Page 266

TITLE 26-INTERNAL REVENUE CODE Contributions to capital of corporation, see section 118 of this title. Exchange of stock for property, nonrecognition of gain or loss, see section 1032 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 118, 351, 617 of this title. [§ 363. Repealed Pub. L. 94-455, title XIX, § 1901(a)(49), Oct. 4, 1976, 90 Stat. 17731 Section, act Aug. 16, 1954, ch. 736, 68A Stat. 119, re- lated to a cross reference for rules relating to the effect on earnings and profits of transactions to which this part applies. EFFECTIVE DATE OF R1PEAL 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-SPECIAL RULE; DEFINITIONS Sec. 367. Foreign corporations. 368. Definitions relating to corporate reorganizations. § 367. Foreign corporations (a) Transfers of property from the United States (1) General rule If, in connection with any exchange de- scribed in section 332, 351, 354, 355, 356, or 361, there is a transfer of property (other than stock or securities of a foreign corpora- tion which is a party to the exchange or a party to the reorganization) by a United States person to a foreign corporation, for purposes of determining the extent to which gain shall be recognized on such transfer, a foreign corporation shall not be considered to be a corporation unless, pursuant to a request filed not later than the close of the 183d day after the beginning of such transfer (and filed in such form and manner as may be pre- scribed by regulations by the Secretary), it is established to the satisfaction of the Secre- tary that such exchange is not in pursuance of a plan having as one of its principal pur- poses the avoidance of Federal income taxes. (2) Exception for transactions designated by the Secretary Paragraph (1) shall not apply to any ex- change (otherwise within paragraph (1)), or to any type of property, which the Secretary by regulations designates as not requiring the filing of a request. (b) Other transfers (I) Effect of section to be determined under regula. tions In the case of any exchange described in section 332, 351, 354, 355, 356, or 361 in con- nection with which there is no transfer of property described in subsection (a)(1), a for- eign corporation shall be considered to be a corporation except to the extent provided in regulations prescribed by the Secretary which are necessary or appropriate to prevent the avoidance of Federal income taxes. (2) Regulations relating to sale or exchange of stock in foreign corporations The regulations prescribed pursuant to paragraph (1) shall include (but shall not be limited to) regulations dealing with the sale or exchange of stock or securities in a foreign corporation by a United States person, includ- ing regulations providing- (A) the circumstances under which- (i) gain shall be recognized currently, or amounts included in gross income current- ly as a dividend, or both, or (it) gain or other amounts may be de- ferred for inclusion in the gross income of a shareholder (or his successor in inter- est) at a later date, and (B) the extent to which adjustments shall be made to earnings and profits, basis of stock or securities, and basis of assets. (c) Transactions to be treated as exchanges (1) Section 355 distribution For purposes of this section, any distribu- tion described in section 355 (or so much of section 35G as relates to section 355) shall be treated as an exchange whether or not it is an exchange. (2) Contribution of capital to controlled corpora- tions For purposes of this chapter, any transfer of property to a foreign corporation as a con- tribution to the capital of such corporation by one or more persons who, immediately after the transfer, own (within the meaning of section 318) stock possessing at least 80 percent of the total combined votlng power of all classes of stock of such corporation enti- tled to vote shall be treated as an exchange of such property for stock of the foreign corpo- ration equal in value to the fair market value of the property transferred. (d) Transitional rule In the case of any exchange beginning before January 1, 1978- (1) subsection (a) shall be applied without regard to whether or not there is a transfer of property described in subsection (a)(1), and (2) subsection (b) shall not apply. (Aug. 16, 1954, ch. 736, 68A Stat. 119; Jan. 12, 1971, Pub. L. 91-681, § l(a), 84 Stat. 2065; Oct. 4, 1976, Pub. L. 94-455, title X, § 1042(a), 90 Stat. 1634.) AMErDMENTS 1976-Pub. L. 94-455, among other changes, added provisions permitting nonrecognition of gain if a re- quest for a ruling that tax avoidance is not present is filed within 183 days after beginning of an exchange, relating to an organization, reorganization, and liqui- dation of a foreign corporation, in the case of out- bound transfers, however, for all other transfers, regu- lations are to provide the extent that earnings are to be taken into account as dividends and provisions re- lating to Tax Court review of the tax avoidance rul- ings. 1971-Subsec. (a). Pub. L. 91-681 designated existing provisions as subsec. (a), and, as so designated, added provisions relating to instances of an exchange, de- scribed in subsection (b). Provisions relating to distri- butions described in section 355 (or so much of section 356 as relates to section 355) were stricken and were transferred to subsec. (c). Subsec. (W). Pub. L. 91-681 added subsec. (b). Subsec. (c). Pub. L. 91-681 designated as subsec. (c) provisions relating to distribution described in section 355 (or so much of section 356 as relates to section 355). Page 266