Page 285

TITLE 26-INTERNAL REVENUE CODE PART VI-TREATMENT OF CERTAIN COR- PORATE INTERESTS AS STOCK OR IN- DEBTEDNESS Sec. 385. Treatment of certain interests in corporations as stock or indebtedness. AMENDMENTS 1969-Pub. L. 91-172, title IV, §415(a), Dec. 30, 1969, 83 Stat. 613, added Part heading and analysis of sec- tions. § 385. Treatment of certain interests in corporations as stock or indebtedness (a) Authority to prescribe regulations The Secretary is authorized to prescribe sucl regulations as may be necessary or appropriate to determine whether an interest in a corpora- tion is to be treated for purposes of this title as stock or indebtedness. (b) Factors The regulations prescribed under this section shall set forth factors which are to be taken into account in determining with respect to a particular factual situation whether a debtor- creditor relationship exists or a corporation- shareholder relationship exists. The factors so set forth in the regulations may include among other factors: (1) whether there is a written unconditional promise to pay on demand or on a specified date a sum certain In money in return for an adequate consideration in money or money's worth, and to pay a fixed rate of interest, (2) whether there is subordination to or preference over any indebtedness of the cor- poration, (3) the ratio of debt to equity of the corpo- ration, (4) whether there is convertibility into the stock of the corporation, and (5) the relationship between holdings of stock in the corporation and holdings of the interest in question. (Added Pub. L. 91-172, title IV, § 415(a), Dec. 30, 1969, 83 Stat. 613, and amended; Pub. L. 94- 455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.) AMENDMENTS 1976-Subsec. (a). Pub. L. 94-455 struck out "or his delegate" following "Secretary". [§§ 391-395. Repealed. Pub. L. 94-455, title XIX, § 1901(a)(55), Oct. 4, 1976, 90 Stat. 17731 Section 391, acts Aug. 16, 1954, ch. 736, 68A Stat. 131; Sept. 2, 19518, Pub, L. 88-866, title I, § 22(a), 72 Stat. 1620, related to the effective date of section 301 et seq. of this title. Section 392, act Aug. 16, 1954, ch. 736, 68A Stat. 131, related to the effective date of section 331 et seq. of this title. Section 393, act Aug. 16, 1954, ch. 736, 68A Stat. 132, related to the effective date of section 351 et seq. of this title. Section 394, act Aug. 16, 1954, ch. 736, 68A Stat. 133, related to the effective date of section 381 et seq. of this title. Section 395, act Aug. 16, 1954, ch. 736, 68A Stat. 133, related to special rules for application of this sub- chapter. EFFECTIVE DATE OF REPEAL Repeal of sections 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. Subchapter D-Deferred Compensation, Etc. Part 1. Pension, profit-sharing, stock bonus plans, etc. II. Certain stock options. AMENDMENTS 1964-Pub. L. 88-272, title II, §221(d)(1), Feb. 26, 1964, 78 Stat. 75, substituted "Certain stock options" for "Miscellaneous provisions" in the heading to Part II. SUBCHAPTER REFERRED TO IN OTHER SECTIONS This subchapter is referred to in sections 6103, 7476, 7802 of this title. PART I-PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC. Subpart A. General rule. B. Special rules. SUBPART A-GENERAL RULE Sec. 401. Qualified pension, profit-sharing, and stock bonus plans. 402. Taxability of beneficiary of employees' trust. 403. Taxation of employee annuities. 404. Deduction for contributions of an employer to an employees' trust or annuity plan and compensa- tion under a deferred-payment plan. 405. Qualified bond purchase plans. 406. Certain employees of foreign subsidiaries. 407. Certain employees of domestic subsidiaries en- gaged in business outside the United States. 408. Individual retirement accounts. 409. Retirement bonds. A.mENDMENTS 1974-Pub. L. 93-406, title II, § 1016(b)(1), Sept. 2, 1974, 88 Stat. 932, inserted heading "Subpart A-Gen- eral Rule" and added analysis of subparts. Pub. L. 93-406, title II, § 2002(h)(2), Sept. 2, 1974, 88 Stat. 970, added items 408 and 409. 1964-Pub. L. 88-272, title II, § 220(c)(1), Feb. 26, 1964, 78 Stat. 62, added items 406 and 407. 1962-Pub. L. 87-792, § 5(b), Oct. 10, 1962, 76 Stat. 827, added item 405. PART REFERRED TO IN OTHER SECTIONS This part is referred to in sections 1023, 6058, 7802 of this title; title 19 section 2373; title 29 sections 1084, 1201, 1202, 1321. § 401. Qualified pension, profit-sharing, and stock bonus plans (a) Requirements for qualification A trust created or organized in the United States and forming part of a stock bonus, pen- sion, or profit-sharing plan of an employer for the exclusive benefit of his employees or their beneficiaires shall constitute a qualified trust under this section- (1) If contributions are made to the trust by such employer, or employees, or both, or by another employer who is entitled to deduct his contributions under section 404(a)(3)(B) (relating to deduction for contributions to profit-sharing and stock bonus plans), for the purpose of distributing to such employees or Page 285 § 401