§ 305.
(b)
Exceptions
Subsection (a) shall not apply to a distribution by a corporation of its stock, and the distribution shall be treated as a distribution of property to which section 301 applies—
(1)
Distributions in lieu of money
If the distribution is, at the election of any of the shareholders (whether exercised before or after the declaration thereof), payable either—
(2)
Disproportionate distributions
If the distribution (or a series of distributions of which such distribution is one) has the result of—
(A)
the receipt of property by some shareholders, and
(B)
an increase in the proportionate interests of other shareholders in the assets or earnings and profits of the corporation.
(3)
Distributions of common and preferred stock
If the distribution (or a series of distributions of which such distribution is one) has the result of—
(A)
the receipt of preferred stock by some common shareholders, and
(B)
the receipt of common stock by other common shareholders.
(4)
Distributions on preferred stock
(5)
Distributions of convertible preferred stock
(c)
Certain transactions treated as distributions
For purposes of this section and section 301, the Secretary shall prescribe regulations under which a change in conversion ratio, a change in redemption price, a difference between redemption price and issue price, a redemption which is treated as a distribution to which section 301 applies, or any transaction (including a recapitalization) having a similar effect on the interest of any shareholder shall be treated as a distribution with respect to any shareholder whose proportionate interest in the earnings and profits or assets of the corporation is increased by such change, difference, redemption, or similar transaction. Regulations prescribed under the preceding sentence shall provide that—
(1)
where the issuer of stock is required to redeem the stock at a specified time or the holder of stock has the option to require the issuer to redeem the stock, a redemption premium resulting from such requirement or option shall be treated as reasonable only if the amount of such premium does not exceed the amount determined under the principles of section 1273(a)(3),
(2)
a redemption premium shall not fail to be treated as a distribution (or series of distributions) merely because the stock is callable, and
(3)
in any case in which a redemption premium is treated as a distribution (or series of distributions), such premium shall be taken into account under principles similar to the principles of section 1272(a).
(e)
Treatment of purchaser of stripped preferred stock
(1)
In general
If any person purchases after April 30, 1993, any stripped preferred stock, then such person, while holding such stock, shall include in gross income amounts equal to the amounts which would have been so includible if such stripped preferred stock were a bond issued on the purchase date and having original issue discount equal to the excess, if any, of—
(A)
the redemption price for such stock, over
(B)
the price at which such person purchased such stock.
The preceding sentence shall also apply in the case of any person whose basis in such stock is determined by reference to the basis in the hands of such purchaser.
(3)
Tax treatment of person stripping stock
(4)
Amounts treated as ordinary income
(5)
Stripped preferred stock
For purposes of this subsection—
(B)
Description of stock
Stock is described in this subsection if such stock—
(i)
is limited and preferred as to dividends and does not participate in corporate growth to any significant extent, and
(ii)
has a fixed redemption price.
(6)
Purchase
For purposes of this subsection, the term “purchase” means—
(A)
any acquisition of stock, where
(B)
the basis of such stock is not determined in whole or in part by the reference to the adjusted basis of such stock in the hands of the person from whom acquired.
([Aug. 16, 1954, ch. 736], [68A Stat. 90]; [Pub. L. 91–172, title IV, § 421(a)], Dec. 30, 1969, [83 Stat. 614]; [Pub. L. 94–455, title XIX, § 1906(b)(13)(A)], Oct. 4, 1976, [90 Stat. 1834]; [Pub. L. 97–34, title III, § 321(a)], (b), Aug. 13, 1981, [95 Stat. 287], 289; [Pub. L. 97–448, title I, § 103(f)], Jan. 12, 1983, [96 Stat. 2378]; [Pub. L. 101–508, title XI], §§ 11322(a), 11801(a)(17), (c)(7), Nov. 5, 1990, [104 Stat. 1388–463], 1388–521, 1388–524; [Pub. L. 103–66, title XIII, § 13206(c)(1)], Aug. 10, 1993, [107 Stat. 465]; [Pub. L. 108–357, title VIII, § 831(b)], Oct. 22, 2004, [118 Stat. 1587]; [Pub. L. 115–141, div. U, title IV, § 401(c)(2)(D)], Mar. 23, 2018, [132 Stat. 1206].)