Internal Revenue Code · 26 U.S.C.
§ 332. Complete liquidations of subsidiaries
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. § 332
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
- March 23, 2018 by Pub. L. 115–141
- Amendments
- 5 dated changes in the source credit
- Length
- 4 subsections · 1,018 words · about 4 min to read
- Defines
- 2 terms
- Cross-references
- cites 5; cited by 14 Code sections and 83 other regulations
- Regulations
- 8 issued under this section
No gain or loss shall be recognized on the receipt by a corporation of property distributed in complete liquidation of another corporation.
If a corporation receives a distribution from a regulated investment company or a real estate investment trust which is considered under subsection (b) as being in complete liquidation of such company or trust, then, notwithstanding any other provision of this chapter, such corporation shall recognize and treat as a dividend from such company or trust an amount equal to the deduction for dividends paid allowable to such company or trust by reason of such distribution.
For purposes of this subsection, the term “affiliated group” has the meaning given such term by section 1504(a) (without regard to paragraph (2) of section 1504(b)).
If the distributee of a distribution described in paragraph (1) is a controlled foreign corporation (as defined in section 957), then notwithstanding paragraph (1) or subsection (a), such distribution shall be treated as a distribution to which section 331 applies.
The Secretary shall provide such regulations as appropriate to prevent the abuse of this subsection, including regulations which provide, for the purposes of clause (iv) of paragraph (2)(A), that a corporation is not in existence for any period unless it is engaged in the active conduct of a trade or business or owns a significant ownership interest in another corporation so engaged.
(Aug. 16, 1954, ch. 736, 68A Stat. 102; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 99–514, title VI, § 631(e)(2), title XVIII, § 1804(e)(6)(A), Oct. 22, 1986, 100 Stat. 2273, 2803; Pub. L. 105–277, div. J, title III, § 3001(a), (b)(1), Oct. 21, 1998, 112 Stat. 2681–904; Pub. L. 108–357, title VIII, § 893(a), Oct. 22, 2004, 118 Stat. 1646; Pub. L. 109–135, title IV, § 412(v), Dec. 21, 2005, 119 Stat. 2638; Pub. L. 115–141, div. U, title IV, § 401(d)(1)(D)(xvii)(III), Mar. 23, 2018, 132 Stat. 1208.)
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 § 332
- § 1.332-1 Distributions in liquidation of subsidiary corporation; general.
- § 1.332-2 Requirements for nonrecognition of gain or loss.
- § 1.332-3 Liquidations completed within one taxable year.
- § 1.332-4 Liquidations covering more than one taxable year.
- § 1.332-5 Distributions in liquidation as affecting minority interests.
- § 1.332-6 Records to be kept and information to be filed with return.
- § 1.332-7 Indebtedness of subsidiary to parent.
- § 1.332-8 Recognition of gain on liquidation of certain holding companies.
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 5 other sections
- § 1504(a)(2) Definitions
- § 361 Nonrecognition of gain or loss to corporations; treatment of distributions
- § 331 Gain or loss to shareholder in corporate liquidations
- § 301 Distributions of property
- § 957 Controlled foreign corporations; United States persons
Cited by 14 Code sections
- § 168(i)(7)(B)(i) Accelerated cost recovery system
- § 197(f)(2)(B)(i) Amortization of goodwill and certain other intangibles
- § 334(b)(1) Basis of property received in liquidations
- § 336(d)(3) Gain or loss recognized on property distributed in complete liquidation
- § 337(a) Nonrecognition for property distributed to parent in complete liquidation of subsidiary
- § 367(a)(1) Foreign corporations
- § 368(a)(3)(C)(ii) Definitions relating to corporate reorganizations
- § 381(a)(1) Carryovers in certain corporate acquisitions
- § 864(c)(8)(E) Definitions and special rules
- § 904(f)(3)(D)(iv) Limitation on credit
- § 1245(b)(3) Gain from dispositions of certain depreciable property
- § 1250(d)(3) Gain from dispositions of certain depreciable realty
- § 4978(d)(3) Tax on certain dispositions by employee stock ownership plans and certain cooperatives
- § 6038B(a)(1)(A) Notice of certain transfers to foreign persons
Cited in 83 regulations not issued under it
- § 1.47-3 Exceptions to the application of § 1.47-1.
- § 1.50A-4 Exceptions to the application of § 1.50A-3.
- § 1.59A-3 Base erosion payments and base erosion tax benefits.
- § 1.108(i)-1 Deferred discharge of indebtedness income and deferred original issue discount deductions of C corporations.
- § 1.197-1T Certain elections for intangible property (temporary).
- § 1.197-2 Amortization of goodwill and certain other intangibles.
- § 1.245A(e)-1 Special rules for hybrid dividends.
- § 1.267(f)-1 Controlled groups.
- § 1.312-11 Effect on earnings and profits of certain other tax-free exchanges, tax-free distributions, and tax-free transfers from one corporation to another.
- § 1.334-1 Basis of property received in liquidations.
- § 1.336-2 Availability, mechanics, and consequences of section 336(e) election.
- § 1.337-1 Nonrecognition for property distributed to parent in complete liquidation of subsidiary.
- § 1.338(h)(10)-1 Deemed asset sale and liquidation.
- § 1.355-6 Recognition of gain on certain distributions of stock or securities in controlled corporation.
- § 1.367(a)-0 Table of contents.
- § 1.367(a)-1 Transfers to foreign corporations subject to section 367(a): In general.
- § 1.367(a)-1T Transfers to foreign corporations subject to section 367(a): In general (temporary).
- § 1.367(a)-8 Gain recognition agreement requirements.
- § 1.367(b)-0 Table of contents.
- § 1.367(b)-1 Other transfers.
- § 1.367(b)-2 Definitions and special rules.
- § 1.367(b)-3 Repatriation of foreign corporate assets in certain nonrecognition transactions.
- § 1.367(b)-3T Repatriation of foreign corporate assets in certain nonrecognition transactions (temporary).
- § 1.367(d)-1 Transfers of intangible property to foreign corporations.
Show 59 more
- § 1.367(d)-1T Transfers of intangible property to foreign corporations (temporary).
- § 1.367(e)-2 Distributions described in section 367(e)(2).
- § 1.368-2 Definition of terms.
- § 1.381(a)-1 General rule relating to carryovers in certain corporate acquisitions.
- § 1.381(c)(4)-1 Method of accounting.
- § 1.381(c)(5)-1 Inventory method.
- § 1.381(c)(22)-1 Successor life insurance company.
- § 1.451-3 Timing of income inclusion for taxpayers with an applicable financial statement using an accrual method of accounting.
- § 1.453-9 Gain or loss on disposition of installment obligations.
- § 1.453-11 Installment obligations received from a liquidating corporation.
- § 1.460-4 Methods of accounting for long-term contracts.
- § 1.467-7 Section 467 recapture and other rules relating to dispositions and modifications.
- § 1.597-5 Taxable Transfers.
- § 1.617-4 Treatment of gain from disposition of certain mining property.
- § 1.861-15 Income from certain aircraft or vessels first leased on or before December 28, 1980.
- § 1.861-16 Income from certain craft first leased after December 28, 1980.
- § 1.865-1 Loss with respect to personal property other than stock.
- § 1.865-2 Loss with respect to stock.
- § 1.884-2T Special rules for termination or incorporation of a U.S. trade or business or liquidation or reorganization of a foreign corporation or its domestic subsidiary (temporary).
- § 1.897-3 Election by foreign corporation to be treated as a domestic corporation under section 897(i).
- § 1.897-4AT Table of contents (temporary).
- § 1.897-5T Corporate distributions (temporary).
- § 1.897-6T Nonrecognition exchanges applicable to corporations, their shareholders, and other taxpayers, and certain transfers of property in corporate reorganizations (temporary).
- § 1.921-1T Temporary regulations providing transition rules for DISCs and FSCs.
- § 1.936-11 New lines of business prohibited.
- § 1.954-6 Foreign base company shipping income.
- § 1.987-0 Table of contents.
- § 1.987-8 Termination of a section 987 QBU.
- § 1.987-11 Suspended section 987 loss relating to certain elections; loss-to-the-extent-of-gain rule.
- § 1.987-13 Suspended section 987 loss upon terminations.
- § 1.995-4 Gain on disposition of stock in a DISC.
- § 1.1245-4 Exceptions and limitations.
- § 1.1245-6 Relation of section 1245 to other sections.
- § 1.1248-1 Treatment of gain from certain sales or exchanges of stock in certain foreign corporations.
- § 1.1248-8 Earnings and profits attributable to stock following certain non-recognition transactions.
- § 1.1250-1 Gain from dispositions of certain depreciable realty.
- § 1.1250-3 Exceptions and limitations.
- § 1.1251-1 General rule for treatment of gain from disposition of property used in farming where farm losses offset nonfarm income.
- § 1.1251-4 Exceptions and limitations.
- § 1.1252-1 General rule for treatment of gain from disposition of farm land.
- § 1.1252-2 Special rules.
- § 1.1254-0 Table of contents for section 1254 recapture rules.
- § 1.1254-2 Exceptions and limitations.
- § 1.1361-4 Effect of QSub election.
- § 1.1374-3 Net unrealized built-in gain.
- § 1.1502-13 Intercompany transactions.
- § 1.1502-19 Excess loss accounts.
- § 1.1502-32 Investment adjustments.
- § 1.1502-33 Earnings and profits.
- § 1.1502-34 Special aggregate stock ownership rules.
- § 1.1502-35 Transfers of subsidiary stock and deconsolidations of subsidiaries.
- § 1.1502-36 Unified loss rule.
- § 1.1502-80 Applicability of other provisions of law.
- § 1.6038B-1 Reporting of certain transfers to foreign corporations.
- § 1.6043-2 Return of information respecting distributions in liquidation.
- § 1.9006-1 Interest and penalties in case of certain taxable years.
- § 58.4501-5 Examples.
- § 301.7701-3 Classification of certain business entities.
- § 601.201 Rulings and determinations letters.
Amendment history
From the source credit and the official notes, newest first.
- Amended by Pub. L. 115–141Parts changed in 2018: (d)(2)(B)
- Amended by Pub. L. 109–135Parts changed in 2005: (d)(1)(B)
- Amended by Pub. L. 108–357Parts changed in 2004: (d)
- Amended by Pub. L. 105–277Parts changed in 1998: (b) (c)
- Amended by Pub. L. 99–514Parts changed in 1986: (b)(1) (c)
- Enacted by Pub. L. 94–455Parts changed in 1976: (b)
Where it sits in the Code
- Subtitle A Income Taxes
- Chapter 1 NORMAL TAXES AND SURTAXES
- Subchapter C Corporate Distributions and Adjustments
- Part II CORPORATE LIQUIDATIONS
- Subpart A Effects on Recipients
Nearby sections
- § 331 Gain or loss to shareholder in corporate liquidations
- § 332 Complete liquidations of subsidiaries
- § 333 Repealed
- § 334 Basis of property received in liquidations
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
Amendments
2018—Subsec. (d)(2)(B). Pub. L. 115–141 substituted “paragraph (2)” for “paragraphs (2) and (4)”.
2005—Subsec. (d)(1)(B). Pub. L. 109–135 substituted “distribution of property to which section 301 applies” for “distribution to which section 301 applies”.
2004—Subsec. (d). Pub. L. 108–357 added subsec. (d).
1998—Subsec. (b). Pub. L. 105–277, § 3001(b)(1), substituted “this section” for “subsection (a)” in introductory provisions.
Subsec. (c). Pub. L. 105–277, § 3001(a), added subsec. (c).
1986—Subsec. (b)(1). Pub. L. 99–514, § 1804(e)(6)(A), amended par. (1) generally. Prior to amendment, par. (1) read as follows: “the corporation receiving such property was, on the date of the adoption of the plan of liquidation, and has continued to be at all times until the receipt of the property, the owner of stock (in such other corporation) possessing at least 80 percent of the total combined voting power of all classes of stock entitled to vote and the owner of at least 80 percent of the total number of shares of all other classes of stock (except nonvoting stock which is limited and preferred as to dividends); and either”.
Subsec. (c). Pub. L. 99–514, § 631(e)(2), struck out subsec. (c) containing special rule for indebtedness of subsidiary to parent in relation to complete liquidations of subsidiaries.
1976—Subsec. (b). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.
Statutory Notes and Related Subsidiaries
Effective Date of 2004 Amendment
Pub. L. 108–357, title VIII, § 893(b), Oct. 22, 2004, 118 Stat. 1647, provided that: “The amendment made by this section [amending this section] shall apply to distributions in complete liquidation occurring on or after the date of the enactment of this Act [Oct. 22, 2004].”
Effective Date of 1998 Amendment
Pub. L. 105–277, div. J, title III, § 3001(c), Oct. 21, 1998, 112 Stat. 2681–904, provided that: “The amendments made by this section [amending this section and section 334 of this title] shall apply to distributions after May 21, 1998.”
Effective Date of 1986 Amendment
Amendment by section 631(e)(2) of Pub. L. 99–514 applicable to any distribution in complete liquidation, and any sale or exchange, made by a corporation after July 31, 1986, unless such corporation is completely liquidated before Jan. 1, 1987, any transaction described in section 338 of this title for which the acquisition date occurs after Dec. 31, 1986, and any distribution, not in complete liquidation, made after Dec. 31, 1986, with exceptions and special and transitional rules, see section 633 of Pub. L. 99–514, set out as an Effective Date note under section 336 of this title.
Pub. L. 99–514, title XVIII, § 1804(e)(6)(B), Oct. 22, 1986, 100 Stat. 2803, provided that:
“(i) In general.— Except as provided in clause (iii), the amendment made by subparagraph (A) [amending this section] shall apply with respect to plans of complete liquidation adopted after March 28, 1985.“(ii) Certain distributions made after december 31, 1984.— Except as provided in clause (iii), the amendment made by subparagraph (A) shall also apply with respect to plans of complete liquidations adopted on or before March 28, 1985, pursuant to which any distribution is made in a taxable year beginning after December 31, 1984 (December 31, 1983, in the case of an affiliated group to which an election under section 60(b)(7) of the Tax Reform Act of 1984 [Pub. L. 98–369, set out as a note under section 1504 of this title] applies), but only if the liquidating corporation and any corporation which receives a distribution in complete liquidation of such corporation are members of an affiliated group of corporations filing a consolidated return for the taxable year which includes the date of the distribution.“(iii) Transitional rule for affiliated groups.— The amendment made by subparagraph (A) shall not apply with respect to plans of complete liquidation if the liquidating corporation is a member of an affiliated group of corporations under section 60(b) (2), (5), (6), or (8) of the Tax Reform Act of 1984 [Pub. L. 98–369, set out as a note under section 1504 of this title], for all taxable years which include the date of any distribution pursuant to such plan.”
Savings Provision
For provisions that nothing in amendment by Pub. L. 115–141 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Mar. 23, 2018, for purposes of determining liability for tax for periods ending after Mar. 23, 2018, see section 401(e) of Pub. L. 115–141, set out as a note under section 23 of this title.
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.