[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: 26CFR1.356-2]

[Page 233]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.356-2  Receipt of additional consideration not in connection with 
an exchange.

    (a) If, in a transaction to which section 355 would apply except for 
the fact that a shareholder (individual or corporate) receives property 
permitted by section 355 to be received without the recognition of gain, 
together with other property or money, without the surrender of any 
stock or securities of the distributing corporation, then the sum of the 
money and the fair market value of the other property as of the date of 
the distribution shall be treated as a distribution of property to which 
the rules of section 301 (other than section 301(b) and section 301(d)) 
apply. See section 358 for determination of basis of such other 
property.
    (b) Paragraph (a) of this section may be illustrated by the 
following examples:

    Example (1). Individuals A and B each own 50 of the 100 outstanding 
shares of common stock of Corporation X. Corporation X owns all of the 
stock of Corporation Y, 100 shares. Corporation X distributes to each 
shareholder 50 shares of the stock of Corporation Y plus $100 cash 
without requiring the surrender of any shares of its own stock. The $100 
cash received by each is treated as a distribution of property to which 
the rules of section 301 apply.
    Example (2). If, in the above example, Corporation X distributes 50 
shares of stock of Corporation Y to A and 30 shares of such stock plus 
$100 cash to B without requiring the surrender of any of its own stock, 
the amount of cash received by B is treated as a distribution of 
property to which the rules of section 301 apply.