Page:United States Statutes at Large Volume 68A.djvu/131

 C H. 1—NORMAL TAXES AND SURTAXES

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(1) DISPOSITIONS OTHER THAN REDEMPTIONS.—If such disposition is not a redemption (within the meaning of section 317(b))— (A) The amount reaUzed shall be treated as gain from the sale of property which is not a capital asset. This subparagraph shall not apply to the extent that— (i) the amount realized, exceeds (ii) such stock's ratable share of the amount which would have been a dividend at the time of distribution if (in lieu of section 306 stock) the corporation had distributed money in an amount equal to the fair market value of the stock at the time of distribution. (B) Any excess of the amount realized over the sum of— (i) the amount treated under subparagraph (A) as gain from the sale of property which is not a capital asset, plus (ii) the adjusted basis of the stock, shall be treated as gain from the sale of such stock. (C) No loss shall be recognized. (2) REDEMPTION.—If the disposition is a redemption, the amount realized shall be treated as a distribution of property to which section 301 applies. (b) EXCEPTIONS.—Subsection (a) shall not apply—• (1) TERMINATION OF SHAREHOLDER'S INTEREST.— (A) N O T I N REDEMPTION.—If the disposition—

(i) is not a redemption; (ii) is not, directly or indirectly, to a person the ownership of whose stock would (under section 318(a)) be attributable to the shareholder; and (iii) terminates the entire stock interest of the shareholder in the corporation (and for purposes of this clause, section 318 (a) shall apply). (B) I N REDEMPTION.—If the disposition is a redemption and section 302(b)(3) applies. (2) LIQUIDATIONS.—If the section 306 stock is redeemed in a distribution in partial or complete liquidation to which part II (sec. 331 and following) applies. (3) W H E R E GAIN OR LOSS IS NOT RECOGNIZED.—To the extent

that, under any provision of this subtitle, gain or loss to the shareholder is not recognized with respect to the disposition of the section 306 stock. (4) TRANSACTIONS NOT IN AVOIDANCE.—If it is established to the satisfaction of the Secretary or his delegate— (A) that the distribution, and the disposition or redemption, or (B) in the case of a prior or simultaneous disposition (or redemption) of the stock with respect to which the section 306 stock disposed of (or redeemed) was issued, that the disposition (or redemption) of the section 306 stock, was not in pursuance of a plan having as one of its principal purposes the avoidance of Federal income tax. (c) SECTION 306 STOCK D E F I N E D. —


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(1) IN GENERAL,—For purposes of this subchapter, the term ''section 306 stock" means stock which meets the requirements of subparagraph (A), (B), or (C) of this paragraph. §306(0(1)

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