Internal Revenue Code · 26 U.S.C.
§ 354. Exchanges of stock and securities in certain reorganizations
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. § 354
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Enacted
- March 31, 1976 by Pub. L. 94–253
- Last amended
- July 22, 1998 by Pub. L. 105–206
- Amendments
- 6 dated changes in the source credit
- Length
- 3 subsections · 743 words · about 3 min to read
- Defines
- 1 term
- Cross-references
- cites 6; cited by 11 Code sections and 57 other regulations
- Regulations
- 1 issued under this section
No gain or loss shall be recognized if stock or securities in a corporation a party to a reorganization are, in pursuance of the plan of reorganization, exchanged solely for stock or securities in such corporation or in another corporation a party to the reorganization.
Neither paragraph (1) nor so much of section 356 as relates to paragraph (1) shall apply to the extent that any stock (including nonqualified preferred stock, as defined in section 351(g)(2)), securities, or other property received is attributable to interest which has accrued on securities on or after the beginning of the holder’s holding period.
Nonqualified preferred stock (as defined in section 351(g)(2)) received in exchange for stock other than nonqualified preferred stock (as so defined) shall not be treated as stock or securities.
Clause (i) shall not apply in the case of a recapitalization under section 368(a)(1)(E) of a family-owned corporation.
For purposes of this clause, except as provided in regulations, the term “family-owned corporation” means any corporation which is described in clause (i) of section 447(d)(2)(C) 11 See References in Text note below. throughout the 8-year period beginning on the date which is 5 years before the date of the recapitalization. For purposes of the preceding sentence, stock shall not be treated as owned by a family member during any period described in section 355(d)(6)(B).
The statutory period for the assessment of any deficiency attributable to a corporation failing to be a family-owned corporation shall not expire before the expiration of 3 years after the date the Secretary is notified by the corporation (in such manner as the Secretary may prescribe) of such failure, and such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment.
For special rules for certain exchanges in pursuance of plans of reorganization within the meaning of subparagraph (D) or (G) of section 368(a)(1), see section 355.
Notwithstanding any other provision of this subchapter, subsection (a)(1) (and so much of section 356 as relates to this section) shall apply with respect to a plan of reorganization (whether or not a reorganization within the meaning of section 368(a)) for a railroad confirmed under section 1173 of title 11 of the United States Code, as being in the public interest.
(Aug. 16, 1954, ch. 736, 68A Stat. 112; Pub. L. 94–253, § 1(c), Mar. 31, 1976, 90 Stat. 296; Pub. L. 95–473, § 2(a)(2)(F), Oct. 17, 1978, 92 Stat. 1465; Pub. L. 96–589, §§ 4(e)(1), (h)(1), 6(i)(2), Dec. 24, 1980, 94 Stat. 3403, 3404, 3410; Pub. L. 101–508, title XI, § 11801(c)(8)(D), Nov. 5, 1990, 104 Stat. 1388–524; Pub. L. 104–88, title III, § 304(c), Dec. 29, 1995, 109 Stat. 944; Pub. L. 105–34, title X, § 1014(b), (e)(1), (2), Aug. 5, 1997, 111 Stat. 920, 921; Pub. L. 105–206, title VI, § 6010(e)(2), July 22, 1998, 112 Stat. 814.)
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 § 354
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 6 other sections
- § 356 Receipt of additional consideration
- § 351(g)(2) Transfer to corporation controlled by transferor
- § 447(d) Method of accounting for corporations engaged in farming
- § 355(d)(6)(B) Distribution of stock and securities of a controlled corporation
- § 61 Gross income defined
- § 368(a)(1) Definitions relating to corporate reorganizations
Cited by 11 Code sections
- § 83(g) Property transferred in connection with performance of services
- § 108(e)(7)(A)(iii) Income from discharge of indebtedness
- § 351(g)(4) Transfer to corporation controlled by transferor
- § 356(a)(1)(A) Receipt of additional consideration
- § 368(a)(1)(D) Definitions relating to corporate reorganizations
- § 381(a)(2) Carryovers in certain corporate acquisitions
- § 382(g)(3)(A)(i) Limitation on net operating loss carryforwards and certain built-in losses following ownership change
- § 424(c)(1)(B) Definitions and special rules
- § 953(d)(4)(A) Insurance income
- § 1276(d)(1)(B) Disposition gain representing accrued market discount treated as ordinary income
- § 7466(b) Judicial conduct and disability procedures
Cited in 57 regulations not issued under it
- § 1.61-9 Dividends.
- § 1.83-8 Applicability of section and transitional rules.
- § 1.108-7 Reduction of attributes.
- § 1.245A(e)-1 Special rules for hybrid dividends.
- § 1.263(a)-5 Amounts paid or incurred to facilitate an acquisition of a trade or business, a change in the capital structure of a business entity, and certain other transactions.
- § 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.
- § 1.338-3 Qualification for the section 338 election.
- § 1.355-6 Recognition of gain on certain distributions of stock or securities in controlled corporation.
- § 1.356-1 Receipt of additional consideration in connection with an exchange.
- § 1.356-3 Rules for treatment of securities as “other property”.
- § 1.356-5 Transactions involving gift or compensation.
- § 1.356-6 Rules for treatment of nonqualified preferred stock as other property.
- § 1.356-7 Rules for treatment of nonqualified preferred stock and other preferred stock received in certain transactions.
- § 1.358-1 Basis to distributees.
- § 1.358-2 Allocation of basis among nonrecognition property.
- § 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)-3 Treatment of transfers of stock or securities to foreign corporations.
- § 1.367(a)-7 Outbound transfers of property described in section 361(a) or (b).
- § 1.367(a)-8 Gain recognition agreement requirements.
- § 1.367(b)-0 Table of contents.
- § 1.367(b)-2 Definitions and special rules.
- § 1.367(b)-4 Acquisition of foreign corporate stock or assets by a foreign corporation in certain nonrecognition transactions.
- § 1.367(b)-10 Acquisition of parent stock or securities for property in triangular reorganizations.
Show 33 more
- § 1.367(b)-13 Special rules for determining basis and holding period.
- § 1.368-1 Purpose and scope of exception of reorganization exchanges.
- § 1.368-2 Definition of terms.
- § 1.368-3 Records to be kept and information to be filed with returns.
- § 1.381(a)-1 General rule relating to carryovers in certain corporate acquisitions.
- § 1.381(c)(2)-1 Earnings and profits.
- § 1.381(c)(4)-1 Method of accounting.
- § 1.381(c)(5)-1 Inventory method.
- § 1.382-2T Definition of ownership change under section 382, as amended by the Tax Reform Act of 1986 (temporary).
- § 1.385-3 Certain distributions of debt instruments and similar transactions.
- § 1.424-1 Definitions and special rules applicable to statutory options.
- § 1.460-4 Methods of accounting for long-term contracts.
- § 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).
- § 1.956-2 Definition of United States property.
- § 1.995-4 Gain on disposition of stock in a DISC.
- § 1.996-3 Divisions of earnings and profits.
- § 1.1015-5 Increased basis for gift tax paid.
- § 1.1232-3 Gain upon sale or exchange of obligations issued at a discount after December 31, 1954.
- § 1.1232-3A Inclusion as interest of original issue discount on certain obligations issued after May 27, 1969.
- § 1.1233-1 Gains and losses from short sales.
- § 1.1248-8 Earnings and profits attributable to stock following certain non-recognition transactions.
- § 1.1272-2 Treatment of debt instruments purchased at a premium.
- § 1.1400Z2(a)-1 Deferring tax on capital gains by investing in opportunity zones.
- § 1.1502-13 Intercompany transactions.
- § 1.1502-19 Excess loss accounts.
- § 1.1502-35 Transfers of subsidiary stock and deconsolidations of subsidiaries.
- § 1.6038B-1 Reporting of certain transfers to foreign corporations.
- § 20.2032-1 Alternate valuation.
- § 58.4501-1 Excise tax on stock repurchases.
- § 58.4501-2 General rules regarding excise tax on stock repurchases.
- § 58.4501-5 Examples.
- § 58.4501-7 Special rules for acquisitions or repurchases of stock of certain foreign corporations.
Amendment history
From the source credit and the official notes, newest first.
- Amended by Pub. L. 105–206Parts changed in 1998: (a)(2)(C)(ii)(III)
- Amended by Pub. L. 105–34Parts changed in 1997: (a)(2)(B) (a)(2)(C) (a)(3)(A)
- Amended by Pub. L. 104–88Parts changed in 1995: (c)
- Amended by Pub. L. 101–508Parts changed in 1990: (d)
- Amended by Pub. L. 96–589Parts changed in 1980: (a)(2) (a)(3) (b) (c)
- Amended by Pub. L. 95–473Parts changed in 1978: (c)
- Enacted by Pub. L. 94–253Parts changed in 1976: (d)
Where it sits in the Code
- Subtitle A Income Taxes
- Chapter 1 NORMAL TAXES AND SURTAXES
- Subchapter C Corporate Distributions and Adjustments
- Part III CORPORATE ORGANIZATIONS AND REORGANIZATIONS
- Subpart B Effects on Shareholders and Security Holders
Nearby sections
- § 354 Exchanges of stock and securities in certain reorganizations
- § 355 Distribution of stock and securities of a controlled corporation
- § 356 Receipt of additional consideration
- § 357 Assumption of liability
- § 358 Basis to distributees
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
References in Text
Section 447(d), referred to in subsec. (a)(2)(C)(ii)(II), was repealed and provisions not relating to family-owned corporations were redesignated as section 447(d) by Pub. L. 115–97, title I, § 13102(a)(5)(C), Dec. 22, 2017, 131 Stat. 2103.
Amendments
1998—Subsec. (a)(2)(C)(ii)(III). Pub. L. 105–206 added subcl. (III).
1997—Subsec. (a)(2)(B). Pub. L. 105–34, § 1014(e)(1), inserted “(including nonqualified preferred stock, as defined in section 351(g)(2))” after “stock”.
Subsec. (a)(2)(C). Pub. L. 105–34, § 1014(b), added subpar. (C).
Subsec. (a)(3)(A). Pub. L. 105–34, § 1014(e)(2), inserted “nonqualified preferred stock and” after “subsection (including”.
1995—Subsec. (c). Pub. L. 104–88 struck out “or approved by the Interstate Commerce Commission under subchapter IV of chapter 113 of title 49,” after “Code,”.
1990—Subsec. (d). Pub. L. 101–508 struck out subsec. (d) “Exchanges under the final system plan for ConRail” which read as follows: “No gain or loss shall be recognized if stock or securities in a corporation are, in pursuance of an exchange to which paragraph (1) or (2) of section 374(c) applies, exchanged solely for stock of the Consolidated Rail Corporation, securities of such Corporation, certificates of value of the United States Railway Association, or any combination thereof.”
1980—Subsec. (a)(2). Pub. L. 96–589, § 4(e)(1), redesignated existing pars. (A) and (B) as par. (A)(i), (ii), and added par. (B).
Subsec. (a)(3). Pub. L. 96–589, § 4(e)(1), designated existing provisions as subpar. (A), inserted provisions excluding property to which paragraph (2)(B) applies, and added subpar. (B).
Subsec. (b). Pub. L. 96–589, § 4(h)(1), substituted “subparagraph (D) or (G) of section 368(a)(1)” for “section 368(a)(1)(D)”, wherever appearing.
Subsec. (c). Pub. L. 96–589, § 6(i)(2), substituted “confirmed under section 1173 of title 11 of the United States Code, or approved by the Interstate Commerce Commission” for “approved by the Interstate Commerce Commission under section 77 of the Bankruptcy Act, or”.
1978—Subsec. (c). Pub. L. 95–473 substituted “subchapter IV of chapter 113 of title 49” for “section 20b of the Interstate Commerce Act”.
1976—Subsec. (d). Pub. L. 94–253 added subsec. (d).
Statutory Notes and Related Subsidiaries
Effective Date of 1998 Amendment
Amendment by Pub. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title.
Effective Date of 1997 Amendment
Amendment by Pub. L. 105–34 applicable, with certain exceptions, to transactions after June 8, 1997, see section 1014(f) of Pub. L. 105–34, set out as a note under section 351 of this title.
Effective Date of 1995 Amendment
Amendment by Pub. L. 104–88 effective Jan. 1, 1996, see section 2 of Pub. L. 104–88, set out as an Effective Date note under section 1301 of Title 49, Transportation.
Effective Date of 1980 Amendment
Amendment by section 4(e)(1) of Pub. L. 96–589 applicable to bankruptcy cases or similar judicial proceedings commencing after Dec. 31, 1980, and to exchanges which occur after Dec. 31, 1980, and which do not occur in a bankruptcy case or similar judicial proceeding or in a proceeding under Title 11, Bankruptcy, commenced on or before Dec. 31, 1980, with an exception permitting the debtor to make the amendment applicable to such cases, proceedings or exchanges commencing after Sept. 30, 1979, see section 7(c), (f) of Pub. L. 96–589, set out as a note under section 108 of this title.
Amendment by section 4(h)(1) of Pub. L. 96–589 applicable to bankruptcy cases or similar judicial proceedings commencing after Dec. 31, 1980, with an exception permitting the debtor to make the amendment applicable to such cases or proceedings commencing after Sept. 30, 1979, see section 7(c)(1), (f) of Pub. L. 96–589, set out as a note under section 108 of this title.
Amendment by section 6(i)(2) of Pub. L. 96–589 effective Oct. 1, 1979, but not applicable to any proceeding under Title 11 commenced before Oct. 1, 1979, see section 7(e) of Pub. L. 96–589, set out as a note under section 108 of this title.
Effective Date of 1976 Amendment
Pub. L. 94–253, § 2, Mar. 31, 1976, 90 Stat. 297, provided that: “The amendments made by section 1 [amending this section and sections 356, 358, and 374 of this title] shall apply to taxable years ending after March 31, 1976.”
Savings Provision
For provisions that nothing in amendment by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.
Abolition of United States Railway Association and Transfer of Functions
United States Railway Association abolished effective Apr. 1, 1987, all powers, duties, rights, and obligations of Association relating to Consolidated Rail Corporation under Regional Rail Reorganization Act of 1973 (45 U.S.C. 701 et seq.) transferred to Secretary of Transportation on Jan. 1, 1987, and any securities of Corporation held by Association transferred to Secretary of Transportation on Oct. 21, 1986, see section 1341 of Title 45, Railroads.