Page 260

TITLE 26-INTERNAL REVENUE CODE (2) For the basis of stock, securities, or property re- ceived in an exchange to which this section applies, see sections 358 and 362. (3) For special rule in the case of an exchange de- scribed in this section but which results in a gift, see sec- tion 2501 and following. (4) For special rule in the case of an exchange de- scribed 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). (Aug. 16, 1954, ch. 736, 68A Stat. 111; Nov. 13, 1966, Pub. L. 89-809, title II, § 203(a), (b), 80 Stat. 1577; Oct. 4, 1976, Pub. L. 94-455, title XIX, § 1901(a)(48)(A), (B), 90 Stat. 1772.) AMENDMENTS 1976-Subsec. (a). Pub. L. 94-455, § 1901(a)(48)(A), struck out "(including, in the case of transfers made on or before June 30, 1967, an investment company)" following "property is transferred to a corporation". Subsec. (d). Pub. L. 94-455, § 1901(a)(48)(B), among other changes, substituted in subsec. catchhne "Ex- ception" for "Application of June 30, 1967, date" and in text provision that this section does not apply to a transfer of property to an investment company for provisions relating to treatment of a transfer of prop. erty to an investment company as made on or before June 30, 1967. 1966-Subsec. (a). Pub. L. 89-809, § 203(a), inserted "(including, in the case of transfers made on or before June 30, 1967, an investment company)" following "if property is transferred to a corporation". Subsec. (d). Pub. L. 89-809, § 203(b), added subsec. (d) and redesignated former subsec. (d as (e). Subsec. (e). Pub. L. 89-809, § 203(b), redesignated former subsec. (d) as (e). EFncTvE DATE OF 1976 AMENDMENT Section 1901(a)(48)(C) of Pub. L. 94-455 provided that: "The amendments made by this paragraph [amending subsecs. (a) and (d) of this section] shall take effect with respect to transfers of property occur- ring after the date of the enactment of this Act (Oct. 4, 1976]." EyncTIvE DATE OF 1966 AMENDMENT Section 203(c) of Pub. L. 89-809 provided that: "The amendments made by subsections (a) and (b) lamend- ing subsec. (a) of this section, redesignating subsec. (d) as (e), and adding subsec. (d)] shall apply with respect to transfers of property to investment companies whether made before, on, or after the date of the en- actment of this Act [Nov. 13, 1966]." CRoss REFERENCES Assumption of liability, see section 357 of this title. Basis of property received in liquidations purchase defined, see section 334 of this title. Basis to corporations, see section 362 of this title. Basis to distributees, see section 358 of this title. Foreign corporations, see section 367 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 48, 49, 311, 334, 341, 357, 358, 362, 367, 382, 613A, 683, 721, 995, 1245, 1250, 1251 of this title. SUBPART B-EFFECTS ON SHAREHOLDERS AND SECURITY HOLDERS Sec. 354. Exchanges of stock and securities in certain reor- ganizations. 355. Distribution of stock and securities of a con- trolled corporation. 356. Rdceipt of additional consideration. 357. Assumption of liability. 358. Basis to distributees. § 354. Exchanges of stock and securities in certain re- organizations (a) General rule (1) In general No gain or loss shall be recognized if stock or securities In a corporation a party to a re- organization are, in pursuance of the plan of reorganization, exchanged solely for stock or securities in such corporation or in another corporation a party to the reorganization. (2) Limitation Paragraph (1) shall not apply if- (A) the principal amount of any such se- curities received exceeds the principal amount of any such securities surrendered, or (B) any such securities are received and no such securities are surrendered. (3) Cross reference For treatment of the exchange if any property is re- ceived which is not permitted to be received under this subsection (including an excess principal amount of se. curitles received over securtles surrendered), see sec. tion 356. (b) Exception (1) In general Subsection (a) shall not apply to an ex- change in pursuance of a plan of reorganiza- tion within the meaning of section 368(a)(1)(D), unless- (A) the corporation to which the assets are transferred acquires substantially all of the assets of the transferor of such assets; and (B) the stock, securities, and other proper- ties received by such transferor, as well as the other properties of such transferor, are distributed in pursuance of the plan of reor- ganization. (2) Cross reference For special rules for certain exchanges in pursuance of plans of reorganization within the meaning of sec. tion 368(a)(1)(D), see section 355. (e) Certain railroad reorganizations Notwithstanding any other provision of this subehapter, subsection (a)(1) (and so much of section 356 as relates to this section) shall apply with respect to a plan of reorganization (whether or not a reorganization within the meaning of section 368(a)) for a railroad ap- proved by the Interstate Commerce Commis- sion under section 77 of the Bankruptcy Act, or under section 20b of the Interstate Commerce Act, as being in the public interest. (d) Exchanges under the final system plan for Con- Rail No gain or loss shall be recognized if stock or securities in a corporation are, in pursuance of an exchange to which paragraph (1) or (2) of section 374(c) applies, exchanged solely for stock of the Consolidated Rail Corporation, se- curities of such Corporation, certificates of value of the United States Railway Association, or any combination thereof. (Aug. 16, 1954, ch. 736, 68A Stat. 112; Mar. 31, 1976, Pub. L. 94-253, § 1(c), 90 Stat. 296.) AMENDMENTS 1976-Subsec. (d). Pub. L. 94-253 added subsec. (d). § 354 Page 260