§269 — Title 26 Internal Revenue Code | U.S. Code

Summary

The Treasury Secretary can stop or limit tax breaks when a company takeover or asset purchase is mainly done to avoid federal income tax. This covers when someone gets control of a corporation, when a corporation buys another company’s property and uses the seller’s tax basis for that property, and when one corporation makes a "qualified stock purchase," does not make an election under section 338, then liquidates the bought company within 2 years mainly to get deductions, credits, or other tax benefits. The terms "qualified stock purchase" and "acquisition date" mean the same as they do in section 338. The Secretary may allow some or all of the disputed deductions or credits if they won’t cause the tax avoidance. Or the Secretary may move or split income and the tax benefits among the companies or assets involved and allow them only to the extent they won’t produce the tax avoidance. The Secretary can also use a mix of these options.

Title 26, §269

Internal Revenue Code — Source: USLM XML via OLRC

(a)If—

(1)any person or persons acquire, directly or indirectly, control of a corporation, or

(2)any corporation acquires, directly or indirectly, property of another corporation, not controlled, directly or indirectly, immediately before such acquisition, by such acquiring corporation or its stockholders, the basis of which property, in the hands of the acquiring corporation, is determined by reference to the basis in the hands of the transferor corporation,

(b)(1)If—

(A)there is a qualified stock purchase by a corporation of another corporation,

(B)an election is not made under section 338 with respect to such purchase,

(C)the acquired corporation is liquidated pursuant to a plan of liquidation adopted not more than 2 years after the acquisition date, and

(D)the principal purpose for such liquidation is the evasion or avoidance of Federal income tax by securing the benefit of a deduction, credit, or other allowance which the acquiring corporation would not otherwise enjoy,

(2)For purposes of paragraph (1), the terms “qualified stock purchase” and “acquisition date” have the same respective meanings as when used in section 338.

(c)In any case to which subsection (a) or (b) applies the Secretary is authorized—

(1)to allow as a deduction, credit, or allowance any part of any amount disallowed by such subsection, if he determines that such allowance will not result in the evasion or avoidance of Federal income tax for which the acquisition was made; or

(2)to distribute, apportion, or allocate gross income, and distribute, apportion, or allocate the deductions, credits, or allowances the benefit of which was sought to be secured, between or among the corporations, or properties, or parts thereof, involved, and to allow such deductions, credits, or allowances so distributed, apportioned, or allocated, but to give effect to such allowance only to such extent as he determines will not result in the evasion or avoidance of Federal income tax for which the acquisition was made; or

(3)to exercise his powers in part under paragraph (1) and in part under paragraph (2).

Notes & Related Subsidiaries

Editorial Notes

Amendments

2014—Subsec. (a). Pub. L. 113–295 struck out “or acquired on or after October 8, 1940,” after “persons acquire,” in par. (1) and after “corporation acquires,” in par. (2). 1984—Subsecs. (b), (c). Pub. L. 98–369 added subsec. (b), redesignated former subsec. (b) as (c) and inserted reference to subsec. (b). 1976—Subsecs. (a), (b). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary” wherever appearing. Subsec. (c). Pub. L. 94–455, § 1901(a)(38), struck out subsec. (c) relating to presumptions in the case of disproportionate purchase price. 1964—Subsec. (a). Pub. L. 88–272 substituted “the Secretary or his delegate may disallow such deduction, credit, or other allowance” for “such deduction, credit or other allowance shall not be allowed”.

Statutory Notes and Related Subsidiaries

Effective Date

of 2014 AmendmentAmendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a

Savings Provision

, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

Effective Date

of 1984 Amendment Pub. L. 98–369, div. A, title VII, § 712(k)(8)(C), July 18, 1984, 98 Stat. 952, provided that: “The

Amendments

made by this paragraph [amending this section] shall apply to liquidations after October 20, 1983, in taxable years ending after such date.”

Effective Date

of 1964 Amendment Pub. L. 88–272, title II, § 235(d), Feb. 26, 1964, 78 Stat. 127, provided that: “The

Amendments

made by subsections (a) and (c) [enacting sections 1561 to 1563 of this title and amending this section and section 441 and 802 of this title] shall apply with respect to taxable years ending after

December 31, 1963. The amendment made by subsection (b) [amending section 1551 of this title] shall apply with respect to transfers made after

June 12, 1963.”

§269 Acquisitions made to evade or avoid income tax

Summary

Title 26, §269

Notes & Related Subsidiaries

Editorial Notes

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Savings Provision

Effective Date

Amendments

Effective Date

Amendments

Citations & Metadata