Internal Revenue Code · 26 U.S.C.
§ 361. Nonrecognition of gain or loss to corporations; treatment of distributions
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. § 361
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Enacted
- October 22, 1986 by Pub. L. 99–514
- Last amended
- December 21, 2005 by Pub. L. 109–135
- Amendments
- 4 dated changes in the source credit
- Length
- 3 subsections · 814 words · about 4 min to read
- Defines
- 1 term
- Cross-references
- cites 4; cited by 7 Code sections and 51 other regulations
- Regulations
- 1 issued under this section
No gain or loss shall be recognized to a corporation if such corporation is a party to a reorganization and exchanges property, in pursuance of the plan of reorganization, solely for stock or securities in another corporation a party to the reorganization.
If the corporation receiving such other property or money distributes it in pursuance of the plan of reorganization, no gain to the corporation shall be recognized from the exchange, but
If the corporation receiving such other property or money does not distribute it in pursuance of the plan of reorganization, the gain, if any, to the corporation shall be recognized.
If subsection (a) would apply to an exchange but for the fact that the property received in exchange consists not only of property permitted by subsection (a) to be received without the recognition of gain or loss, but also of other property or money, then no loss from the exchange shall be recognized.
For purposes of paragraph (1), any transfer of the other property or money received in the exchange by the corporation to its creditors in connection with the reorganization shall be treated as a distribution in pursuance of the plan of reorganization. The Secretary may prescribe such regulations as may be necessary to prevent avoidance of tax through abuse of the preceding sentence or subsection (c)(3). In the case of a reorganization described in section 368(a)(1)(D) with respect to which stock or securities of the corporation to which the assets are transferred are distributed in a transaction which qualifies under section 355, this paragraph shall apply only to the extent that the sum of the money and the fair market value of other property transferred to such creditors does not exceed the adjusted bases of such assets transferred (reduced by the amount of the liabilities assumed (within the meaning of section 357(c))).
Except as provided in paragraph (2), no gain or loss shall be recognized to a corporation a party to a reorganization on the distribution to its shareholders of property in pursuance of the plan of reorganization.
If any property distributed in the distribution referred to in paragraph (1) is subject to a liability or the shareholder assumes a liability of the distributing corporation in connection with the distribution, then, for purposes of subparagraph (A), the fair market value of such property shall be treated as not less than the amount of such liability.
For purposes of this subsection, any transfer of qualified property by the corporation to its creditors in connection with the reorganization shall be treated as a distribution to its shareholders pursuant to the plan of reorganization.
Section 311 and subpart B of part II of this subchapter shall not apply to any distribution referred to in paragraph (1).
For provision providing for recognition of gain in certain distributions, see section 355(d).
(Aug. 16, 1954, ch. 736, 68A Stat. 118; Pub. L. 99–514, title XVIII, § 1804(g)(1), Oct. 22, 1986, 100 Stat. 2805; Pub. L. 100–647, title I, § 1018(d)(5)(A), Nov. 10, 1988, 102 Stat. 3578; Pub. L. 101–508, title XI, § 11321(b), Nov. 5, 1990, 104 Stat. 1388–463; Pub. L. 108–357, title VIII, § 898(a), Oct. 22, 2004, 118 Stat. 1649; Pub. L. 109–135, title IV, § 403(jj)(1), Dec. 21, 2005, 119 Stat. 2632.)
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 § 361
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 4 other sections
- § 368(a)(1)(D) Definitions relating to corporate reorganizations
- § 355 Distribution of stock and securities of a controlled corporation
- § 357(c) Assumption of liability
- § 311 Taxability of corporation on distribution
Cited by 7 Code sections
- § 332(b)(3) Complete liquidations of subsidiaries
- § 336(c) Gain or loss recognized on property distributed in complete liquidation
- § 355(d)(1) Distribution of stock and securities of a controlled corporation
- § 357(c)(1)(B) Assumption of liability
- § 358(f) Basis to distributees
- § 367(a)(4) Foreign corporations
- § 381(a)(2) Carryovers in certain corporate acquisitions
Cited in 51 regulations not issued under it
- § 1.59A-3 Base erosion payments and base erosion tax benefits.
- § 1.108-7 Reduction of attributes.
- § 1.332-2 Requirements for nonrecognition of gain or loss.
- § 1.338-3 Qualification for the section 338 election.
- § 1.338(h)(10)-1 Deemed asset sale and liquidation.
- § 1.355-8 Definition of predecessor and successor and limitations on gain recognition under section 355(e) and section 355(f).
- § 1.357-2 Liabilities in excess of basis.
- § 1.362-4 Basis of loss duplication 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)-3 Repatriation of foreign corporate assets in certain nonrecognition transactions.
- § 1.367(b)-4 Acquisition of foreign corporate stock or assets by a foreign corporation in certain nonrecognition transactions.
- § 1.368-1 Purpose and scope of exception of reorganization exchanges.
- § 1.368-2 Definition of terms.
- § 1.381(a)-1 General rule relating to carryovers in certain corporate acquisitions.
- § 1.381(c)(1)-1 Net operating loss carryovers in certain corporate acquisitions.
- § 1.381(c)(1)-2 Net operating loss carryovers; two or more dates of distribution or transfer in the taxable year.
- § 1.381(c)(2)-1 Earnings and profits.
- § 1.381(c)(3)-1 Capital loss carryovers.
- § 1.381(c)(4)-1 Method of accounting.
- § 1.381(c)(5)-1 Inventory method.
Show 27 more
- § 1.381(c)(11)-1 Contributions to pension plan, employees' annuity plans, and stock bonus and profit-sharing plans.
- § 1.381(c)(20)-1 Carryforward of disallowed business interest.
- § 1.381(c)(22)-1 Successor life insurance company.
- § 1.381(c)(23)-1 Investment credit carryovers in certain corporate acquisitions.
- § 1.385-3 Certain distributions of debt instruments and similar transactions.
- § 1.451-3 Timing of income inclusion for taxpayers with an applicable financial statement using an accrual method of accounting.
- § 1.460-4 Methods of accounting for long-term contracts.
- § 1.617-4 Treatment of gain from disposition of certain mining property.
- § 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).
- § 1.995-5 Foreign investment attributable to producer's loans.
- § 1.1232-3 Gain upon sale or exchange of obligations issued at a discount after December 31, 1954.
- § 1.1245-4 Exceptions and limitations.
- § 1.1248-8 Earnings and profits attributable to stock following certain non-recognition transactions.
- § 1.1248(f)-1 Certain nonrecognition distributions.
- § 1.1248(f)-2 Exceptions for certain distributions and attribution rules.
- § 1.1250-3 Exceptions and limitations.
- § 1.1252-2 Special rules.
- § 1.1254-2 Exceptions and limitations.
- § 1.1502-13 Intercompany transactions.
- § 1.1502-19 Excess loss accounts.
- § 1.1502-35 Transfers of subsidiary stock and deconsolidations of subsidiaries.
- § 1.1502-36 Unified loss rule.
- § 1.6038B-1 Reporting of certain transfers to foreign corporations.
- § 1.7874-2 Surrogate foreign corporation.
- § 1.7874-6 Stock transferred by members of the EAG.
- § 1.7874-10 Disregard of certain distributions.
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 III CORPORATE ORGANIZATIONS AND REORGANIZATIONS
- Subpart C Effects on Corporations
Nearby sections
- § 361 Nonrecognition of gain or loss to corporations; treatment of distributions
- § 362 Basis to corporations
- § 363 Repealed
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
Amendments
2005—Subsec. (b)(3). Pub. L. 109–135 inserted before period at end “(reduced by the amount of the liabilities assumed (within the meaning of section 357(c)))”.
2004—Subsec. (b)(3). Pub. L. 108–357 inserted at end “In the case of a reorganization described in section 368(a)(1)(D) with respect to which stock or securities of the corporation to which the assets are transferred are distributed in a transaction which qualifies under section 355, this paragraph shall apply only to the extent that the sum of the money and the fair market value of other property transferred to such creditors does not exceed the adjusted bases of such assets transferred.”
1990—Subsec. (c)(5). Pub. L. 101–508 added par. (5).
1988—Pub. L. 100–647 substituted “corporations; treatment of distributions” for “transferor corporations; other treatment of transferor corporation; etc.” in section catchline and amended text generally, revising content and structure of section.
1986—Pub. L. 99–514 amended section generally. Prior to amendment, section related to whether gain or loss was recognized if corporation which was party to reorganization exchanged property, pursuant to plan of reorganization, for stock or securities in another corporation which was party to the reorganization or for other property or money.
Statutory Notes and Related Subsidiaries
Effective Date of 2005 Amendment
Amendment by Pub. L. 109–135 effective as if included in the provision of the American Jobs Creation Act of 2004, Pub. L. 108–357, to which such amendment relates, see section 403(nn) of Pub. L. 109–135, set out as a note under section 26 of this title.
Effective Date of 2004 Amendment
Amendment by Pub. L. 108–357 applicable to transfers of money or other property, or liabilities assumed, in connection with a reorganization occurring on or after Oct. 22, 2004, see section 898(c) of Pub. L. 108–357, set out as a note under section 357 of this title.
Effective Date of 1990 Amendment
Amendment by Pub. L. 101–508 applicable to distributions after Oct. 9, 1990, but not applicable to any distribution pursuant to a written binding contract in effect on Oct. 9, 1990, and at all times thereafter before such distribution, see section 11321(c) of Pub. L. 101–508, set out as a note under section 355 of this title.
Effective Date of 1988 Amendment
Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.
Effective Date of 1986 Amendment
Pub. L. 99–514, title XVIII, § 1804(g)(4), Oct. 22, 1986, 100 Stat. 2806, provided that: “The amendments made by this subsection [amending this section and section 368 of this title] shall apply to plans of reorganizations adopted after the date of the enactment of this Act [Oct. 22, 1986].”
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.