[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: 26CFR1.356-4]

[Page 234-235]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.356-4  Exchanges for section 306 stock.

    If, in a transaction to which section 356 is applicable, other 
property or money is received in exchange for section 306 stock, an 
amount equal to the fair market value of the property plus the money, if 
any, shall be treated as a distribution of property to which section 301 
is applicable. The determination of whether section 306 stock is 
surrendered for other property (including money) is a question of fact 
to be decided under all of the circumstances of each case. Ordinarily, 
the other property (including money) received will first be treated as 
received in exchange for any section 306 stock owned by a shareholder 
prior to such transaction. For example, if a shareholder who owns a 
share of common stock (having a basis to him of $100) and a share of 
preferred stock which is section 306 stock (having a basis to him of 
$100) surrenders both shares in a transaction to which section 356 is 
applicable for one share of common stock having a fair market value of 
$80 and one $100 bond having a fair market value of $100, the bond will 
be deemed received in exchange for the section 306 stock and it will be 
treated as a distribution to which section 301 is applicable to the

[[Page 235]]

extent of its entire fair market value ($100).