[Code of Federal Regulations]
[Title 26, Volume 11]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.1036-1]

[Page 138-139]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.1036-1  Stock for stock of the same corporation.

    (a) Section 1036 permits the exchange, without the recognition of 
gain or loss, of common stock for common stock, or of preferred stock 
for preferred stock, in the same corporation. Section 1036 applies even 
though voting stock is exchanged for nonvoting stock or nonvoting stock 
is exchanged for voting stock. It is not limited to an exchange between 
two individual stockholders; it includes a transaction between a 
stockholder and the corporation. However, a transaction between a 
stockholder and the corporation may qualify not only under section 
1036(a), but also under section 368(a)(1)(E) (recapitalization) or 
section 305(a) (distribution of stock and stock rights). The provisions 
of section 1036(a) do not apply if stock is exchanged for bonds,

[[Page 139]]

or preferred stock is exchanged for common stock, or common stock is 
exchanged for preferred stock, or common stock in one corporation is 
exchanged for common stock in another corporation. See paragraph (l) of 
section 1301-1 for certain transactions treated as distributions under 
section 301. See paragraph (e)(5) of Sec. 1.368-2 for certain 
transactions which result in deemed distributions under section 305(c) 
to which sections 305(b)(4) and 301 apply.
    (b) For rules relating to recognition of gain or loss where an 
exchange is not wholly in kind, see subsections (b) and (c) of section 
1031. For rules relating to the basis of property acquired in an 
exchange described in paragraph (a) of this section, see subsection (d) 
of section 1031.
    (c) A transfer is not within the provisions of section 1036(a) if as 
part of the consideration the other party to the exchange assumes a 
liability of the taxpayer (or if the property transferred is subject to 
a liability), but the transfer, if otherwise qualified, will be within 
the provisions of section 1031(b).
    (d) Nonqualified preferred stock. See Sec. 1.356-7(a) for the 
applicability of the definition of nonqualified preferred stock in 
section 351(g)(2) for stock issued prior to June 9, 1997, and for stock 
issued in transactions occurring after June 8, 1997, that are described 
in section 1014(f)(2) of the Taxpayer Relief Act of 1997, Public Law 
105-34 (111 Stat. 788, 921).

[T.D. 6500, 25 FR 11910, Nov. 26, 1960, as amended by T.D. 7281, 38 FR 
18540, July 12, 1973; T.D. 8904, 65 FR 58652, Oct. 2, 2000]