§152. Basis of property received in liquidations

A. General rule. If property is received in a distribution in partial or complete liquidation and if gain or loss is recognized on receipt of such property, then the basis of the property in the hands of the distributee shall be the fair market value of such property at the time of the distribution, except as provided in Subsections B and C of this Section.

B. Liquidation of subsidiary.

(1) In general. If property is received by a corporation in a distribution in complete liquidation of another corporation (within the meaning of R.S. 47:133 F(2)), then, except as provided in Subsection B(2) of this Section, the basis of the property in the hands of the distributee shall be the same as it would be in the hands of the transferor. If property is received by a corporation in a transfer to which R.S. 47:133 F(3) applies, and if Subsection B(2) of this Section does not apply, then the basis of the property in the hands of the transferee shall be the same as it would be in the hands of the transferor.

(2) Exception. If property is received by a corporation in a distribution in complete liquidation of another corporation (within the meaning of R.S. 47:133 F(2), and if,

(a) the distribution is pursuant to a plan of liquidation adopted,

(i) on or after January 1, 1958, and

(ii) not more than 2 years after the date of the transaction described in Subsection B(2)(b) of this Section, (or, in the case of a series of transactions, the date of the last such transaction); and

(b) stock of the distributing corporation possessing at least 80% of the total combined voting power of all classes of stock entitled to vote, and at least 80% of the total number of shares of all other classes of stock (except nonvoting stock which is limited and preferred as to dividends), was acquired by the distributee by purchase (as defined in Subsection B(3) of this Section) during a period of not more than 12 months, then the basis of the property in the hands of the distributee shall be the adjusted basis of the stock with respect to which the distribution was made. For purposes of the preceding sentence, under regulations prescribed by the collector, proper adjustment in the adjusted basis of any stock shall be made for any distribution made to the distributee with respect to such stock before the adoption of the plan of liquidation, for any money received, for any liabilities assumed or subject to which the property was received, and for other items.

(3) Purchase defined. For purposes of Subsection B(2)(b) of this Section, the term "purchase" means any acquisition of stock, but only if,

(a) the basis of the stock in the hands of the distributee is not determined (i) in whole or in part by reference to the adjusted basis of such stock in the hands of the person from whom acquired, or (ii) under R.S. 47:145 (relating to property acquired from a decedent), and

(b) the stock is not acquired in an exchange to which R.S. 47:133 E applies.

(4) Distributee defined. For purposes of this Subsection, the term "distributee" means only the corporation which meets the 80% stock ownership requirements specified in R.S. 47:133 F(2).

C. Exceptions.

If the property was acquired by a shareholder in the liquidation of a corporation in cancellation or redemption of stock with respect to which gain was realized but with respect to which the gain was not taxable in whole or in part under the law as applicable to the year in which the property was received in liquidation (including gains a portion of which are not recognized as a result of elections under R.S. 47:133 G), then the basis shall be the same as the basis of such stock cancelled or redeemed in the liquidation, decreased in the amount of any money received by him, and increased in the amount of any gain taxable to him under the law applicable to the year in which the property was received in liquidation. For purposes of the preceding sentence the basis of property received in such liquidation shall be allocated among the various classes of property under regulations prescribed by the collector.

Amended by Acts 1958, No. 443, §8.