Internal Revenue Code · 26 U.S.C.
§ 302. Distributions in redemption of stock
Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).
Cite as 26 U.S.C. § 302
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Enacted
- October 4, 1976 by Pub. L. 94–455
- Last amended
- December 22, 2010 by Pub. L. 111–325
- Amendments
- 4 dated changes in the source credit
- Length
- 6 subsections · 1,624 words · about 7 min to read
- Defines
- 3 terms
- Cross-references
- cites 9; cited by 12 Code sections and 60 other regulations
- Regulations
- 4 issued under this section
If a corporation redeems its stock (within the meaning of section 317(b)), and if paragraph (1), (2), (3), (4), or (5) of subsection (b) applies, such redemption shall be treated as a distribution in part or full payment in exchange for the stock.
This paragraph shall not apply unless immediately after the redemption the shareholder owns less than 50 percent of the total combined voting power of all classes of stock entitled to vote.
This paragraph shall not apply to any redemption made pursuant to a plan the purpose or effect of which is a series of redemptions resulting in a distribution which (in the aggregate) is not substantially disproportionate with respect to the shareholder.
In determining whether a redemption meets the requirements of paragraph (1), the fact that such redemption fails to meet the requirements of paragraph (2), (3), or (4) shall not be taken into account. If a redemption meets the requirements of paragraph (3) and also the requirements of paragraph (1), (2), or (4), then so much of subsection (c)(2) as would (but for this sentence) apply in respect of the acquisition of an interest in the corporation within the 10-year period beginning on the date of the distribution shall not apply.
Except as provided in paragraph (2) of this subsection, section 318(a) shall apply in determining the ownership of stock for purposes of this section.
Except as otherwise provided in this subchapter, if a corporation redeems its stock (within the meaning of section 317(b)), and if subsection (a) of this section does not apply, such redemption shall be treated as a distribution of property to which section 301 applies.
Whether or not a redemption meets the requirements of subparagraphs (A) and (B) of paragraph (2) shall be determined without regard to whether or not the redemption is pro rata with respect to all of the shareholders of the corporation.
For purposes of determining under subsection (b)(4) whether any stock is held by a shareholder who is not a corporation, any stock held by a partnership, estate, or trust shall be treated as if it were actually held proportionately by its partners or beneficiaries.
(Aug. 16, 1954, ch. 736, 68A Stat. 85; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 96–589, § 5(b), Dec. 24, 1980, 94 Stat. 3405; Pub. L. 97–248, title II, §§ 222(c), 228(a), Sept. 3, 1982, 96 Stat. 478, 493; Pub. L. 98–369, div. A, title VII, § 712(i)(1), July 18, 1984, 98 Stat. 948; Pub. L. 111–325, title III, § 306(a), Dec. 22, 2010, 124 Stat. 3549.)
Terms defined here
Where the text says “the term … means”. Select a term to jump to its definition.
Regulations under this section
Treasury regulations (26 CFR) issued under § 302
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 9 other sections
- § 317(b) Other definitions
- § 67(c)(2)(B) 2-percent floor on miscellaneous itemized deductions
- § 318(a) Constructive ownership of stock
- § 6501 Limitations on assessment and collection
- § 6502 Collection after assessment
- § 301 Distributions of property
- § 303 Distributions in redemption of stock to pay death taxes
- § 306 Dispositions of certain stock
- § 331 Gain or loss to shareholder in corporate liquidations
Cited by 12 Code sections
- § 301(f)(1) Distributions of property
- § 304(a)(1) Redemption through use of related corporations
- § 306(b)(1)(B) Dispositions of certain stock
- § 312(n)(7) Effect on earnings and profits
- § 318(b)(1) Constructive ownership of stock
- § 338(h)(14) Certain stock purchases treated as asset acquisitions
- § 355(g)(5)(B) Distribution of stock and securities of a controlled corporation
- § 562(b)(1)(B) Rules applicable in determining dividends eligible for dividends paid deduction
- § 857(d)(2) Taxation of real estate investment trusts and their beneficiaries
- § 1059(e)(1)(A)(i) Corporate shareholder’s basis in stock reduced by nontaxed portion of extraordinary dividends
- § 1368(e)(1)(B) Distributions
- § 1445(e)(3) Withholding of tax on dispositions of United States real property interests
Cited in 60 regulations not issued under it
- § 1.45D-1 New markets tax credit.
- § 1.59A-3 Base erosion payments and base erosion tax benefits.
- § 1.67-2T Treatment of pass-through entities (temporary).
- § 1.83-6 Deduction by employer.
- § 1.108(i)-2 Application of section 108(i) to partnerships and S corporations.
- § 1.245A-5 Limitation of section 245A deduction and section 954(c)(6) exception.
- § 1.303-2 Requirements.
- § 1.303-3 Application of other sections.
- § 1.304-1 General.
- § 1.304-2 Acquisition by related corporation (other than subsidiary).
- § 1.304-3 Acquisition by a subsidiary.
- § 1.304-7 Certain acquisitions by foreign acquiring corporations.
- § 1.306-2 Exception.
- § 1.306-3 Section 306 stock defined.
- § 1.316-1 Dividends.
- § 1.318-4 Constructive ownership as actual ownership; exceptions.
- § 1.346-2 Treatment of certain redemptions.
- § 1.355-0 Outline of sections.
- § 1.355-2 Limitations.
- § 1.355-6 Recognition of gain on certain distributions of stock or securities in controlled corporation.
- § 1.355-8 Definition of predecessor and successor and limitations on gain recognition under section 355(e) and section 355(f).
- § 1.367(a)-8 Gain recognition agreement requirements.
- § 1.367(a)-9T Treatment of deemed section 351 exchanges pursuant to section 304(a)(1) (temporary).
- § 1.367(e)-1 Distributions described in section 367(e)(1).
Show 36 more
- § 1.368-2 Definition of terms.
- § 1.401(a)-20 Requirements of qualified joint and survivor annuity and qualified preretirement survivor annuity.
- § 1.421-2 General rules.
- § 1.562-1 Dividends for which the dividends paid deduction is allowable.
- § 1.815-2 Distributions to shareholders.
- § 1.856-1 Definition of real estate investment trust.
- § 1.897-5T Corporate distributions (temporary).
- § 1.902-1 Credit for domestic corporate shareholder of a foreign corporation for foreign income taxes paid by the foreign corporation.
- § 1.951-1 Amounts included in gross income of United States shareholders.
- § 1.963-3 Distributions counting toward a minimum distribution.
- § 1.996-3 Divisions of earnings and profits.
- § 1.996-4 Subsequent effect of previous disposition of DISC stock.
- § 1.1041-2 Redemptions of stock.
- § 1.1060-1 Special allocation rules for certain asset acquisitions.
- § 1.1248-1 Treatment of gain from certain sales or exchanges of stock in certain foreign corporations.
- § 1.1248-3 Earnings and profits attributable to stock in complex cases.
- § 1.1248-4 Limitation on tax applicable to individuals.
- § 1.1297-1 Definition of passive foreign investment company.
- § 1.1368-1 Distributions by S corporations.
- § 1.1368-2 Accumulated adjustments account (AAA).
- § 1.1368-3 Examples.
- § 1.1377-1 Pro rata share.
- § 1.1400Z2(b)-1 Inclusion of gains that have been deferred under section 1400Z-2(a).
- § 1.1445-5 Special rules concerning distributions and other transactions by corporations, partnerships, trusts, and estates.
- § 1.1502-13 Intercompany transactions.
- § 1.1502-32 Investment adjustments.
- § 1.7701(l)-3 Recharacterizing financing arrangements involving fast-pay stock.
- § 1.9003-1 Election to have the provisions of section 613(c) (2) and (4) of the 1954 Code, as amended, apply for past years.
- § 31.3406(b)(2)-4 Reportable dividend payment.
- § 53.4940-1 Excise tax on net investment income.
- § 53.4942(a)-2 Computation of undistributed income.
- § 58.4501-2 General rules regarding excise tax on stock repurchases.
- § 58.4501-3 Exceptions.
- § 58.4501-5 Examples.
- § 58.4501-7 Special rules for acquisitions or repurchases of stock of certain foreign corporations.
- § 601.201 Rulings and determinations letters.
Amendment history
From the source credit and the official notes, newest first.
Where it sits in the Code
- Subtitle A Income Taxes
- Chapter 1 NORMAL TAXES AND SURTAXES
- Subchapter C Corporate Distributions and Adjustments
- Part I DISTRIBUTIONS BY CORPORATIONS
- Subpart A Effects on Recipients
Nearby sections
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
Amendments
2010—Subsec. (a). Pub. L. 111–325, § 306(a)(2), substituted “(4), or (5)” for “or (4)”.
Subsec. (b)(5), (6). Pub. L. 111–325, § 306(a)(1), added par. (5) and redesignated former par. (5) as (6).
1984—Subsec. (f)(3). Pub. L. 98–369 substituted “complete liquidation” for “partial or complete liquidation”.
1982—Subsec. (a). Pub. L. 97–248, § 222(c)(3), substituted “paragraph (1), (2), (3), or (4)” for “paragraph (1), (2), or (3)”.
Subsec. (b)(4), (5). Pub. L. 97–248, § 222(c)(1), (4), added par. (4), redesignated former par. (4) as (5) and substituted “paragraph (2), (3), or (4)” for “paragraph (2) or (3)” after “to meet the requirements of”, and “paragraph (1), (2), or (4)” for “paragraph (1) or (2)” after “and also the requirements of”.
Subsec. (c)(2)(C). Pub. L. 97–248, § 228(a), added subpar. (C).
Subsecs. (e), (f). Pub. L. 97–248, § 222(c)(2), added subsec. (e) and redesignated former subsec. (e) as (f).
1980—Subsec. (a). Pub. L. 96–589, § 5(b)(2)(A), struck out reference to par. (4) of subsec. (b).
Subsec. (b)(4), (5). Pub. L. 96–589, § 5(b)(1), (2)(B), redesignated par. (5) as (4) and struck out reference to par. (4) in two places. Former par. (4) was struck out.
1976—Subsec. (c)(2). Pub. L. 94–455 struck out “or his delegate” after “Secretary” wherever appearing.
Statutory Notes and Related Subsidiaries
Effective Date of 2010 Amendment
Amendment by Pub. L. 111–325 applicable to distributions after Dec. 22, 2010, see section 306(c) of Pub. L. 111–325, set out as a note under section 267 of this title.
Effective Date of 1984 Amendment
Amendment by Pub. L. 98–369 effective as if included in the provision of the Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97–248, to which such amendment relates, see section 715 of Pub. L. 98–369, set out as a note under section 31 of this title.
Effective Date of 1982 Amendment; Partial Liquidations
Pub. L. 97–248, title II, § 228(b), Sept. 3, 1982, 96 Stat. 493, provided that: “The amendment made by subsection (a) [amending this section] shall apply with respect to distributions after August 31, 1982, in taxable years ending after such date.”
Pub. L. 97–248, title II, § 222(f), Sept. 3, 1982, 96 Stat. 481, as amended by Pub. L. 97–448, title III, § 306(a)(6)(A), Jan. 12, 1983, 96 Stat. 2402; Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
“(1) In general.— The amendments made by this section [amending this section and sections 306, 312, 331, 334, 336, 341, 346, 543, and 562 of this title and repealing section 338 of this title] shall apply to distributions after August 31, 1982.“(2) Exceptions.—“(A) Ruling requests.— The amendments made by this section shall not apply to distributions made by any corporation if—“(i)(I) on July 22, 1982, there was a ruling request by such corporation pending with the Internal Revenue Service as to whether such distributions would qualify as a partial liquidation, or“(II) within the period beginning on July 12, 1981, and ending on July 22, 1982, the Internal Revenue Service granted a ruling to such corporation that the distributions would qualify as a partial liquidation, and“(ii) such distributions are pursuant to a plan of partial liquidation adopted before October 1, 1982 (or, if later, 90 days after the date on which the Internal Revenue Service granted a ruling pursuant to the request described in clause (i)(I)).“(B) Plans adopted before july 23, 1982.— The amendments made by this section shall not apply to distributions made pursuant to a plan of partial liquidation adopted before July 23, 1982.“(C) Control acquired after 1981 and before july 23, 1982.— The amendments made by this section shall not apply to distributions made pursuant to a plan of partial liquidation adopted before October 1, 1982, where control of the corporation making the distributions was acquired after December 31, 1981, and before July 23, 1982.“(D) Tender offer or binding contract outstanding on july 22, 1982.—“(i) In general.— The amendments made by this section shall not apply to distributions made by a corporation if—“(I) such distributions are pursuant to a plan of liquidation adopted before October 1, 1982, and“(II) control of such corporation was acquired after July 22, 1982, pursuant to a tender offer or binding contract outstanding on such date.“(ii) Extension of time for adopting plan where acquisition subject to federal regulatory approval.— If the acquisition described in clause (i)(II) is subject to approval by a Federal regulatory agency, clause (i) shall be applied by substituting for ‘October 1, 1982’ the date which is 90 days after the date on which approval by the Federal regulatory agency of such acquisition becomes final.“(iii) Special rule where offer subject to approval by foreign regulatory body.— In any case where an offer to acquire stock in a corporation was subject to intervention by a foreign regulatory body and a public announcement of such an offer resulted in the intervention by such foreign regulatory body before July 23, 1982—“(I) such public announcement shall be treated as a tender offer, and“(II) clause (i) shall be applied by substituting for ‘October 1, 1982’ the date which is 90 days after the date on which such regulatory body approves a public offer to acquire stock in such corporation.“(iv) Special rule where one-third of shares acquired during march and april 1982.— If—“(I) one-third or more of the shares of a corporation were acquired by another corporation during March and April 1982, and“(II) during March or April 1982, the acquiring corporation filed with the Federal Trade Commission notification of its intent to acquire control of the acquired corporation,subclause (II) of clause (i) shall not apply with respect to distributions made by the acquired corporation.“(E) Insurance companies.— The amendments made by this section shall not apply to distributions made by an insurance company pursuant to a plan of partial liquidation adopted before October 1, 1982, where control was acquired by the distributee or its parent after December 31, 1980, and before July 23, 1982, and the conduct of the insurance business by the distributee is conditioned on approval by a State regulatory authority.For purposes of this paragraph, the term ‘control’ has the meaning given to such term by section 368(c) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], except that in applying such section both direct and indirect ownership of stock shall be taken into account.“(3) Approval of plan by board of directors.— For purposes of—“(A) paragraph (2), and“(B) applying section 346(a)(2) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of this Act) [Sept. 3, 1982] to distributions to which (but for paragraph (2)) the amendments made by this section would apply,a plan of liquidation shall be treated as adopted when approved by the corporation’s board of directors.“(4) Coordination with amendments made by section 224.— For purposes of section 338(e)(2)(C) of the Internal Revenue Code of 1986 (as added by section 224), any property acquired in a distribution to which the amendments made by this section do not apply by reason of paragraph (2) shall be treated as acquired before September 1, 1982.”
Effective Date of 1980 Amendment
Amendment by Pub. L. 96–589 applicable to stock which is issued after Dec. 31, 1980, except as otherwise provided, see section 7(d)(2), (f) of Pub. L. 96–589, set out as a note under section 108 of this title.
Savings Provisions
Applicability of subsec. (b)(1) to the determination of gross investment income under sections 4940 and 4948(a) of this title, see section 101(l)(8) of Pub. L. 91–172, set out as a note under section 4940 of this title.