§ 301. Distributions of property
(b)
Amount distributed
(1)
General rule
For purposes of this section, the amount of any distribution shall be the amount of money received, plus the fair market value of the other property received.
(c)
Amount taxable
In the case of a distribution to which subsection (a) applies—
(1)
Amount constituting dividend
That portion of the distribution which is a dividend (as defined in section
316) shall be included in gross income.
(2)
Amount applied against basis
That portion of the distribution which is not a dividend shall be applied against and reduce the adjusted basis of the stock.
(3)
Amount in excess of basis
(A)
In general
Except as provided in subparagraph (B), that portion of the distribution which is not a dividend, to the extent that it exceeds the adjusted basis of the stock, shall be treated as gain from the sale or exchange of property.
(B)
Distributions out of increase in value accrued before March 1, 1913
That portion of the distribution which is not a dividend, to the extent that it exceeds the adjusted basis of the stock and to the extent that it is out of increase in value accrued before March 1, 1913, shall be exempt from tax.
(d)
Basis
The basis of property received in a distribution to which subsection (a) applies shall be the fair market value of such property.
(e)
Special rule for certain distributions received by 20 percent corporate shareholder
(1)
In general
Except to the extent otherwise provided in regulations, solely for purposes of determining the taxable income of any 20 percent corporate shareholder (and its adjusted basis in the stock of the distributing corporation), section
312 shall be applied with respect to the distributing corporation as if it did not contain subsections (k) and (n) thereof.
(2)
20 percent corporate shareholder
For purposes of this subsection, the term “20 percent corporate shareholder” means, with respect to any distribution, any corporation which owns (directly or through the application of section
318)—
(A)
stock in the corporation making the distribution possessing at least 20 percent of the total combined voting power of all classes of stock entitled to vote, or
(3)
Application of section
312
(n)(7) not affected
The reference in paragraph (1) to subsection (n) of section
312 shall be treated as not including a reference to paragraph (7) of such subsection.
(f)
Special rules
(3)
For distributions in corporate organizations and reorganizations, see part III (sec.
351 and following).