[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: 26CFR1.351-2]

[Page 183]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.351-2  Receipt of property.

    (a) If an exchange would be within the provisions of section 351(a) 
if it were not for the fact that the property received in exchange 
consists not only of property permitted by such subsection to be 
received without the recognition of gain, 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. No loss to the recipient shall be 
recognized.
    (b) See section 357 and the regulations pertaining to that section 
for applicable rules as to the treatment of liabilities as ``other 
property'' in cases subject to section 351, where another party to the 
exchange assumes a liability, or acquires property subject to a 
liability.
    (c) See sections 358 and 362 and the regulations pertaining to those 
sections for applicable rules with respect to the determination of the 
basis of stock, securities, or other property received in exchanges 
subject to section 351.
    (d) See part I (section 301 and following), subchapter C, chapter 1 
of the Code, and the regulations thereunder for applicable rules with 
respect to the taxation of dividends where a distribution by a 
corporation of its stock or securities in connection with an exchange 
subject to section 351(a) has the effect of the distribution of a 
taxable dividend.
    (e) 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). See Sec. 
1.356-7(c) for the treatment of preferred stock received in certain 
exchanges for common or preferred stock described in section 
351(g)(2)(C)(i)(II).

[T.D. 6500, 25 FR 11607, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, as 
amended by T.D. 8904, 65 FR 58650, Oct. 2, 2000]

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