[Code of Federal Regulations]
[Title 26, Volume 4]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.332-4]

[Page 70-71]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.332-4  Liquidations covering more than one taxable year.

    (a) If the plan of liquidation is consummated by a series of 
distributions extending over a period of more than one taxable year, the 
nonrecognition of gain or loss with respect to the distributions in 
liquidation shall, in addition to the requirements of Sec. 1.332-2, be 
subject to the following requirements:
    (1) In order for the distribution in liquidation to be brought 
within the exception provided in section 332 to the general rule for 
computing gain or loss with respect to amounts received in liquidation 
of a corporation, the entire property of the corporation shall be 
transferred in accordance with a plan of liquidation, which plan shall 
include a statement showing the period within which the transfer of the 
property of the liquidating corporation to the recipient corporation is 
to be completed. The transfer of all the property under the liquidation 
must be completed within three years from the close of the taxable year 
during which is made the first of the series of distributions under the 
plan.
    (2) For each of the taxable years which falls wholly or partly 
within the period of liquidation, the recipient corporation shall, at 
the time of filing its return, file with the district director of 
internal revenue a waiver of the statute of limitations on assessment. 
The waiver shall be executed on such form as may be prescribed by the 
Commissioner and shall extend the period of assessment of all income and 
profits taxes for each such year to a date not earlier than one year 
after the last date of the period for assessment of such taxes for the 
last taxable year in which the transfer of the property of such 
liquidating corporation to the

[[Page 71]]

controlling corporation may be completed in accordance with section 332. 
Such waiver shall also contain such other terms with respect to 
assessment as may be considered by the Commissioner to be necessary to 
insure the assessment and collection of the correct tax liability for 
each year within the period of liquidation.
    (3) For each of the taxable years which falls wholly or partly 
within the period of liquidation, the recipient corporation may be 
required to file a bond, the amount of which shall be fixed by the 
district director. The bond shall contain all terms specified by the 
Commissioner, including provisions unequivocally assuring prompt payment 
of the excess of income and profits taxes (plus penalty, if any, and 
interest) as computed by the district director without regard to the 
provisions of sections 332 and 334(b) over such taxes computed with 
regard to such provisions, regardless of whether such excess may or may 
not be made the subject of a notice of deficiency under section 6212 and 
regardless of whether it may or may not be assessed. Any bond required 
under section 332 shall have such surety or sureties as the Commissioner 
may require. However, see 6 U.S.C. 15, providing that where a bond is 
required by law or regulations, in lieu of surety or sureties there may 
be deposited bonds or notes of the United States. Only surety companies 
holding certificates of authority from the Secretary as acceptable 
sureties on Federal bonds will be approved as sureties. The bonds shall 
be executed in triplicate so that the Commissioner, the taxpayer, and 
the surety or the depositary may each have a copy. On and after 
September 1, 1953, the functions of the Commissioner with respect to 
such bonds shall be performed by the district director for the internal 
revenue district in which the return was filed and any bond filed on or 
after such date shall be filed with such district director.
    (b) Pending the completion of the liquidation, if there is a 
compliance with paragraph (a) (1), (2), and (3) of this section and 
Sec. 1.332-2 with respect to the nonrecognition of gain or loss, the 
income and profits tax liability of the recipient corporation for each 
of the years covered in whole or in part by the liquidation shall be 
determined without the recognition of any gain or loss on account of the 
receipt of the distributions in liquidation. In such determination, the 
basis of the property or properties received by the recipient 
corporation shall be determined in accordance with section 334(b). 
However, if the transfer of the property is not completed within the 
three-year period allowed by section 332 or if the recipient corporation 
does not continue qualified with respect to the ownership of stock of 
the liquidating corporation as required by that section, gain or loss 
shall be recognized with respect to each distribution and the tax 
liability for each of the years covered in whole or in part by the 
liquidation shall be recomputed without regard to the provisions of 
section 332 or section 334(b) and the amount of any additional tax due 
upon such recomputation shall be promptly paid.