
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC269]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
               Subchapter B--Computation of Taxable Income
 
                      PART IX--ITEMS NOT DEDUCTIBLE
 
Sec. 269. Acquisitions made to evade or avoid income tax


(a) In general

    If--
        (1) any person or persons acquire, or acquired on or after 
    October 8, 1940, directly or indirectly, control of a corporation, 
    or
        (2) any corporation acquires, or acquired on or after October 8, 
    1940, directly or indirectly, property of another corporation, not 
    controlled, directly or indirectly, immediately before such 
    acquisition, by such acquiring corporation or its stockholders, the 
    basis of which property, in the hands of the acquiring corporation, 
    is determined by reference to the basis in the hands of the 
    transferor corporation,

and the principal purpose for which such acquisition was made is evasion 
or avoidance of Federal income tax by securing the benefit of a 
deduction, credit, or other allowance which such person or corporation 
would not otherwise enjoy, then the Secretary may disallow such 
deduction, credit, or other allowance. For purposes of paragraphs (1) 
and (2), control means the ownership of stock possessing at least 50 
percent of the total combined voting power of all classes of stock 
entitled to vote or at least 50 percent of the total value of shares of 
all classes of stock of the corporation.

(b) Certain liquidations after qualified stock purchases

                           (1) In general

        If--
            (A) there is a qualified stock purchase by a corporation of 
        another corporation,
            (B) an election is not made under section 338 with respect 
        to such purchase,
            (C) the acquired corporation is liquidated pursuant to a 
        plan of liquidation adopted not more than 2 years after the 
        acquisition date, and
            (D) the principal purpose for such liquidation is the 
        evasion or avoidance of Federal income tax by securing the 
        benefit of a deduction, credit, or other allowance which the 
        acquiring corporation would not otherwise enjoy,

    then the Secretary may disallow such deduction, credit, or other 
    allowance.

                        (2) Meaning of terms

        For purposes of paragraph (1), the terms ``qualified stock 
    purchase'' and ``acquisition date'' have the same respective 
    meanings as when used in section 338.

(c) Power of Secretary to allow deduction, etc., in part

    In any case to which subsection (a) or (b) applies the Secretary is 
authorized--
        (1) to allow as a deduction, credit, or allowance any part of 
    any amount disallowed by such subsection, if he determines that such 
    allowance will not result in the evasion or avoidance of Federal 
    income tax for which the acquisition was made; or
        (2) to distribute, apportion, or allocate gross income, and 
    distribute, apportion, or allocate the deductions, credits, or 
    allowances the benefit of which was sought to be secured, between or 
    among the corporations, or properties, or parts thereof, involved, 
    and to allow such deductions, credits, or allowances so distributed, 
    apportioned, or allocated, but to give effect to such allowance only 
    to such extent as he determines will not result in the evasion or 
    avoidance of Federal income tax for which the acquisition was made; 
    or
        (3) to exercise his powers in part under paragraph (1) and in 
    part under paragraph (2).

(Aug. 16, 1954, ch. 736, 68A Stat. 80; Pub. L. 88-272, title II, 
Sec. 235(c)(2), Feb. 26, 1964, 78 Stat. 126; Pub. L. 94-455, title XIX, 
Secs. 1901(a)(38), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1771, 1834; 
Pub. L. 98-369, div. A, title VII, Sec. 712(k)(8)(A), (B), July 18, 
1984, 98 Stat. 952.)


                               Amendments

    1984--Subsecs. (b), (c). Pub. L. 98-369 added subsec. (b), 
redesignated former subsec. (b) as (c) and inserted reference to subsec. 
(b).
    1976--Subsecs. (a), (b). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck 
out ``or his delegate'' after ``Secretary'' wherever appearing.
    Subsec. (c). Pub. L. 94-455, Sec. 1901(a)(38), struck out subsec. 
(c) relating to presumptions in the case of disproportionate purchase 
price.
    1964--Subsec. (a). Pub. L. 88-272 substituted ``the Secretary or his 
delegate may disallow such deduction, credit, or other allowance'' for 
``such deduction, credit or other allowance shall not be allowed''.


                    Effective Date of 1984 Amendment

    Section 712(k)(8)(C) of Pub. L. 98-369 provided that: ``The 
amendments made by this paragraph [amending this section] shall apply to 
liquidations after October 20, 1983, in taxable years ending after such 
date.''


                    Effective Date of 1964 Amendment

    Amendment by Pub. L. 88-272 applicable to taxable years ending after 
Dec. 31, 1963, see section 235(d) of Pub. L. 88-272, set out as a note 
under section 1551 of this title.

                  Section Referred to in Other Sections

    This section is referred to in section 1551 of this title.
