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TITLE 26-INTERNAL REVENUE CODE (c), then the provisions of this paragraph only shall apply. (2) Sales of stock or securities If the property received on an exchange which is within any of the provisions of para- graph (1) consists in whole or in part of stock or securities issued by the corporation from which such property was received, and if in obedience to an order of the Securities and Exchange Commission such stock or securi- ties (other than stock which is not preferred as to both dividends and assets) are sold and the proceeds derived therefrom are applied in whole or in part in the retirement or cancella- tion of stock or of securities of the recipient corporation outstanding at the time of such exchange, no gain or loss shall be recognized to the recipient corporation on the sale of the stock or securities with respect to which such order was made; except that if any part of the proceeds derived from the sale of such stock or securities is not so applied, or if the amount of such proceeds is in excess of the fair market value of such stock or securities at the time of such exchange, the gain, if any, shall be recognized, but in an amount not in excess of the proceeds which are not so ap- plied, or in an amount not more than the amount by which the proceeds derived from such sale exceed such fair market value, whichever is the greater. (e) Exchanges not solely in kind (I) General rule If an exchange (not within any of the provi- sions of subsection (d)) would be within the provisions of subsection (a) if it were not for the fact that property received in exchange consists not only of property permitted by such subsection to be received without the recogrdtion of gain or loss, 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, and the loss, if any, to the re- cipient shall not be recognized. (2) Distribution treated as dividend If an exchange is within the provisions of paragraph (1) and if it includes a distribution which has the effect of the distribution of a taxable dividend, then there shall be taxed as a dividend to each distributee such an amount of the gain recognized under such paragraph as is not in excess of his ratable share of the undistributed earnings and prof- its of the corporation accumulated after Feb- ruary 28, 1913. The remainder, if any, of the gain recognized under paragraph (1) shall be taxed as a gain from the exchange of proper- ty. (f) Conditions for application of sect ,dn The provisions of this section shall not apply to an exchange, expenditure, investment, distri- bution, or sale unless- (1) the order of the Securities and Ex- change Commission in obedience to which such exchange, expenditure, investment, dis- tribution, or sale was made recites that such exchange, expenditure, investment, distribu- tion, or sale is necessary or appropriate to ef- fectuate the provisions of section 11(b) of the Public Utility Holding Company Act of 1935 (15 U.S.C. 79k(b)), (2) such order specifies and itemizes the stock and securities and other property which are ordered to be acquired, transferred, re- ceived, or sold on such exchange, acquisition, expenditure, distribution, or sale, and, in the case of an investment, the investment to be made, and (3) such exchange, acquisition, expenditure, investment, distribution, or sale was made in obedience to such order, and was completed within the time prescribed therefor. (g) Nonapplicatlon of other provisions If an exchange or distribution made in obedi- ence to an order of the Securities and Ex- change Commission, is within any of the provi- sions of this part and may also be considered to be within any of the other provisions of this subehapter or subchapter C (see. 301 and fol- lowing, relating to corporate distributions and adjustments), then the provisions of this part only shall apply. (Aug. 16, 1954, ch. 736, 68A Stat. 312; Oct. 4, 1976, Pub. L. 94-455, title XIX, §§ 1901(a)(132), 1906(b)(13)(A), 90 Stat. 1786, 1834.) AMENDMENTS 1976-Subsecs. (b)(2), (4). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. (c). Pub. L. 94-455, § 1901(a)(132)(A), among other changes, struck out the special rule relating to the non-recognition of gain where a shareholder Is given distribution rights to acquire common stock in a second corporation without the surrender of stock in the first corporation. Subsec. (f). Pub. L. 94-455, § 1901(a)(132)(B), substi- tuted "The provisions" for "Except in the case of a distribution described in subsection (c)(2), the provi- sions" and struck out "49 Stat. 820;" before "15 U.S.C. 79k(b)". Subsec. (g). Pub. L. 94-455, § 1901(a)(132)(C), substi- tuted "If an" for "If a distribution described in subsec- tion (c)(2), or an ". E cTivE DATE OF 1976 AMENDMENT Amendment of subsecs. (c), (f), and (g) by section 1901(a)(132) of Pub. L. 94-455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as an Effective Date of 1976 Amendment note under section 2 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 1082, 1223, 1245, 1250 of this title. § 1082. Basis for determining gain or loss (a) Exchanges generally (1) Exchanges subject to the provisions of section 1081(a) or (e) If the property was acquired on an ex- change subject to the provisions of section 1081(a) or (e), or the corresponding provisions of prior internal revenue laws, the basis shall be the same as in the case of the property ex. changed, decreased in the amount of any money received by the taxpayer, and in- creased in the amount of gain or decreased in the amount of loss to the taxpayer that was recognized on such exchange under the law applicable to the year in which the exchange § 1082 Page 660