[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: 26CFR1.334-1]

[Page 72]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.334-1  Basis of property received in liquidations.

    (a) In general. Section 334 sets forth rules prescribing the basis 
of property received in a distribution in partial or complete 
liquidation of a corporation. The general rule of section 334 is set 
forth in section 334(a) to the effect that if property is received in a 
distribution in partial or complete liquidation and if gain or loss is 
recognized on the receipt of such property, then the basis of the 
property in the hands of the distributee shall be the fair market value 
of such property at the time of the distribution. Such general rule has 
no application to a liquidation to which section 332 or section 333 
applies. See section 334 (b) and (c).
    (b) Transferor's basis. Unless section 334(b)(2) and subsection (c) 
of this section apply, property received by a parent corporation in a 
complete liquidation to which section 332 is applicable shall, under 
section 334(b)(1), have the same basis in the hands of the parent as its 
adjusted basis in the hands of the subsidiary. The rule stated above is 
applicable even though the subsidiary was indebted to the parent on the 
date the plan of liquidation was adopted and part of such property was 
received in satisfaction of such indebtedness in a transfer to which 
section 332(c) is applicable. See Sec. 1.460-4(k)(3)(iv)(B)(2) for 
rules relating to adjustments to the basis of certain contracts 
accounted for using a long-term contract method of accounting that are 
acquired in certain liquidations described in section 332.

[T.D. 7231, 37 FR 28287, Dec. 22, 1972, as amended at T.D. 8474, 58 FR 
25557, Apr. 27, 1993; T.D. 8995, 67 FR 34605, May 15, 2002]

                         effects on corporation