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TITLE 26-INTERNAL REVENUE CODE [§ 342. Repealed. Pub. L. 94-455, title XIX, § 1901(a)(47), Oct. 4, 1976, 90 Stat. 1772] Section, act Aug. 16, 1954, ch. 736, 68A Stat. 110, re- lated to the liquidation of certain foreign personal holding companies. EFFECTIVE DATE OF REPEAL Repeal of section effective for taxable years begin- ning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as an Effective Date of 1976 Amend- ment note under section 2 of this title. SUBPART D-DEFINITION Sec. 346. Partial liquidation defined. § 346. Partial liquidation defined (a) In general For purposes of this subchapter, a distribu- tion shall be treated as in partial liquidation of a corporation if- (1) the distribution is one of a series of dis- tributions in redemption of all of the stock of the corporation pursuant to a plan; or (2) the distribution is not essentially equiv- alent to a dividend, is in redemption of a part of the stock of the corporation pursuant to a plan, and occurs within the taxable year in which the plan is adopted or within the suc- ceeding taxable year, including (but not limit- ed to) a distribution which meets the require- ments of subsection (b). For purposes of section 562(b) (relating to the dividends paid deduction) and section 6043 (re- lating to information returns), a partial liquida- tion includes a redemption of stock to which section 302 applies. (b) Termination of a business A distribution shall be treated as a distribu- tion described in subsection (a)(2) if the re- quirements of paragraphs (1) and (2) of this subsection are met. (1) The distribution is attributable to the corporation's ceasing to conduct, or consists of the assets of, a trade or business which has been actively conducted throughout the 5- year period immediately before the distribu- tion, which trade or business was not acquired by the corporation within such period in a transaction in which gain or loss was recog- nized In whole or in part. (2) Immediately after the distribution the liquidating corporation is actively engaged in the conduct of a trade or business, which trade or business was actively conducted throughout the 5-year period ending on the date of the distribution and was not acquired by the corporation within such period in a transaction in which gain or loss was recog- nied in whole or in part. Whether or not a distribution meets the re- quirements of paragraphs (1) and (2) of this subsection shall be determined without regard to whether or not the distribution is pro rata with respect to all of the shareholders of the corporation. (c) Treatment of certain redemptions The fact that, with respect to a shareholder, a distribution qualifies under section 302(a) (re- lating to redemptions treated as distributions in part or full payment in exchange for stock) by reason of section 302(b) shall not be taken into account in determining whether the distribu- tion, with respect to such shareholder, is also a distribution in partial liquidation of the corpo- ration. (Aug. 16, 1954, ch. 736, 68A Stat. 110.) CROSS REFERENCES Corporations, gain or loss on sales or exchanges in connection with liquidations, see section 337 of this title. Dividend defined, see section 316 of this title. Effect on earnings and profits of certain distribu- tions in partial liquidation, see section 312 of this title. Gain or loss to shareholders in corporate liquida- tions, partial liquidations, see section 331 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 331 of this title. PART III--CORPORATE ORGANIZATIONS AND REORGANIZATIONS Subpart A. Corporate organizations. B. Effects on shareholders and security holders. C. Effects on corporations.' D. Special rule; definitions. SUBPART A-CORPORATE ORGANIZATIONS Sec. 351. Transfer to corporation controlled by transferor. § 351. Transfer to corporation controlled by transfer (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 or securi- ties in such corporation and immediately after the exchange such person or persons are in con- trol (as defined in section 368(c)) of the corpo- ration. For purposes of this section, stock or se- curities issued for services shall not be consid- ered as issued in return for property. (b) Receipt of property If subsection (a) would apply to an exchange but for the fact that there is received, in addi- tion to the stock or securities permitted to be received under subsection (a), other property or money, then- (1) gain (if any) to such recipient shall be recognized, but not in excess of- (A) the amount of money received, plus (B) the fair market value of such other property received; and (2) no loss to such recipient shall be recog- nized. () Special rule In determining control, for purposes of this section, the fact that any corporate transferor distributes part or all of the stock which it re- ceives in the exchange to its shareholders shall not be taken into account. (d) Exception This section shall not apply to a transfer of property to an investment company. (e) Cross references (1) For special rule where another party to the ex- change assumes a liability, or acquires property subject to a liability, see section 357. 'So in original. Does not conform to subpart head- ing. Page 259