Title 26 — Internal Revenue CodeRelease 119-73
§5881 Greenmail
Title 26 › Subtitle Subtitle E— Alcohol, Tobacco, and Certain Other Excise Taxes › Chapter 54— GREENMAIL › § 5881
Summary
Anyone who receives "greenmail" owes a tax equal to 50 percent of the gain or other income from it. Greenmail means payments a corporation (or someone acting with it) makes to buy back its own stock from a shareholder who held the stock for less than 2 years, when the buyback offer was not made on the same terms to all shareholders. The tax applies whether or not the gain is recognized for tax purposes, and people related to the shareholder are counted under the related-party rules.
Full Legal Text
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.
Legislative History
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.”
Reference
Citations & Metadata
Citation
26 U.S.C. § 5881
Title 26 — Internal Revenue Code
Last Updated
Apr 6, 2026
Release point: 119-73