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TITLE 26-INTERNAL REVENUE CODE period ending on the date of the distribu- tion, (C) such trade or business was not ac- quired within the period described in sub. paragraph (B) in a transaction in which gain or loss was recognized in whole or in part, and (D) control of a corporation which (at the time of acquisition of control) was conduct- ing such trade or business- (I) was not acquired directly (or through one or more corporations) by another cor- poration within the period described in subparagraph (B), or (ii) was so acquired by another corpora- tion within such period, but such control was so acquired only by reason of transac. tions in which gain or loss was not recog- nized in whole or in part, or only by reason of such transactions combined with acquisitions before the beginning of such period. (Aug. 16, 1954, ch. 736, 68A Stat. 113; Oct. 4, 1976, Pub. L. 94-455, title XIX, § 1906(b)(13)(A), 90 Stat. 1834.) AMENDMENTS 1976-Subsec. (a)(1)(D)(ii). Pub. L. 94-455 struck out "or lis delegate" following "Secretary". CROSS REFERENCES Allocation of earnings and profits in distributions or exchanges to which this section applies, see section 312 of this title. Basis to distributees, see section 358 of this title. Capital gains and losses, distribution to which this section applies to be treated as an exchange, see sec- tion 1223 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 83, 306, 312, 355, 356, 358, 367, 368, 425, 815, 877, 995, 1223, 2107, 2501, 6166, 6166A of this title. § 356. Receipt of additional consideration (a) Gain on exchanges (I) Recognition of gain If- (A) section 354 or 355 would apply to an exchange but for the fact that (B) the property received in the exchange consists not only of property permitted by section 354 or 355 to be received without the recognition of gain but also of other property or money, then the gain, if any, to the recipient shall be recognized, but in an amount not in excess of the sum of such money and the fair market value of such other property. " (2) Treatment as dividend If an exchange is described in paragraph (1) but has the effect of the distribution of a dividend, then there shall be treated as a divi- dend to each distributee such an amount of the gain recognized under paragraph (1) as is not in excess of his ratable share of the undis- tributed earnings and profits of the corpora- tion accumulated after February 28, 1913. The remainder, if any, of the gain recognized under paragraph (1) shall be treated as gain from the exchange of property. (b) Additional consideration received In certain dis. tributions If- (1) section 355 would apply to a distribution but for the fact that (2) the property received in the distribution consists not only of property permitted by section 355 to be received without the recog- nition of gain, but also of other property or money, then an amount equal to the sum of such money and the fair market value of such other property shall be treated as a distribution of property to which section 301 applies. (c) Loss If- (1) section 354 would apply to an exchange or section 355 woulu apply to an exchange or distribution, but for the fact that (2) the property received in the exchange or distribution consists not only of property per- mitted by section 354 or 355 to be received without the recognition of gain or loss, but also of other property or money, then no loss from the exchange or distribution shall be recognized. (d) Securities as other property For purposes of this section- (1) In general Except as provided in paragraph (2), the term "other property" includes securities. (2) Exceptions (A) Securities with respect to which nonrecogni- tion of gain would be permitted The term "other property" does not in- clude securities to the extent that, under section 354 or 355, such securities would be permitted to be received without the recog- nition of gain. (B) Greater principal amount in section 354 ex- change If- (i) in an exchange described in section 354 (other than subsection (c) or (d) thereof), securities of a corporation a party to the reorganization are surren- dered and securities of any corporation a party to the reorganization are received, and (ii) the principal amount of such securi- ties received exceeds the principal amount of such securities surrendered, then, with respect to such securities re- ceived, the term "other property" means only the fair market value of such excess. For purposes of this subparagraph and sub- paragraph (C) if no securities are surren- dered, the excess shall be the entire princi- pal amount of the securities received. (C) Greater principal amount in section 355 transaction If, in an exchange or distribution de- scribed in section 355, the principal amount of the securities in the controlled corpora- tion which are received exceeds the princi- pal amount of the securities in the distrib- uting corporation which are surrendered, then, with respect to such securities re- § 356 Page 262