Page:United States Statutes at Large Volume 68A.djvu/156

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INTERNAL REVENUE CODE OF 1954 reorganization are surrendered and securities of any corporation a party to the reorganization are received, and (ii) the principal amount of such securities received exceeds the principal amount of such securities surrendered, then, with respect to such securities received, the term "other property" means only the fair market value of such excess. For purposes of this subparagraph and subparagraph (C), if no securities are surrendered, the excess shall be the entire principal amount of the securities received. (C) GREATER PRINCIPAL AMOUNT IN SECTION 355 TRANSAC-

TION.—If, in an exchange or distribution described in section 355, the principal amount of the securities in the controlled corporation which are received exceeds the principal amount of the securities in the distributing corporation which are surrendered, then, with respect to such securities received, the term "other property" means only the fair market value of such excess. (e) EXCHANGES FOR SECTION 306 STOCK.—Notwithstanding any

other provision of this section, to the extent that any of the other property (or money) is received in exchange for section 306 stock, an amount equal to the fair market value of such other property (or the amount of such money) shall be treated as a distribution of property to which section 301 applies. (f) TRANSACTIONS INVOLVING G I F T OR COMPENSATION.— For special rules for a transaction described in section 354, 355, or this section, but which— (1) results in a gift, see section 2501 and following, or (2) has the effect of the payment of compensation, see section 61 (a)(1). SEC. 357. ASSUMPTION OF LIABILITY. (a) GENERAL RULE.—Except as provided in subsections (b) and

(c),if(1) the taxpayer receives property which would be permitted to be received under section 351, 361, or 371 without the recognition of gain if it were the sole consideration, and (2) as part of the consideration, another party to the exchange assumes a liability of the taxpayer, or acquires from the taxpayer property subject to a liability, then such assumption or acquisition shall not be treated as money or other property, and shall not prevent the exchange from being within the provisions of section 351, 361, or 371, as the case may be. (b) T A X AVOIDANCE P U R P O S E. —

(1) IN GENERAL.—If, taking into consideration the nature of the liability and the circumstances in the light of which the arrangement for the assumption or acquisition was made, it appears that the principal purpose of the taxpayer with respect to the assumption or acquisition described in subsection (a)— (A) was a purpose to avoid Federal income tax on the exchange, or (B) if not such purpose, was not a bona fide business purpose, then such assumption or acquisition (in the total amount of the liability assumed or acquired pursuant to such exchange) shall, for purposes of section 351, 361, or 371 (as the case may be), be considered as money received by the taxpayer on the exchange. § 356(d)(2)(B)(i)

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