Internal Revenue Code · 26 U.S.C.
§ 318. Constructive ownership 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. § 318
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Enacted
- September 14, 1960 by Pub. L. 86–779
- Last amended
- December 21, 2005 by Pub. L. 109–135
- Amendments
- 7 dated changes in the source credit
- Length
- 2 subsections · 1,046 words · about 5 min to read
- Cross-references
- cites 10; cited by 44 Code sections and 100 other regulations
- Regulations
- 4 issued under this section
For purposes of subparagraph (A)(ii), a legally adopted child of an individual shall be treated as a child of such individual by blood.
Stock owned, directly or indirectly, by or for a partnership or estate shall be considered as owned proportionately by its partners or beneficiaries.
If 50 percent or more in value of the stock in a corporation is owned, directly or indirectly, by or for any person, such person shall be considered as owning the stock owned, directly or indirectly, by or for such corporation, in that proportion which the value of the stock which such person so owns bears to the value of all the stock in such corporation.
Stock owned, directly or indirectly, by or for a partner or a beneficiary of an estate shall be considered as owned by the partnership or estate.
If 50 percent or more in value of the stock in a corporation is owned, directly or indirectly, by or for any person, such corporation shall be considered as owning the stock owned, directly or indirectly, by or for such person.
If any person has an option to acquire stock, such stock shall be considered as owned by such person. For purposes of this paragraph, an option to acquire such an option, and each one of a series of such options, shall be considered as an option to acquire such stock.
Except as provided in subparagraphs (B) and (C), stock constructively owned by a person by reason of the application of paragraph (1), (2), (3), or (4), shall, for purposes of applying paragraphs (1), (2), (3), and (4), be considered as actually owned by such person.
Stock constructively owned by an individual by reason of the application of paragraph (1) shall not be considered as owned by him for purposes of again applying paragraph (1) in order to make another the constructive owner of such stock.
Stock constructively owned by a partnership, estate, trust, or corporation by reason of the application of paragraph (3) shall not be considered as owned by it for purposes of applying paragraph (2) in order to make another the constructive owner of such stock.
For purposes of this paragraph, if stock may be considered as owned by an individual under paragraph (1) or (4), it shall be considered as owned by him under paragraph (4).
(Aug. 16, 1954, ch. 736, 68A Stat. 99; Pub. L. 86–779, § 10(h), Sept. 14, 1960, 74 Stat. 1009; Pub. L. 87–834, § 20(d)(1), Oct. 16, 1962, 76 Stat. 1063; Pub. L. 88–554, § 4(a), (b)(2), Aug. 31, 1964, 78 Stat. 762, 763; Pub. L. 97–248, title II, § 224(c)(3), Sept. 3, 1982, 96 Stat. 489; Pub. L. 98–369, div. A, title VII, §§ 712(k)(5)(E), 721(j), July 18, 1984, 98 Stat. 950, 969; Pub. L. 99–514, title VI, § 621(c)(1), Oct. 22, 1986, 100 Stat. 2266; Pub. L. 105–34, title XI, § 1142(e)(3), Aug. 5, 1997, 111 Stat. 983; Pub. L. 109–135, title IV, § 412(u), Dec. 21, 2005, 119 Stat. 2638.)
Regulations under this section
Treasury regulations (26 CFR) issued under § 318
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 10 other sections
- § 401(a) Qualified pension, profit-sharing, and stock bonus plans
- § 501(a) Exemption from tax on corporations, certain trusts, etc.
- § 302 Distributions in redemption of stock
- § 304 Redemption through use of related corporations
- § 306(b)(1)(A) Dispositions of certain stock
- § 338(h)(3) Certain stock purchases treated as asset acquisitions
- § 382 Limitation on net operating loss carryforwards and certain built-in losses following ownership change
- § 856(d) Definition of real estate investment trust
- § 958(b) Rules for determining stock ownership
- § 6038(e)(2) Information reporting with respect to certain foreign corporations and partnerships
Cited by 44 Code sections
- § 41(b)(3)(D)(ii) Credit for increasing research activities
- § 59A(g)(3) Tax on base erosion payments of taxpayers with substantial gross receipts
- § 83(i)(3)(B)(iii) Property transferred in connection with performance of services
- § 105(h)(5)(B) Amounts received under accident and health plans
- § 168(h)(6)(F)(iii)(III) Accelerated cost recovery system
- § 263A(e)(2)(B)(ii) Capitalization and inclusion in inventory costs of certain expenses
- § 269A(b)(2) Personal service corporations formed or availed of to avoid or evade income tax
- § 269B(e)(2)(B) Stapled entities
- § 301(e)(2) Distributions of property
- § 302(c)(1) Distributions in redemption of stock
- § 304(b)(1) Redemption through use of related corporations
- § 306(b)(1)(A)(ii) Dispositions of certain stock
- § 338(h)(1) Certain stock purchases treated as asset acquisitions
- § 355(d)(8)(A) Distribution of stock and securities of a controlled corporation
- § 356(a)(2) Receipt of additional consideration
- § 367(c)(2) Foreign corporations
- § 382(l)(3)(A) Limitation on net operating loss carryforwards and certain built-in losses following ownership change
- § 409(n)(1)(B) Qualifications for tax credit employee stock ownership plans
- § 414(m)(6)(B)(i) Definitions and special rules
- § 416(i)(1)(B)(i)(I) Special rules for top-heavy plans
- § 441(i)(2)(B) Period for computation of taxable income
- § 453(f)(1)(A) Installment method
- § 465(c)(7)(D)(iii) Deductions limited to amount at risk
- § 469(j)(2)(B) Passive activity losses and credits limited
Show 20 more
- § 512(b)(13)(D)(ii) Unrelated business taxable income
- § 664(g)(2)(B) Charitable remainder trusts
- § 856(d)(5) Definition of real estate investment trust
- § 871(h)(3)(C) Tax on nonresident alien individuals
- § 881(b)(3)(B) Tax on income of foreign corporations not connected with United States business
- § 897(c)(6)(C) Disposition of investment in United States real property
- § 904(h)(6)(B) Limitation on credit
- § 958(b) Rules for determining stock ownership
- § 1042(b)(2) Sales of stock to employee stock ownership plans or certain cooperatives
- § 1059(e)(1)(A)(iii)(I) Corporate shareholder’s basis in stock reduced by nontaxed portion of extraordinary dividends
- § 1060(e)(2)(B) Special allocation rules for certain asset acquisitions
- § 1061(d)(2)(A) Partnership interests held in connection with performance of services
- § 1239(b)(2) Gain from sale of depreciable property between certain related taxpayers
- § 1372(b) Partnership rules to apply for fringe benefit purposes
- § 2036(b)(2) Transfers with retained life estate
- § 4975(f)(6)(C) Tax on prohibited transactions
- § 6038(e)(2) Information reporting with respect to certain foreign corporations and partnerships
- § 6038A(c)(5) Information with respect to certain foreign-owned corporations
- § 7701(a)(51)(H) Definitions
- § 7704(d)(3)(B) Certain publicly traded partnerships treated as corporations
Cited in 100 regulations not issued under it
- § 1.44-3 Certificate by seller.
- § 1.59A-1 Base erosion and anti-abuse tax.
- § 1.59A-7 Application of base erosion and anti-abuse tax to partnerships.
- § 1.61-21 Taxation of fringe benefits.
- § 1.105-11 Self-insured medical reimbursement plan.
- § 1.163(j)-7 Application of the section 163(j) limitation to foreign corporations and United States shareholders.
- § 1.163(j)-10 Allocation of interest expense, interest income, and other items of expense and gross income to an excepted trade or business.
- § 1.197-2 Amortization of goodwill and certain other intangibles.
- § 1.245A(e)-1 Special rules for hybrid dividends.
- § 1.263A-4 Rules for property produced in a farming business.
- § 1.267A-5 Definitions and special rules.
- § 1.269B-1 Stapled foreign corporations.
- § 1.280G-1 Golden parachute payments.
- § 1.302-1 General.
- § 1.302-2 Redemptions not taxable as dividends.
- § 1.302-3 Substantially disproportionate redemption.
- § 1.302-4 Termination of shareholder's interest.
- § 1.304-2 Acquisition by related corporation (other than subsidiary).
- § 1.304-5 Control.
- § 1.304-7 Certain acquisitions by foreign acquiring corporations.
- § 1.306-2 Exception.
- § 1.332-8 Recognition of gain on liquidation of certain holding companies.
- § 1.336-1 General principles, nomenclature, and definitions for a section 336(e) election.
- § 1.336-2 Availability, mechanics, and consequences of section 336(e) election.
Show 76 more
- § 1.336-4 Adjusted grossed-up basis.
- § 1.337(d)-3 Gain recognition upon certain partnership transactions involving a partner's stock.
- § 1.338-2 Nomenclature and definitions; mechanics of the section 338 election.
- § 1.338-3 Qualification for the section 338 election.
- § 1.338-8 Asset and stock consistency.
- § 1.355-6 Recognition of gain on certain distributions of stock or securities in controlled corporation.
- § 1.355-7 Recognition of gain on certain distributions of stock or securities in connection with an acquisition.
- § 1.362-4 Basis of loss duplication property.
- § 1.367(a)-3 Treatment of transfers of stock or securities to foreign corporations.
- § 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(b)-3 Repatriation of foreign corporate assets in certain nonrecognition transactions.
- § 1.367(e)-1 Distributions described in section 367(e)(1).
- § 1.368-2 Definition of terms.
- § 1.382-2T Definition of ownership change under section 382, as amended by the Tax Reform Act of 1986 (temporary).
- § 1.382-3 Definitions and rules relating to a 5-percent shareholder.
- § 1.382-4 Constructive ownership of stock.
- § 1.385-1 General provisions.
- § 1.409A-1 Definitions and covered plans.
- § 1.409A-3 Permissible payments.
- § 1.409(p)-1 Prohibited allocation of securities in an S corporation.
- § 1.409(p)-1T Prohibited allocations of securities in an S corporation (temporary).
- § 1.414(q)-1T Highly compensated employee (temporary).
- § 1.416-1 Questions and answers on top-heavy plans.
- § 1.441-3 Taxable year of a personal service corporation.
- § 1.545-3 Special adjustment to taxable income.
- § 1.672(f)-2 Certain foreign corporations.
- § 1.704-1 Partner's distributive share.
- § 1.856-4 Rents from real property.
- § 1.861-9 Allocation and apportionment of interest expense and rules for asset-based apportionment.
- § 1.863-8 Source of income derived from space and ocean activity under section 863(d).
- § 1.863-9 Source of income derived from communications activity under section 863(a), (d), and (e).
- § 1.864-4 U.S. source income effectively connected with U.S. business.
- § 1.871-14 Rules relating to repeal of tax on interest of nonresident alien individuals and foreign corporations received from certain portfolio debt investments.
- § 1.881-3 Conduit financing arrangements.
- § 1.881-5 Exception for certain possessions corporations.
- § 1.883-4 Qualified shareholder stock ownership test.
- § 1.884-4 Branch-level interest tax.
- § 1.884-5 Qualified resident.
- § 1.894-1 Income affected by treaty.
- § 1.897-1 Taxation of foreign investment in United States real property interests, definition of terms.
- § 1.897-2 United States real property holding corporations.
- § 1.897-9T Treatment of certain interest in publicly traded corporations, definition of foreign person, and foreign governments and international organizations (temporary).
- § 1.904-4 Separate application of section 904 with respect to certain categories of income.
- § 1.904-5 Look-through rules as applied to controlled foreign corporations and other entities.
- § 1.905-5 Foreign tax redeterminations of foreign corporations that relate to taxable years of the foreign corporation beginning before January 1, 2018.
- § 1.937-2 Income from sources within a possession.
- § 1.951A-2 Tested income and tested loss.
- § 1.954-1 Foreign base company income.
- § 1.958-1 Direct and indirect ownership of stock.
- § 1.958-2 Constructive ownership of stock.
- § 1.987-2 Attribution of items to eligible QBUs; definition of a transfer and related rules.
- § 1.988-4 Source of gain or loss realized on a section 988 transaction.
- § 1.1042-1T Questions and answers relating to the sales of stock to employee stock ownership plans or certain cooperatives (temporary).
- § 1.1061-5 Section 1061(d) transfers to related persons.
- § 1.1239-1 Gain from sale or exchange of depreciable property between certain related taxpayers after October 4, 1976.
- § 1.1297-1 Definition of passive foreign investment company.
- § 1.1471-5 Definitions applicable to section 1471.
- § 1.1502-76 Taxable year of members of group.
- § 1.6038-2 Information returns required of United States persons with respect to annual accounting periods of certain foreign corporations.
- § 1.6038A-1 General requirements and definitions.
- § 1.6038B-1 Reporting of certain transfers to foreign corporations.
- § 1.6043-4 Information returns relating to certain acquisitions of control and changes in capital structure.
- § 1.6049-5 Interest and original issue discount subject to reporting after December 31, 1982.
- § 1.7874-4 Disregard of certain stock related to the domestic entity acquisition.
- § 1.7874-7 Disregard of certain stock attributable to passive assets.
- § 1.7874-10 Disregard of certain distributions.
- § 1.7874-12 Definitions.
- § 53.4958-4 Excess benefit transaction.
- § 53.4960-0 Table of contents.
- § 53.4960-1 Scope and definitions.
- § 53.4968-3 Related organizations.
- § 58.4501-4 Application of netting rule.
- § 58.4501-7 Special rules for acquisitions or repurchases of stock of certain foreign corporations.
- § 301.6111-2 Confidential corporate tax shelters.
- § 301.9100-7T Time and manner of making certain elections under the Tax Reform Act of 1986.
Amendment history
From the source credit and the official notes, newest first.
- Amended by Pub. L. 109–135Parts changed in 2005: (b)(8)
- Amended by Pub. L. 105–34Parts changed in 1997: (b)(8)
- Amended by Pub. L. 99–514Parts changed in 1986: (b)(5)
- Amended by Pub. L. 98–369Parts changed in 1984: (a)(5)(E) (b)(4)
- Amended by Pub. L. 97–248Parts changed in 1982: (b)(4)
- Amended by Pub. L. 88–554Parts changed in 1964: (a) (b)(7)
- Amended by Pub. L. 87–834Parts changed in 1962: (b)(7)
- Enacted by Pub. L. 86–779Parts changed in 1960: (b)(6)
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 C Definitions; Constructive Ownership of Stock
Nearby sections
- § 316 Dividend defined
- § 317 Other definitions
- § 318 Constructive ownership of stock
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
Amendments
2005—Subsec. (b)(8). Pub. L. 109–135 substituted “section 6038(e)(2)” for “section 6038(d)(2)”.
1997—Subsec. (b)(8). Pub. L. 105–34 substituted “6038(d)(2)” for “6038(d)(1)”.
1986—Subsec. (b)(5). Pub. L. 99–514 substituted “382(l)(3)” for “382(a)(3)”.
1984—Subsec. (a)(5)(E). Pub. L. 98–369, § 721(j), added subpar. (E).
Subsec. (b)(4). Pub. L. 98–369, § 712(k)(5)(E), substituted “section 338(h)(3) (defining purchase)” for “section 338(h)(3)(B) (relating to purchase of stock from subsidiaries, etc.)”.
1982—Subsec. (b)(4). Pub. L. 97–248 substituted “section 338(h)(3)(B) (relating to purchase of stock from subsidiaries, etc.)” for “section 334(b)(3)(C) (relating to basis of property received in certain liquidations of subsidiaries)”.
1964—Subsec. (a). Pub. L. 88–554, § 4(a), struck out sidewise attribution by providing that when stock is attributed to a partnership, estate, trust, or corporation from a partner, shareholder, or beneficiary, this stock is not to be attributed again to another partner, beneficiary, or shareholder.
Subsec. (b)(7), (8). Pub. L. 88–554, § 4(b)(2), added par. (7) and redesignated former par. (7) as (8).
1962—Subsec. (b)(7). Pub. L. 87–834 added par. (7).
1960—Subsec. (b)(6). Pub. L. 86–779 added par. (6).
Statutory Notes and Related Subsidiaries
Effective Date of 1997 Amendment
Pub. L. 105–34, title XI, § 1142(f), Aug. 5, 1997, 111 Stat. 983, provided that: “The amendments made by this section [amending this section and sections 901 and 6038 of this title] shall apply to annual accounting periods beginning after the date of the enactment of this Act [Aug. 5, 1997].”
Effective Date of 1986 Amendment
Amendment by Pub. L. 99–514 applicable to any ownership change after Dec. 31, 1986, except as otherwise provided, see section 621(f) of Pub. L. 99–514, as amended, set out as a note under section 382 of this title.
Effective Date of 1984 Amendment
Amendment by section 712(k)(5)(E) of Pub. L. 98–369 not applicable to any qualified stock purchase where the acquisition date is before Sept. 1, 1982, see section 712(k)(9)(A) of Pub. L. 98–369, set out as a note under section 338 of this title.
Amendment by section 712(k)(5)(E) of 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.
Amendment by section 721(j) of Pub. L. 98–369 effective as if included in the Subchapter S Revision Act of 1982, Pub. L. 97–354, see section 721(y)(1) of Pub. L. 98–369, set out as a note under section 1361 of this title.
Effective Date of 1982 Amendment
Amendment by Pub. L. 97–248 applicable to any target corporation with respect to which the acquisition date occurs after Aug. 31, 1982, with special rules for certain acquisitions before Sept. 1, 1982, and certain acquisitions of financial institutions in which there was a binding contract on July 22, 1982, to acquire control, see section 224(d) of Pub. L. 97–248, set out as an Effective Date note under section 338 of this title.
Effective Date of 1964 Amendment
Pub. L. 88–554, § 4(c), Aug. 31, 1964, 78 Stat. 764, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: “The amendments made by this section [amending this section and sections 304, 382, 856, 958, and 6038 of this title] shall take effect on the date of the enactment of this Act, [Aug. 31, 1964], except that, for purposes of sections 302 and 304 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], such amendments shall not apply with respect to distributions in payment for stock acquisitions or redemptions, if such acquisitions or redemptions occurred before the date of the enactment of this Act.”
Effective Date of 1960 Amendment
Amendment by Pub. L. 86–779 applicable with respect to taxable years of real estate investment trusts beginning after Dec. 31, 1960, see section 10(k) of Pub. L. 86–779, set out as an Effective Date note under section 856 of this title.