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TITLE 26-INTERNAL REVENUE CODE ceived, the term "other property" means only the fair market value of such excess. (e) Exchanges for section 306 stock Notwithstanding any other provision of this section, to the extent that any of the other property (or money) is received in exchange for section 306 stock, an amcunt equal to the fair market value of such other property (or the amount of such money) shall be treated as a distribution of property to which section 301 applies. (f) Transactions involving gift or compensation For special rules for a transaction described in section 354, 355, or this section, but which- (1) results in a gift, see section 2501 and following, or (2) has the effect of the payment of compensation, see section 61(a)(1). (Aug. 16, 1954, ch. 736, 68A Stat. 115; Mar. 31, 1976, Pub. L. 94-253, § l(c), 90 Stat. 296.) AMENDMENTS 1976-Subsec. (d)(2)(E)(i). Pub. L. 94-253 substituted "subsection (c) or (d) thereof" for "subsection (c) thereof". EFFECTIVE DATE OF 1976 AMENDMENT Amendment by Pub. L. 94-253 applicable to taxable years ending after Mar. 31, 1976, see section 2 of Pub. L. 94-253, set out as an Effective Date of 1376 Amend- mcuit note under section 374 of this title. CRoss REFERENCES Basis to distributees, see section 358 of this title. Capital gains and losses, distributions under this sec- tion relating to section 355 to be treated as exchanges, see section 1223 of this title. Definitions relating to corporate reorganizations, see section 368 of this title. Effect on earnings and profits, allocation in corpo- rate separations, see section 312 of this title. Foreign corporations, see section 367 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 83, 306, 312, 354, 355. 358. 367, 368, 425, 1223, 6166, 6166A of this title. § 357. Assumption of liability (a) General rule Except as provided in subsections (b) and (c), if- (1) the taxpayer receives property which would be permitted to be received under sec- tion 351, 361, 371, or 374 without the recogni- tion of gain if it were the sole consideration, and (2) as part of the consideration, another party to the exchange assumes a liability of the taxpayer, or acquires from the taxpayer property subject to a liability, then such assumption or acquistion shall not be treated as money or other property, and shall not prevent the exchange from being within the provisions of section 351, 361, 371, or 374, as the case may be. (b) Tax avoidance purpose (1) In general If, taking into consideration the nature of the liability and the circumstances in the light of which the arrangement for the as- sumption or acquisition was made, it appears that the principal purpose of the taxpayer with respect to the assumption or acquisition described in subsection (a)- (A) was a purpose to avoid Federal income tax on the exchange, or (B) if not such purpose, was not a bona fide business purpose, then such assumption or acquisition (in the total amount of the liability assumed or ac- quired pursuant to such exchange) shall, for purposes of section 351, 361, 371, or 374 (as the case may be), be considered as money re- ceived by the taxpayer on the exchange. (2) Burden of proof In any suit or proceeding where the burden is on the taxpayer to prove such assumption or acquisition is not to be treated as money received by the taxpayer, such burden shall not be considered as sustained unless the tax- payer sustaims such burden by the clear pre- ponderance of the evidence. (c) Liabilities in excess of basis (1) In general In the case of an exchange- (A) to which section 351 applies, or (B) to which section 361 applies by reason of a plan of reorganization within the meaning of section 368(a)(1)(D), if the sum of the amount of the liabilities as- sumed, plus the amount of the liabilities to which the property is subject, exceeds the total of the adjusted basis of the property transferred pursuant to such exchange, then such excess shall be considered as a gain from the sale or exchange of a capital asset or of property which is not a capital asset, as the case may be. (2) Exceptions Paragraph (1) shall not apply to any ex- change to which- (A) subsection (b)(1) of this section ap- plies, or (B) section 371 or 374 applies. (Aug. 16, 1954, ch. 736, 68A Stat. 116; June 29, 1956, ch. 463, § 2, 70 Stat. 403.) AMENDMENTS 1956-Subsec. (a). Act June 29, 1956, § 2(1), substitut- ed "371, or 374" for "or 371", in two instances. Subsec. (b). Act June 29, 1956, § 2(1), substituted "371, or 374" for "or 371". Subsec. (c)(2)(B). Act June 29, 1956, § 2(2), substitut- ed "371 or 374" for "371". SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 371 of this title. § 358. Basis to distributees (a) General rule In the case of an exchange to which section 351, 354, 355, 356, 361, 371(b), or 374 applies- (1) Nonrecognition property The basis of the property permitted to be received under such section without the rec- ognition of gain or loss shall be the same as that of the property exchanged- (A) decreased by- (I) the fair market value of any other property (except money) received by the taxpayer, Page 263