§5881 — Title 26 Internal Revenue Code | U.S. Code

Summary

A 50% tax must be paid by anyone who gets a payment that counts as "greenmail" — basically profit or other income from a company (or someone working with the company) buying back a shareholder’s stock under certain conditions. Greenmail happens when the shareholder held the stock less than 2 years, certain people connected to the shareholder were involved during that 2‑year period, and the buyback offer was not made on the same terms to all shareholders. "Public tender offer" means an offer that must be filed with a federal or state securities agency. "Related" means people connected in the way covered by sections 267 or 707(b). The 50% tax applies even if the gain is not otherwise recognized. For tax deficiency rules, this tax is handled like the taxes under subtitle A.

Title 26, §5881

Internal Revenue Code — Source: USLM XML via OLRC

(a)There is hereby imposed on any person who receives greenmail a tax equal to 50 percent of gain or other income of such person by reason of such receipt.

(b)For purposes of this section, the term “greenmail” means any consideration transferred by a corporation (or any person acting in concert with such corporation) to directly or indirectly acquire stock of such corporation from any shareholder if—

(1)such shareholder held such stock (as determined under section 1223) for less than 2 years before entering into the agreement to make the transfer,

(2)at some time during the 2-year period ending on the date of such acquisition—

(A)such shareholder,

(B)any person acting in concert with such shareholder, or

(C)any person who is related to such shareholder or person described in subparagraph (B),

(3)such acquisition is pursuant to an offer which was not made on the same terms to all shareholders.

(c)For purposes of this section—

(1)The term “public tender offer” means any offer to purchase or otherwise acquire stock or assets in a corporation if such offer was or would be required to be filed or registered with any Federal or State agency regulating securities.

(2)A person is related to another person if the relationship between such persons would result in the disallowance of losses under section 267 or 707(b).

(d)The tax imposed by this section shall apply whether or not the gain or other income referred to in subsection (a) is recognized.

(e)For purposes of the deficiency procedures of subtitle F, any tax imposed by this section shall be treated as a tax imposed by subtitle A.

Notes & Related Subsidiaries

Editorial Notes

Amendments

1988—Subsec. (a). Pub. L. 100–647, § 2004(o)(1)(A), substituted “gain or other income of such person by reason of such receipt” for “gain realized by such person on such receipt”. Subsec. (b). Pub. L. 100–647, § 2004(o)(1)(B)(i), substituted “a corporation (or any person acting in concert with such corporation) to directly or indirectly acquire stock of such corporation” for “a corporation to directly or indirectly acquire its stock”. Subsec. (d). Pub. L. 100–647, § 2004(o)(1)(C), substituted “amount” for “gain” in heading and inserted “or other income” after “the gain” in text. Subsec. (e). Pub. L. 100–647, § 2004(o)(2), added subsec. (e).

Statutory Notes and Related Subsidiaries

Effective Date

of 1988 AmendmentAmendment by section 2004(o)(1)(A), (C), (2) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provisions of the Revenue Act of 1987, Pub. L. 100–203, title X, to which such amendment relates, see section 2004(u) of Pub. L. 100–647, set out as a note under section 56 of this title. Pub. L. 100–647, title II, § 2004(o)(1)(B)(ii), Nov. 10, 1988, 102 Stat. 3608, provided that: “The amendment made by clause (i) [amending this section] shall apply to transactions occurring on or after March 31, 1988.”

Effective Date

Pub. L. 100–203, title X, § 10228(d), Dec. 22, 1987, 101 Stat. 1330–418, provided that: “The

Amendments

made by this section [enacting this chapter and amending section 275 of this title] shall apply to consideration received after the date of the enactment of this Act [Dec. 22, 1987] in taxable years ending after such date; except that such

Amendments

shall not apply in the case of any acquisition pursuant to a written binding contract in effect on December 15, 1987, and at all times thereafter before the acquisition.”

§5881 Greenmail

Summary

Title 26, §5881

Notes & Related Subsidiaries

Editorial Notes

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

Amendments

Amendments

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