Current through Register Vol. 42, No. 11, August 30, 2024
(1) For transactions occurring after July 31,
1986 - the election to recognize gain on certain liquidations pertaining to 26 U.S.C. §
333 has been repealed under the provisions of Act 90-583 and
Public Law 99-514.
(2) For
transactions after December 31, 1984, and before August 1, 1986 - In the case
of a shareholder who has made a valid election pursuant to 26 U.S.C. §
333 to recognize gain in certain liquidations for federal income tax purposes, then
in the case of property distributed in complete liquidation of a corporation
incorporated under the laws of the United States, or any state or political
subdivision thereof, if -
(a) the liquidation
is made in pursuance of a plan of liquidation adopted, and
(b) the distribution is in complete
cancellation or redemption of all the stock, and the transfer of all the
property under the liquidation occurs within some one calendar month, then in
the case of each qualified electing shareholder (as defined in 26 U.S.C. §
333) gain on the shares owned by him at the time of the adoption of the
plan of liquidation shall be recognized only to the extent provided in
paragraph (2) below.
(3)
(a) in the case of a qualified electing
shareholder other than a corporation -
1.
there shall be recognized, and treated as a dividend, so much of the gain as is
not in excess of his ratable share of the earnings and profits of the
corporation accumulated after December 31, 1932. Such earnings and profits are
to be determined as of the close of the month in which the transfer in
liquidation occurred under subparagraph (1)(b) above, but without diminution by
reason of distributions made during such month; but by including in the
computation thereof all amounts accrued up to the date on which the transfer of
all the property under the liquidation is completed; and
2. there shall be recognized, and treated as
a gain from the sale or exchange of property, so much of the remainder of the
gain as is not in excess of the amount by which the value of that portion of
the assets received by him which consists of money, or of stock or securities
acquired by the corporation after December 31, 1932, exceeds his ratable share
of such earnings and profits.
(b) In the case of a qualified electing
shareholder which is a corporation, the gain shall be recognized only to the
extent of the greater of the following -
1.
the portion of the assets received by it which consists of money, or of stock
or securities acquired by the liquidating corporation after December 31, 1932;
or
2. its ratable share of the
earnings and profits of the liquidating corporation accumulated after December
31, 1932, such earnings and profits to be determined as of the close of the
month in which the transfer in liquidation occurred under subparagraph (1)(b)
above, but without diminution by reason of distributions made during such
month, but by including in the computation thereof all amounts accrued up to
the date on which the transfer of all the property under the liquidation is
completed.
Authors: Verlon R. Frost, Jeff
Taylor
Statutory Authority:
Code of Ala.
1975, §§
40-2A-7(a)(5),
40-18-8.
