Internal Revenue Code · 26 U.S.C.
§ 356. Receipt of additional consideration
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. § 356
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
- August 5, 1997 by Pub. L. 105–34
- Amendments
- 3 dated changes in the source credit
- Length
- 7 subsections · 820 words · about 4 min to read
- Defines
- 6 terms
- Cross-references
- cites 8; cited by 13 Code sections and 51 other regulations
- Regulations
- 7 issued under this section
If an exchange is described in paragraph (1) but has the effect of the distribution of a dividend (determined with the application of section 318(a)), then there shall be treated as a dividend to each distributee such an amount of the gain recognized under paragraph (1) as is not in excess of his ratable share of the undistributed earnings and profits of the corporation accumulated after February 28, 1913. The remainder, if any, of the gain recognized under paragraph (1) shall be treated as gain from the exchange of property.
The term “other property” does not include securities to the extent that, under section 354 or 355, such securities would be permitted to be received without the recognition of gain.
If, in an exchange or distribution described in section 355, the principal amount of the securities in the controlled corporation which are received exceeds the principal amount of the securities in the distributing corporation which are surrendered, then, with respect to such securities received, the term “other property” means only the fair market value of such excess.
Except as provided in paragraph (2), the term “other property” includes nonqualified preferred stock (as defined in section 351(g)(2)).
The term “other property” does not include nonqualified preferred stock (as so defined) to the extent that, under section 354 or 355, such preferred stock would be permitted to be received without the recognition of gain.
Notwithstanding any other provision of this section, to the extent that any of the other property (or money) is received in exchange for section 306 stock, an amount equal to the fair market value of such other property (or the amount of such money) shall be treated as a distribution of property to which section 301 applies.
(Aug. 16, 1954, ch. 736, 68A Stat. 115; Pub. L. 94–253, § 1(c), Mar. 31, 1976, 90 Stat. 296; Pub. L. 97–248, title II, § 227(b), Sept. 3, 1982, 96 Stat. 492; Pub. L. 101–508, title XI, § 11801(c)(8)(E), Nov. 5, 1990, 104 Stat. 1388–524; Pub. L. 105–34, title X, § 1014(d), Aug. 5, 1997, 111 Stat. 921.)
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 § 356
- § 1.356-1 Receipt of additional consideration in connection with an exchange.
- § 1.356-2 Receipt of additional consideration not in connection with an exchange.
- § 1.356-3 Rules for treatment of securities as “other property”.
- § 1.356-4 Exchanges for section 306 stock.
- § 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.
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 8 other sections
- § 354 Exchanges of stock and securities in certain reorganizations
- § 318(a) Constructive ownership of stock
- § 355 Distribution of stock and securities of a controlled corporation
- § 301 Distributions of property
- § 351(g)(2) Transfer to corporation controlled by transferor
- § 306 Dispositions of certain stock
- § 2501 Imposition of tax
- § 61(a)(1) Gross income defined
Cited by 13 Code sections
- § 306(c)(1)(B)(i) Dispositions of certain stock
- § 312(h)(1) Effect on earnings and profits
- § 351(c)(2) Transfer to corporation controlled by transferor
- § 354(a)(2)(B) Exchanges of stock and securities in certain reorganizations
- § 355(a)(3)(B) Distribution of stock and securities of a controlled corporation
- § 358(b)(2) Basis to distributees
- § 367(c)(1) Foreign corporations
- § 368(a)(2)(H)(ii) Definitions relating to corporate reorganizations
- § 453(f)(6)(C) Installment method
- § 856(c)(8) Definition of real estate investment trust
- § 1059(e)(1)(B) Corporate shareholder’s basis in stock reduced by nontaxed portion of extraordinary dividends
- § 1223(1)(B) Holding period of property
- § 6166(g)(1)(C) Extension of time for payment of estate tax where estate consists largely of interest in closely held business
Cited in 51 regulations not issued under it
- § 1.59A-3 Base erosion payments and base erosion tax benefits.
- § 1.61-9 Dividends.
- § 1.245A-5 Limitation of section 245A deduction and section 954(c)(6) exception.
- § 1.245A(e)-1 Special rules for hybrid dividends.
- § 1.303-2 Requirements.
- § 1.306-3 Section 306 stock defined.
- § 1.312-7 Effect on earnings and profits of gain or loss realized after February 28, 1913.
- § 1.312-10 Allocation of earnings in certain corporate separations.
- § 1.336-2 Availability, mechanics, and consequences of section 336(e) election.
- § 1.337(d)-7 Tax on property owned by a C corporation that becomes property of a RIC or REIT.
- § 1.338-3 Qualification for the section 338 election.
- § 1.346-1 Partial liquidation.
- § 1.354-1 Exchanges of stock and securities in certain reorganizations.
- § 1.355-1 Distribution of stock and securities of a controlled corporation.
- § 1.355-2 Limitations.
- § 1.355-5 Records to be kept and information to be filed.
- § 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.
- § 1.355-8 Definition of predecessor and successor and limitations on gain recognition under section 355(e) and section 355(f).
- § 1.358-1 Basis to distributees.
- § 1.358-2 Allocation of basis among nonrecognition property.
- § 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.
Show 27 more
- § 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)-5 Distributions of stock described in section 355.
- § 1.367(b)-10 Acquisition of parent stock or securities for property in triangular reorganizations.
- § 1.368-1 Purpose and scope of exception of reorganization exchanges.
- § 1.368-3 Records to be kept and information to be filed with returns.
- § 1.385-3 Certain distributions of debt instruments and similar transactions.
- § 1.385-4 Treatment of consolidated groups.
- § 1.460-4 Methods of accounting for long-term contracts.
- § 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).
- § 1.996-7 Carryover of DISC tax attributes.
- § 1.1059(e)-1 Non-pro rata redemptions.
- § 1.1223-1 Determination of period for which capital assets are held.
- § 1.1361-5 Termination of QSub election.
- § 1.1366-2 Limitations on deduction of passthrough items of an S corporation to its shareholders.
- § 1.1368-2 Accumulated adjustments account (AAA).
- § 1.1400Z2(b)-1 Inclusion of gains that have been deferred under section 1400Z-2(a).
- § 1.1502-13 Intercompany transactions.
- § 1.1502-32 Investment adjustments.
- § 1.7701(l)-4 Rules regarding inversion transactions.
- § 20.6166A-3 Acceleration of payment.
- § 31.3406(b)(2)-4 Reportable dividend payment.
- § 58.4501-1 Excise tax on stock repurchases.
- § 58.4501-3 Exceptions.
- § 58.4501-4 Application of netting rule.
- § 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. 105–34Parts changed in 1997: (e)
- Amended by Pub. L. 101–508Parts changed in 1990: (d)(2)(B)(i)
- Amended by Pub. L. 97–248Parts changed in 1982: (a)(2)
- Enacted by Pub. L. 94–253Parts changed in 1976: (d)(2)(B)(i)
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
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
Amendments
1997—Subsecs. (e) to (g). Pub. L. 105–34 added subsec. (e) and redesignated former subsecs. (e) and (f) as (f) and (g), respectively.
1990—Subsec. (d)(2)(B)(i). Pub. L. 101–508 struck out “or (d)” after “subsection (c)”.
1982—Subsec. (a)(2). Pub. L. 97–248 inserted “(determined with the application of section 318(a))” after “distribution of a dividend”.
1976—Subsec. (d)(2)(B)(i). Pub. L. 94–253 substituted “subsection (c) or (d) thereof” for “subsection (c) thereof”.
Statutory Notes and Related Subsidiaries
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 1982 Amendment
Pub. L. 97–248, title II, § 227(c)(2), Sept. 3, 1982, 96 Stat. 492, provided that: “The amendment made by subsection (b) [amending this section] shall apply to distributions after August 31, 1982, in taxable years ending after such date.”
Effective Date of 1976 Amendment
Amendment by Pub. L. 94–253 applicable to taxable years ending after Mar. 31, 1976, see section 2 of Pub. L. 94–253, set out as a note under section 354 of this title.
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.