoption of such plan of liquidation. (2) Nonrecognition with respect to inventory in cer- tain cases Notwithstanding paragraph (1) of this sub- section, if substantially all of the property de- scribed in subparagraph (A) of such para- graph (1) which is attributable to a trade or business of the corporation is, in accordance with this section, sold or exchanged to one person in one transaction, then for purposes of subsection (a) the term "property" in- cludes- (A) such property so sold or exchanged, and (B) installment obligations acquired in re- spect of such sale or exchange. (c) Limitations (1) Collapsible corporations and liquidations to which section 333 applies This section shall not apply to any sale or exchange- (A) made by a collapsible corporation (as defined in section 341(b)), or (B) following the adoption of a plan of complete liquidation, if section 333 applies with respect to such liquidation. (2) Liquidations to which section 332 applies In the case of a sale or exchango following the adoption of a plan of complete liquida- tion, if section 332 applies with respect to such liquidation, then- (A) if the basis of the property of the li- quidating corporation in the hands of the distributee is determined under section 334(b)(1), this section shall not apply; or (B) if the basis of the property of the li- quidating corporation in the hands of the distributee is determined under section 334(b)(2), this section shall apply only to that portion (if any) of the gain which is not greater than the excess of (I) that por- tion of the adjusted basis (adjusted for any adjustment required under the second sen- tence of section 334(b)(2)) of the stock of the liquidating corporation which is alloca- ble, under regulations prescribed by the Secretary, to the property sold or ex- changed, over (ii) the adjusted basis, in the hands of the liquidating corporation, of the property sold or exchanged. This paragraph shall not apply to a sale or exchange by a member of an affiliated group of corporations, as defined in section 1504(a) (but without regard to the exceptions con- tained in section 1504(b)), if each member of such group (including the common parent corporation) which receives, within the 12- month period beginning on the date of the adoption of a plan of complete liquidation by the corporation which made the sale or ex- change, a distribution in complete liquidation from any other member of such group is itself completely liquidated within such 12-month period. (d) Special rule for certain minority shareholders If a corporation adopts a plan of complete liq- uidation, and if subsection (a) does not apply to sales or exchanges of property by such corpora- tion, solely by reason of the application of sub- section (c)(2)(A), then for the first taxable year of any shareholder (other than a corporation which meets the 80 percent stock ownership re- quirement specified in section 322(b)(1)) in which he receives a distribution in complete liq- uidation- (1) the amount realized by such share- holder on the distribution shall be increased by his proportionate share of the amount by which the tax imposed by this subtitle on such corporation would have been reduced if subsection (c)(2)(A) had not been applicable, and (2) for purposes of this title, such share- holder shall be deemed to have paid, on the last day prescribed by law for the payment of the tax imposed by this subtitle on such shareholder for such taxable year, an amount of tax equal to the amount of the increase de- scribed in paragraph (1). (Aug. 16, 1954, ch. 736, 68A Stat. 106; Sept. 2, 1958, Pub. L. 85-866, title I, § 19, 72 Stat. 1615; Oct. 4, 1976, Pub. L. 94-455, title XIX, §§ 1901(a)(46), 1906(b)(13)(A), title XXI, § 2118(a), 90 Stat. 1772, 1834, 1912.) AMENDMENTS 1976-Subsec. (a). Pub. L. 94-455, § 1901(a)(46)(A), among other changes, struck out provisions limiting the general rule to corporations adopting a plan of complete liquidation on or after June 22, 1954. Page 252 § 337