[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: 26CFR1.355-4]

[Page 201]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.355-4  Non pro rata distributions, etc.

    Section 355 provides for nonrecognition of gain or loss with respect 
to a distribution whether or not (a) the distribution is pro rata with 
respect to all of the shareholders of the distributing corporation, (b) 
the distribution is pursuant to a plan of reorganization within the 
meaning of section 368 (a) (1)(D), or (c) the shareholder surrenders 
stock in the distributing corporation. Under section 355, the stock of a 
controlled corporation may consist of common stock or preferred stock. 
(See, however, section 306 and the regulations thereunder.) Section 355 
does not apply, however, if the substance of a transaction is merely an 
exchange between shareholders or security holders of stock or securities 
in one corporation for stock or securities in another corporation. For 
example, if two individuals, A and B, each own directly 50 percent of 
the stock of corporation X and 50 percent of the stock of corporation Y, 
section 355 would not apply to a transaction in which A and B transfer 
all of their stock of X and Y to a new corporation Z, for all of the 
stock of Z, and Z then distributes the stock of X to A and the stock of 
Y to B.

[T.D. 8238, 54 FR 296, Jan. 5, 1989]