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Treasury Regulations · 26 CFR

§ 1.356-3. Rules for treatment of securities as “other property”.

In effect eCFR current as of October 15, 2026

Regulation text, no changes From the eCFR, current as of October 15, 2026. The eCFR is an authoritative but unofficial editorial compilation of the Code of Federal Regulations; the official text is the annual CFR on govinfo. Compare it with this section on ecfr.gov (external site) or the official annual CFR on govinfo (external site).

Regulation under 26 U.S.C. § 356

Cite as 26 CFR § 1.356-3

At a glance

Read from the text and its source citation. Not part of the regulation.

Status
In the current eCFR
Issued
November 26, 1960 by T.D. 6500
Last amended
May 16, 2000 by T.D. 8882
Issued under
26 U.S.C. § 356
Length
712 words · about 3 min to read
Defines
3 terms
Cross-references
cites 3 Code sections and 1 regulation; cited by 0
(a) As a general rule, for purposes of section 356, the term other property includes securities. However, it does not include securities permitted under section 354 or section 355 to be received tax free. Thus, when securities are surrendered in a transaction to which section 354 or section 355 is applicable, the characterization of the securities received as “other property” does not include securities received where the principal amount of such securities does not exceed the principal amount of securities surrendered in the transaction. If a greater principal amount of securities is received in an exchange described in section 354 (other than subsection (c) or (d) thereof) or section 355 over the principal amount of securities surrendered, the term other property includes the fair market value of such excess principal amount as of the date of the exchange. If no securities are surrendered in exchange, the term other property includes the fair market value, as of the date of receipt, of the entire principal amount of the securities received.
(b) Except as provided in § 1.356-6, for purposes of this section, a right to acquire stock that is treated as a security for purposes of section 354 or 355 has no principal amount. Thus, such right is not other property when received in a transaction to which section 356 applies (regardless of whether securities are surrendered in the exchange). This paragraph (b) applies to transactions occurring on or after March 9, 1998.
(c) In the examples in this paragraph (c), stock means common stock and warrants means rights to acquire common stock. The following examples illustrate the rules of paragraph (a) of this section:
Example 1.

A, an individual, exchanged 100 shares of stock for 100 shares of stock and a security in the principal amount of $1,000 with a fair market value of $990. The amount of $990 is treated as “other property.”

Example 2.

B, an individual, exchanged 100 shares of stock and a security in the principal amount of $1,000 for 300 shares of stock and a security in the principal amount of $1,500. The security had a fair market value on the date of receipt of $1,575. The fair market value of the excess principal amount, or $525, is treated as “other property.”

Example 3.

C, an individual, exchanged a security in the principal amount of $1,000 for 100 shares of stock and a security in the principal amount of $900. No part of the security received is treated as “other property.”

Example 4.

D, an individual, exchanged a security in the principal amount of $1,000 for 100 shares of stock and a security in the principal amount of $1,200 with a fair market value of $1,100. The fair market value of the excess principal amount, or $183.33, is treated as “other property.”

Example 5.

E, an individual, exchanged a security in the principal amount of $1,000 for another security in the principal amount of $1,200 with a fair market value of $1,080. The fair market value of the excess principal amount, or $180, is treated as “other property.”

Example 6.

F, an individual, exchanged a security in the principal amount of $1,000 for two different securities each in the principal amount of $750. One of the securities had a fair market value of $750, the other had a fair market value of $600. One-third of the fair market value of each security ($250 and $200) is treated as “other property.”

Example 7.

G, an individual, exchanged stock for stock and a warrant. The warrant had no principal amount. Thus, G received no excess principal amount within the meaning of section 356(d).

Example 8.

H, an individual, exchanged a warrant for stock and a warrant. The warrants had no principal amount. Thus, H received no excess principal amount within the meaning of section 356(d).

Example 9.

I, an individual, exchanged a warrant for stock and a debt security. The warrant had no principal amount. The debt security had a $100 principal amount. I received $100 of excess principal amount within the meaning of section 356(d).

[T.D. 6500, 25 FR 11607, Nov. 26, 1960, as amended by T.D. 7616, 44 FR 26869, May 8, 1979; T.D. 8752, 63 FR 410, Jan. 6, 1998; T.D. 8882, 65 FR 31078, May 16, 2000]

Terms defined here

Where the text says “the term … means”. Select a term to jump to its definition.

Other regulations under § 356

Cross-references

Computed from the citations in the text of 26 CFR.

Code sections it cites

Regulations it cites

Amendment history

From the source citation at the end of the section, newest first. T.D. is a Treasury decision; FR is the Federal Register.

  1. Amended by T.D. 8882 (65 FR 31078)
  2. Amended by T.D. 8752 (63 FR 410)
  3. Amended by T.D. 7616 (44 FR 26869)
  4. Issued by T.D. 6500 (25 FR 11607)

Where it sits in 26 CFR

  1. Subchapter A Income tax
  2. Part 1 Income taxes
  3. Effects on shareholders and security holders

Nearby sections