La. Revenue and Taxation § 47:133

Current with operative changes from the 2024 Third Special Legislative Session

Section 47:133 - Recognition of gain or loss; exchanges solely in kind

A. Property held for productive use or investment. No gain or loss shall be recognized if property held for productive use in trade or business or for investment (not including stock in trade or other property held primarily for sale, nor stocks, bonds, notes, choses in action, certificates of trust or beneficial interest, or other securities or evidences of indebtedness or interest) is exchanged solely for property of a like kind to be held either for productive use in trade or business or for investment.

B. Stock for stock of same corporation. No gain or loss shall be recognized if common stock in a corporation is exchanged solely for common stock in the same corporation, or if preferred stock in a corporation is exchanged solely for preferred stock in the same corporation.

C. Exchanges of stock or securities in certain reorganizations.

(1) General rule

(a) In general. No gain or loss shall be recognized if stock or securities in a corporation a party to a reorganization are, in pursuance of the plan of reorganization, exchanged solely for stock or securities in such corporation or in another corporation a party to the reorganization.

(b) Limitation. Subsection C(1)(a) of this Section shall not apply if:

(i) the principal amount of any such securities received exceeds the principal amount of any such securities surrendered, or

(ii) any such securities are received and no such securities are surrendered.

(2) Exception.

(a) In general. Subsection C(1) of this Section shall not apply to an exchange in pursuance of a plan or reorganization within the meaning of R.S. 47:138-A(1)(d), unless:

(i) the corporation to which the assets are transferred acquires substantially all of the assets of the transferor of such assets; and

(ii) the stock, securities, and other properties received by such transferor, as well as the other properties of such transferor, are distributed in pursuance of the plan of reorganization.

D. Nonrecognition of gain or loss to corporations. No gain or loss shall be recognized if a corporation a party to a reorganization exchanges property, in pursuance of the plan of reorganization, solely for stock or securities in another corporation a party to the reorganization.

E. Transfer to corporation controlled by transferor.

(1) General rule. No gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock or securities in such corporation and immediately after the exchange such person or persons are in control of the corporation. For purposes of this Subsection, stock or securities issued for services shall not be considered as issued in return for property.

(2) Receipt of property. If Subsection E(1) of this Section would apply to an exchange but for the fact that there is received, in addition to the stock or securities permitted to be received under Subsection E(1) of this Section, other property or money, then:

(a) gain (if any) to such recipient shall be recognized, but not in excess of:

(i) the amount of money received, plus

(ii) the fair market value of such other property received:

(b) no loss to such recipient shall be recognized.

(3) Special rule. In determining whether control exists, for purposes of this Subsection, the fact that any corporate transferor distributes part or all of the stock which it receives in the exchange to its shareholders shall not be taken into account.

(4) Control. For purposes of Subsection E(1) of this Section, the term "control" means the ownership of at least 80 per cent of the total voting power of all voting stock and the ownership of at least 80 per cent of the total number of shares of all of the stock of the corporation.

F. Complete liquidations of subsidiaries.

(1) General rule. No gain or loss shall be recognized on the receipt by a corporation of property distributed in complete liquidation of another corporation.

(2) Liquidations to which this Subsection applies. For purposes of Subsection F(1) of this Section, a distribution shall be considered to be in complete liquidation only if:

(a) the corporation receiving such property was, on the date of the adoption of the plan of liquidation, and has continued to be at all times until the receipt of the property, the owner of stock (in such other corporation) possessing at least 80 per cent of the total combined voting power of all classes of stock entitled to vote and the owner of at least 80 per cent of the total number of shares of all other classes of stock (except nonvoting stock which is limited and preferred as to dividends) of such other corporation; and either

(b) the distribution is by such other corporation in complete cancellation or redemption of all its stock, and the transfer of all the property occurs within the taxable year; in which case the adoption by the shareholders of the resolution under which is authorized the distribution of all the assets of such corporation in complete cancellation or redemption of all its stock shall be considered an adoption of a plan of liquidation, even though no time for the completion of the transfer of the property is specified in such resolution; or

(c) such distribution is one of a series of distributions by such other corporation in complete cancellation or redemption of all its stock in accordance with a plan of liquidation under which the transfer of all the property under the liquidation is to be completed within 3 years from the close of the taxable year during which is made the first of the series of distributions under the plan, except that if such transfer is not completed within such period, or if the taxpayer does not continue qualified under Subsection F(2)(a) of this Section until the completion of such transfer, no distribution under the plan shall be considered a distribution in complete liquidation.

If such transfer of all the property does not occur within the taxable year, the collector may require of the taxpayer such bond, or waiver of the statute of limitations on assessment and collection, or both, as he may deem necessary to insure the assessment and collection of all income taxes then imposed by law for such taxable year or subsequent taxable years, to the extent attributable to property so received. A distribution otherwise constituting a distribution in complete liquidation within the meaning of this paragraph shall not be considered as not constituting such a distribution merely because it does not constitute a distribution or liquidation within the meaning of the corporate law under which the distribution is made; and for purposes of this paragraph a transfer of property of such other corporation to the taxpayer shall not be considered as not constituting a distribution (or one of a series of distributions) in complete cancellation or redemption of all the stock of such other corporation, merely because the carrying out of the plan involves (i) the transfer under the plan to the taxpayer by such other corporation of property, not attributable to shares owned by the taxpayer, on an exchange described in R.S. 47:133 D, and (ii) the complete cancellation or redemption under the plan, as a result of exchanges described in R.S. 47:133 C, of the shares not owned by the taxpayer.

(3) Special rule for indebtedness of subsidiary to parent. If:

(a) a corporation is liquidated and Subsection F(1) of this Section applies to such liquidation, and

(b) on the date of the adoption of the plan of liquidation, such corporation was indebted to the corporation which meets the 80 per cent stock ownership requirements specified in Subsection F(2) of this Section, then no gain or loss shall be recognized to the corporation so indebted because of the transfer of property in satisfaction of such indebtedness.

G. Election as to recognition of gain in certain liquidations.

(1) General rule. In the case of property distributed in complete liquidation of a corporation, if:

(a) the liquidation is made in pursuance of a plan of liquidation adopted on or after January 1, 1958, 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 Subsection G(3) of this Section, 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 Subsections G(5) and G(6) of this Section.

(2) Excluded corporation. For purposes of this Subsection, the term "excluded corporation" means a corporation which at any time between January 1, 1954, and the date of the adoption of the plan of liquidation, both dates inclusive, was the owner of stock possessing 50 per cent or more of the total combined voting power of all classes of stock entitled to vote on the adoption of such plan.

(3) Qualified electing shareholders. For purposes of this Subsection, the term "qualified electing shareholder" means a shareholder (other than an excluded corporation) of any class of stock (whether or not entitled to vote on the adoption of the plan of liquidation) who is a shareholder at the time of the adoption of such plan, and whose written election to have the benefits of Subsection G(1) of this Section has been made and filed in accordance with Subsection G(4) of this Section, but,

(a) in the case of a shareholder other than a corporation, only if written elections have been so filed by shareholders (other than corporations) who at the time of the adoption of the plan of liquidation are owners of stock possessing at least 80 per cent of the total voting power (exclusive of voting power possessed by stock owned by corporations) of all classes of stock entitled to vote on the adoption of such plan of liquidation; or

(b) in the case of a shareholder which is a corporation, only if written elections have been so filed by corporate shareholders (other than an excluded corporation) which at the time of the adoption of such plan of liquidation are owners of stock possessing at least 80 per cent of the total combined voting power (exclusive of voting power possessed by stock owned by an excluded corporation and by shareholders who are not corporations) of all classes of stock entitled to vote on the adoption of such plan of liquidation.

(4) Making and filing of elections. The written elections referred to in Subsection G(3) of this Section must be made and filed in such manner as to be not in contravention of regulations prescribed by the collector. The filing must be within 30 days after the date of the adoption of the plan of liquidation.

(5) Noncorporate shareholders. In the case of a qualified electing shareholder other than a corporation:

(a) 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, 1933, such earnings and profits to be determined as of the close of the month in which the transfer in liquidation occurred under Subsection G(1)(b) of this Section, 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

(b) there shall be recognized and treated as capital gain, 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, 1953, exceeds his ratable share of such earnings and profits.

(6) Corporate shareholders. 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 two following:

(a) 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, 1953; or

(b) its ratable share of the earnings and profits of the liquidating corporation accumulated after December 31, 1933, such earnings and profits to be determined as of the close of the month in which the transfer in liquidation occurred under Subsection G(1)(b) of this Section, 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.

H. Distribution of stock and securities of a controlled corporation.

(1) Effect on distributees.

(a) General rule. If:

(i) a corporation (referred to in this Subsection as the "distributing corporation")

(A) distributes to a shareholder, with respect to its stock, or

(B) distributes to a security holder, in exchange for its securities, solely stock or securities of a corporation (referred to in this Subsection as "controlled corporation") which it controls immediately before the distribution,

(ii) the transaction was not used principally as a device for the distribution of the earnings and profits of the distributing corporation or the controlled corporation or both (but the mere fact that subsequent to the distribution, stock or securities in one or more of such corporations are sold or exchanged by all or some of the distributees (other than pursuant to an arrangement negotiated or agreed upon prior to such distribution) shall not be construed to mean that the transaction was used principally as such a device),

(iii) the requirements of Subsection H(2) of this Section (relating to active businesses) are satisfied, and

(iv) as part of the distribution, the distributing corporation distributes

(A) all of the stock and securities in the controlled corporation held by it immediately before the distribution, or

(B) an amount of stock in the controlled corporation constituting control within the meaning of R.S. 47:138 C, and it is established to the satisfaction of the collector that the retention by the distributing corporation of stock (or stock and securities) in the controlled corporation was not in pursuance of a plan having as one of its principal purposes the avoidance of Louisiana income tax,

then no gain or loss shall be recognized to (and no amount shall be includible in the income of) such shareholder or security holder on the receipt of such stock or securities.

(b) Non pro rata distributions. Subsection H(1)(a) of this Section shall be applied without regard to the following:

(i) whether or not the distribution is pro rata with respect to all of the shareholders of the distributing corporation,

(ii) whether or not the shareholder surrenders stock in the distributing corporation, and

(iii) whether or not the distribution is in pursuance of plan of reorganization within the meaning of R.S. 47:138 A(1)(d).

(c) Limitation. Subsection H(1)(a) of this Section shall not apply if:

(i) the principal amount of the securities of the controlled corporation which are received exceeds the principal amount of the securities which are surrendered in connection with such distribution, or

(ii) securities in the controlled corporation are received and no securities are surrendered in connection with such distribution. For purposes of this Subsection (other than Subsection H(1)(a)(iv) of this Section) and so much of R.S. 47:134 as relates to this Subsection, stock of a controlled corporation acquired by the distributing corporation by reason of any transaction which occurs within 5 years of the distribution of such stock and in which gain or loss was recognized in whole or in part, shall not be treated as stock of such controlled corporation, but as other property.

(2) Requirements as to active business.

(a) In general. Subsection H(1) of this Section shall apply only if either:

(i) the distributing corporation, and the controlled corporation (or, if stock of more than one controlled corporation is distributed, each of such corporations), is engaged immediately after the distribution in the active conduct of a trade or business, or

(ii) immediately before the distribution, the distributing corporation had no assets other than stock or securities in the controlled corporations and each of the controlled corporations is engaged immediately after the distribution in the active conduct of a trade or business.

(b) Definition. For purposes of Subsection H(2)(a) of this Section, a corporation shall be treated as engaged in the active conduct of a trade or business if and only if:

(i) it is engaged in the active conduct of a trade or business, or substantially all of its assets consist of stock and securities of a corporation controlled by it (immediately after the distribution) which is so engaged,

(ii) such trade or business has been actively conducted throughout the five-year period ending on the date of the distribution,

(iii) such trade or business was not acquired within such five-year period in a transaction in which gain or loss was recognized in whole or in part, and

(iv) control of a corporation which (at the time of acquisition of control) was conducting such trade or business--

(A) was not acquired directly (or through one or more corporations) by another corporation within the period described in Subsection H(2)(b)(ii) of this Section, or

(B) was so acquired by another corporation within such period, but such control was so acquired only by reason of transactions in which gain or loss was not recognized in whole or in part, or only by reason of such transactions combined with acquisitions before the beginning of such period.

I. Carryovers.

(1) General rule. In the case of the acquisition of assets of a corporation by another corporation--

(a) in a distribution to such other corporation to which R.S. 47:133 F (relating to liquidations of subsidiaries) applies, except in a case in which the basis of the assets distributed is determined under R.S. 47:152 B(2); or

(b) in a transfer to which R.S. 47:133 D or R.S. 47:134 F(1) (relating to nonrecognition of gain or loss to corporations) applies, but only if the transfer is in connection with a reorganization described in R.S. 47:138 A(1)(a), (c), (d) (but only if the requirements of R.S. 47:133 C(2)(a)(i) and (ii) are met), or R.S. 47:138 A(1)(f), the acquiring corporation shall succeed to and take into account as of the close of the day of distribution or transfer, the items described in R.S. 47:133 I(2) of the distributor or transferor corporation, subject to the conditions and limitations specified in R.S. 47:133 I(2).

(2) Items of the distributor or transferor corporation. The items referred to in R.S. 47:133 I(1) are:

(a) Method of computing depreciation allowance. The acquiring corporation shall be treated as the distributor or transferor corporation for purposes of computing the depreciation allowance under R.S. 47:65 B(2), (3), and (4), on property acquired in a distribution or transfer with respect to that part or all of the basis in the hands of the acquiring corporation as does not exceed the basis in the hands of the distributor or transferor corporation.

(b) Contributions to pension plans, employees' annuity plans, and stock bonus and profit-sharing plans. The acquiring corporation shall be considered to be the distributor or transferor corporation after the date of distribution or transfer for the purpose of determining the amounts deductible under R.S. 47:62 and 64 with respect to pension plans, employees' annuity plans, and stock bonus and profit-sharing plans.

La. Revenue and Taxation § 47:133

Amended by Acts 1956, No. 434, §1; Acts 1957, No. 6, §1; Acts 1958, No. 443, §2.

Amended by Acts 1956, No. 434, §1; Acts 1957, No. 6, §1; Acts 1958, No. 443, §2.