26 U.S.C. § 304: Redemption through use of related corporations

one or more persons are in control of each of two corporations, and in return for property, one of the corporations acquires stock in the other corporation from the person (or persons) so in control, in return for property, one corporation acquires from a shareholder of another corporation stock in such other corporation, and the issuing corporation controls the acquiring corporation, In the case of any acquisition of stock to which subsection (a) of this section applies, determinations as to whether the acquisition is, by reason of section 302(b), to be treated as a distribution in part or full payment in exchange for the stock shall be made by reference to the stock of the issuing corporation. In applying section 318(a) (relating to constructive ownership of stock) with respect to section 302(b) for purposes of this paragraph, sections 318(a)(2)(C) and 318(a)(3)(C) shall be applied without regard to the 50 percent limitation contained therein. by the acquiring corporation to the extent of its earnings and profits, and then by the issuing corporation to the extent of its earnings and profits. Except as otherwise provided in this paragraph, subsection (a) (and not section 351 and not so much of sections 357 and 358 as relates to section 351) shall apply to any property received in a distribution described in subsection (a). assumed by the acquiring corporation, or to which the stock is subject, For purposes of clause (i), an extension, renewal, or refinancing of a liability which meets the requirements of clause (i) shall be treated as meeting such requirements. none of whose stock is attributable to the transferor under section 318(a) (other than paragraph (4) thereof), or who satisfies rules similar to the rules of section 302(c)(2) with respect to both the acquiring and the issuing corporations (determined as if such person were a distributee of each such corporation). pursuant to a plan, control of a bank is acquired and within 2 years after the date on which such control is acquired, stock constituting control of such bank is transferred to a BHC in connection with its formation, incident to the formation of the BHC there is a distribution of property described in subsection (a), and the shareholders of the BHC who receive distributions of such property do not have control of such BHC, The term “qualified minority shareholder” means any shareholder who owns less than 10 percent (in value) of the stock of the BHC. For purposes of the preceding sentence, the rules of paragraph (3) of subsection (c) shall apply. The term “BHC” means a bank holding company (within the meaning of section 2(a) of the Bank Holding Company Act of 1956). the adjusted basis of any intragroup stock, and the earnings and profits of any member of such group, The term “affiliated group” has the meaning given such term by section 1504(a). is in a corporation which is a member of an affiliated group, and is held by another member of such group. a United States shareholder (within the meaning of section 951(b)) of the acquiring corporation, and the transferor or a person who bears a relationship to the transferor described in section 267(b) or 707(b), and which were accumulated during the period or periods such stock was owned by such person while the acquiring corporation was a controlled foreign corporation. be subject to tax under this chapter for the taxable year in which the dividends arise, nor be includible in the earnings and profits of a controlled foreign corporation (as defined in section 957 and without regard to section 953(c)). The Secretary shall prescribe such regulations as are appropriate to carry out the purposes of this paragraph. In the case of any acquisition to which subsection (a) applies in which the acquiring corporation or the issuing corporation is a foreign corporation, the Secretary shall prescribe such regulations as are appropriate in order to eliminate a multiple inclusion of any item in income by reason of this subpart and to provide appropriate basis adjustments (including modifications to the application of sections 959 and 961). For purposes of this section, control means the ownership of stock possessing at least 50 percent of the total combined voting power of all classes of stock entitled to vote, or at least 50 percent of the total value of shares of all classes of stock. If a person (or persons) is in control (within the meaning of the preceding sentence) of a corporation which in turn owns at least 50 percent of the total combined voting power of all stock entitled to vote of another corporation, or owns at least 50 percent of the total value of the shares of all classes of stock of another corporation, then such person (or persons) shall be treated as in control of such other corporation. Where 1 or more persons in control of the issuing corporation transfer stock of such corporation in exchange for stock of the acquiring corporation, the stock of the acquiring corporation received shall be taken into account in determining whether such person or persons are in control of the acquiring corporation. Where 2 or more persons in control of the issuing corporation transfer stock of such corporation to the acquiring corporation and, after the transfer, the transferors are in control of the acquiring corporation, the person or persons in control of each corporation shall include each of the persons who so transfer stock. Section 318(a) (relating to constructive ownership of stock) shall apply for purposes of determining control under this section. paragraph (2)(C) of section 318(a) shall be applied by substituting “5 percent” for “50 percent”, and by substituting “5 percent” for “50 percent”, and in any case where such paragraph would not apply but for subclause (I), by considering a corporation as owning the stock (other than stock in such corporation) owned by or for any shareholder of such corporation in that proportion which the value of the stock which such shareholder owned in such corporation bears to the value of all stock in such corporation. The amendments made by this section [amending this section and section 1059 of this title ] shall apply to distributions and acquisitions after June 8, 1997 . made pursuant to a written agreement which was binding on such date and at all times thereafter, described in a ruling request submitted to the Internal Revenue Service on or before such date, or described in a public announcement or filing with the Securities and Exchange Commission on or before such date.” The amendments made by this section [amending this section and sections 337 and 355 of this title] shall apply to distributions or transfers after December 15, 1987 . 80 percent or more of the stock of the distributing corporation was acquired by the distributee before December 15, 1987 , or 80 percent or more of the stock of the distributing corporation was acquired by the distributee before January 1, 1989 , pursuant to a binding written contract or tender offer in effect on December 15, 1987 . between corporations which are members of the same affiliated group on December 15, 1987 , or between corporations which become members of the same affiliated group pursuant to a binding written contract or tender offer in effect on December 15, 1987 . The amendments made by this section shall not apply to any distribution to which the amendments made by subtitle D of title VI of the Tax Reform Act of 1986 [sections 631 to 634 of Pub. L. 99–514 , see Tables for classification] do not apply. For purposes of subparagraph (A), all corporations which were in existence on the designated date and were members of the same affiliated group which included the distributees on such date shall be treated as 1 distributee. Clause (i) shall not exempt any distribution from the amendments made by this section if such distribution is with respect to stock not held by the distributee (determined without regard to clause (i)) on the designated date directly or indirectly through a corporation which goes out of existence in the transaction. December 15, 1987 , or the date on which the acquisition meeting the requirements of subparagraph (A) occurred.” Except as otherwise provided in this paragraph, the amendments made by paragraphs (1) and (3) [amending this section] shall apply to stock acquired after June 18, 1984 , in taxable years ending after such date. Any taxpayer may elect, at such time and in such manner as the Secretary of the Treasury or his delegate may prescribe, to have the amendments made by paragraphs (1) and (3) apply as if included in section 226 of the Tax Equity and Fiscal Responsibility Act of 1982 [ section 226 of Pub. L. 97–248 , which amended this section and section 306 of this title and enacted Effective Date of 1982 Amendment note set out below]. such BHC was formed not later than the 90th day after the date of the last required approval of any regulatory authority to form such BHC, and such BHC did not elect (at such time and in such manner as the Secretary of the Treasury or his delegate shall prescribe) not to have the provisions of this subparagraph apply. The amendment made by paragraph (3)(A) shall apply to the acquisition of any stock to the extent the liability assumed, or to which such stock is subject, was incurred by the transferor after October 20, 1983 .” Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 306 and 351 of this title] shall apply to transfers occurring after August 31, 1982 , in taxable years ending after such date. the 90th day after the date of the last required approval of any regulatory authority to form such BHC, or January 1, 1983 .