# § 312. Effect on earnings and profits
**(a)** **General rule** Except as otherwise provided in this section, on the distribution of property by a corporation with respect to its stock, the earnings and profits of the corporation (to the extent thereof) shall be decreased by the sum of—
**(1)** the amount of money,
**(2)** the principal amount of the obligations of such corporation (or, in the case of obligations having original issue discount, the aggregate issue price of such obligations), and
**(3)** the adjusted basis of the other property, so distributed.
**(b)** **Distributions of appreciated property** On the distribution by a corporation, with respect to its stock, of any property (other than an obligation of such corporation) the fair market value of which exceeds the adjusted basis thereof—
For purposes of this subsection and subsection (a), the adjusted basis of any property is its adjusted basis as determined for purposes of computing earnings and profits.
**(1)** the earnings and profits of the corporation shall be increased by the amount of such excess, and
**(2)** subsection (a)(3) shall be applied by substituting “fair market value” for “adjusted basis”.
**(c)** **Adjustments for liabilities** In making the adjustments to the earnings and profits of a corporation under subsection (a) or (b), proper adjustment shall be made for—
**(1)** the amount of any liability to which the property distributed is subject, and
**(2)** the amount of any liability of the corporation assumed by a shareholder in connection with the distribution.
**(d)** **Certain distributions of stock and securities**
**(1)** **In general** The distribution to a distributee by or on behalf of a corporation of its stock or securities, of stock or securities in another corporation, or of property, in a distribution to which this title applies, shall not be considered a distribution of the earnings and profits of any corporation—
**(A)** if no gain to such distributee from the receipt of such stock or securities, or property, was recognized under this title, or
**(B)** if the distribution was not subject to tax in the hands of such distributee by reason of section 305(a).
**(2)** **Stock or securities** For purposes of this subsection, the term “stock or securities” includes rights to acquire stock or securities.
**[(e)** **Repealed. Pub. L. 98–369, div. A, title I, § 61(a)(2)(B), July 18, 1984, 98 Stat. 581]**
**(f)** **Effect on earnings and profits of gain or loss and of receipt of tax-free distributions**
**(1)** **Effect on earnings and profits of gain or loss** The gain or loss realized from the sale or other disposition (after February 28, 1913) of property by a corporation—
Gain or loss so realized shall increase or decrease the earnings and profits to, but not beyond, the extent to which such a realized gain or loss was recognized in computing taxable income under the law applicable to the year in which such sale or disposition was made. Where, in determining the adjusted basis used in computing such realized gain or loss, the adjustment to the basis differs from the adjustment proper for the purpose of determining earnings and profits, then the latter adjustment shall be used in determining the increase or decrease above provided. For purposes of this subsection, a loss with respect to which a deduction is disallowed under section 1091 (relating to wash sales of stock or securities), or the corresponding provision of prior law, shall not be deemed to be recognized.
**(A)** for the purpose of the computation of the earnings and profits of the corporation, shall (except as provided in subparagraph (B)) be determined by using as the adjusted basis the adjusted basis (under the law applicable to the year in which the sale or other disposition was made) for determining gain, except that no regard shall be had to the value of the property as of March 1, 1913; but
**(B)** for purposes of the computation of the earnings and profits of the corporation for any period beginning after February 28, 1913, shall be determined by using as the adjusted basis the adjusted basis (under the law applicable to the year in which the sale or other disposition was made) for determining gain.
**(2)** **Effect on earnings and profits of receipt of tax-free distributions** Where a corporation receives (after February 28, 1913) a distribution from a second corporation which (under the law applicable to the year in which the distribution was made) was not a taxable dividend to the shareholders of the second corporation, the amount of such distribution shall not increase the earnings and profits of the first corporation in the following cases:
**(A)** no such increase shall be made in respect of the part of such distribution which (under such law) is directly applied in reduction of the basis of the stock in respect of which the distribution was made; and
**(B)** no such increase shall be made if (under such law) the distribution causes the basis of the stock in respect of which the distribution was made to be allocated between such stock and the property received (or such basis would, but for section 307(b), be so allocated).
**(g)** **Earnings and profits—increase in value accrued before March 1, 1913**
**(1)** If any increase or decrease in the earnings and profits for any period beginning after February 28, 1913, with respect to any matter would be different had the adjusted basis of the property involved been determined without regard to its March 1, 1913, value, then, except as provided in paragraph (2), an increase (properly reflecting such difference) shall be made in that part of the earnings and profits consisting of increase in value of property accrued before March 1, 1913.
**(2)** If the application of subsection (f) to a sale or other disposition after February 28, 1913, results in a loss which is to be applied in decrease of earnings and profits for any period beginning after February 28, 1913, then, notwithstanding subsection (f) and in lieu of the rule provided in paragraph (1) of this subsection, the amount of such loss so to be applied shall be reduced by the amount, if any, by which the adjusted basis of the property used in determining the loss exceeds the adjusted basis computed without regard to the value of the property on March 1, 1913, and if such amount so applied in reduction of the decrease exceeds such loss, the excess over such loss shall increase that part of the earnings and profits consisting of increase in value of property accrued before March 1, 1913.
**(h)** **Allocation in certain corporate separations and reorganizations**
**(1)** **Section 355** In the case of a distribution or exchange to which section 355 (or so much of section 356 as relates to section 355) applies, proper allocation with respect to the earnings and profits of the distributing corporation and the controlled corporation (or corporations) shall be made under regulations prescribed by the Secretary.
**(2)** **Section 368(a)(1)(C) or (D)** In the case of a reorganization described in subparagraph (C) or (D) of section 368(a)(1), proper allocation with respect to the earnings and profits of the acquired corporation shall, under regulations prescribed by the Secretary, be made between the acquiring corporation and the acquired corporation (or any corporation which had control of the acquired corporation before the reorganization).
**(i)** **Distribution of proceeds of loan insured by the United States** If a corporation distributes property with respect to its stock and if, at the time of distribution—
then the earnings and profits of the corporation shall be increased by the amount of such excess, and (immediately after the distribution) shall be decreased by the amount of such excess. For purposes of paragraph (2), the adjusted basis of the property at the time of distribution shall be determined without regard to any adjustment under section 1016(a)(2) (relating to adjustment for depreciation, etc.). For purposes of this subsection, a commitment to make, guarantee, or insure a loan shall be treated as the making, guaranteeing, or insuring of a loan.
**(1)** there is outstanding a loan to such corporation which was made, guaranteed, or insured by the United States (or by any agency or instrumentality thereof), and
**(2)** the amount of such loan so outstanding exceeds the adjusted basis of the property constituting security for such loan,
**[(j)** **Repealed. Pub. L. 108–357, title IV, § 413(c)(4), Oct. 22, 2004, 118 Stat. 1507]**
**(k)** **Effect of depreciation on earnings and profits**
**(1)** **General rule** June 30, 1972June 30, 1972
For purposes of computing the earnings and profits of a corporation for any taxable year beginning after , the allowance for depreciation (and amortization, if any) shall be deemed to be the amount which would be allowable for such year if the straight line method of depreciation had been used for each taxable year beginning after .
**(2)** **Exception** If for any taxable year a method of depreciation was used by the taxpayer which the Secretary has determined results in a reasonable allowance under section 167(a) and which is the unit-of-production method or other method not expressed in a term of years, then the adjustment to earnings and profits for depreciation for such year shall be determined under the method so used (in lieu of the straight line method).
**(3)** **Exception for tangible property**
**(A)** **In general** Except as provided in subparagraph (B), in the case of tangible property to which section 168 applies, the adjustment to earnings and profits for depreciation for any taxable year shall be determined under the alternative depreciation system (within the meaning of section 168(g)(2)).
**(B)** **Treatment of amounts deductible under section 179, 179B, 179C, 179D, or 179E**
**(i)** **In general** For purposes of computing the earnings and profits of a corporation, except as provided in clause (ii), any amount deductible under section 179, 179B, 179C, 179D, or 179E shall be allowed as a deduction ratably over the period of 5 taxable years (beginning with the taxable year for which such amount is deductible under section 179, 179B, 179C, 179D, or 179E, as the case may be).
**(ii)** **Special rule** In the case of a corporation that is a real estate investment trust, any amount deductible under section 179D shall be allowed in the year in which the property giving rise to such deduction is placed in service (or, in the case of energy efficient building retrofit property, the year in which the qualifying final certification is made).
**(4)** **Certain foreign corporations** The provisions of paragraph (1) shall not apply in computing the earnings and profits of a foreign corporation for any taxable year for which less than 20 percent of the gross income from all sources of such corporation is derived from sources within the United States.
**(5)** **Basis adjustment not taken into account** In computing the earnings and profits of a corporation for any taxable year, the allowance for depreciation (and amortization, if any) shall be computed without regard to any basis adjustment under section 50(c).
**(l)** **Discharge of indebtedness income**
**(1)** **Does not increase earnings and profits if applied to reduce basis** The earnings and profits of a corporation shall not include income from the discharge of indebtedness to the extent of the amount applied to reduce basis under section 1017.
**(2)** **Reduction of deficit in earnings and profits in certain cases** If—
then such deficit shall be reduced by an amount equal to the paid-in capital which is allocable to the interest of the shareholder which is so terminated or extinguished.
**(A)** the interest of any shareholder of a corporation is terminated or extinguished in a title 11 or similar case (within the meaning of section 368(a)(3)(A)), and
**(B)** there is a deficit in the earnings and profits of the corporation,
**1** **No adjustment for interest paid on certain registration-required obligations not in registered form** [^1]
The earnings and profits of any corporation shall not be decreased by any interest with respect to which a deduction is not or would not be allowable by reason of section 163(f), unless at the time of issuance the issuer is a foreign corporation that is not a controlled foreign corporation (within the meaning of section 957) and the issuance did not have as a purpose the avoidance of section 163(f) of this subsection
Subsec. (m) was enacted without a period at the end.
**(n)** **Adjustments to earnings and profits to more accurately reflect economic gain and loss** For purposes of computing the earnings and profits of a corporation, the following adjustments shall be made:
**(1)** **Construction period carrying charges**
**(A)** **In general** In the case of any amount paid or incurred for construction period carrying charges—
**(i)** no deduction shall be allowed with respect to such amount, and
**(ii)** the basis of the property with respect to which such charges are allocable shall be increased by such amount.
**(B)** **Construction period carrying charges defined** For purposes of this paragraph, the term “construction period carrying charges” means all—
to the extent such interest, taxes, or charges are attributable to the construction period for such property and would be allowable as a deduction in determining taxable income under this chapter for the taxable year in which paid or incurred.
**(i)** interest paid or accrued on indebtedness incurred or continued to acquire, construct, or carry property,
**(ii)** property taxes, and
**(iii)** similar carrying charges,
**2** **Construction period** [^2]
The term “construction period” has the meaning given the term production period under section 263A(f)(4)(B).
See References in Text note below.
**(2)** **Intangible drilling costs and mineral exploration and development costs**
**(A)** **Intangible drilling costs** Any amount allowable as a deduction under section 263(c) in determining taxable income (other than costs incurred in connection with a nonproductive well)—
**(i)** shall be capitalized, and
**(ii)** shall be allowed as a deduction ratably over the 60-month period beginning with the month in which such amount was paid or incurred.
**(B)** **Mineral exploration and development costs** Any amount allowable as a deduction under section 616(a) or 617 in determining taxable income—
**(i)** shall be capitalized, and
**(ii)** shall be allowed as a deduction ratably over the 120-month period beginning with the later of—
**(I)** the month in which production from the deposit begins, or
**(II)** the month in which such amount was paid or incurred.
**(3)** **Certain amortization provisions not to apply** Sections 173 and 248 shall not apply.
**(4)** **LIFO inventory adjustments**
**(A)** **In general** Earnings and profits shall be increased or decreased by the amount of any increase or decrease in the LIFO recapture amount as of the close of each taxable year; except that any decrease below the LIFO recapture amount as of the close of the taxable year preceding the 1st taxable year to which this paragraph applies to the taxpayer shall be taken into account only to the extent provided in regulations prescribed by the Secretary.
**(B)** **LIFO recapture amount** For purposes of this paragraph, the term “LIFO recapture amount” means the amount (if any) by which—
**(i)** the inventory amount of the inventory assets under the first-in, first-out method authorized by section 471, exceeds
**(ii)** the inventory amount of such assets under the LIFO method.
**(C)** **Definitions** For purposes of this paragraph—
**(i)** **LIFO method** The term “LIFO method” means the method authorized by section 472 (relating to last-in, first-out inventories).
**(ii)** **Inventory assets** The term “inventory assets” means stock in trade of the corporation, or other property of a kind which would properly be included in the inventory of the corporation if on hand at the close of the taxable year.
**(iii)** **Inventory amount** The inventory amount of assets under the first-in, first-out method authorized by section 471 shall be determined—
**(I)** if the corporation uses the retail method of valuing inventories under section 472, by using such method, or
**(II)** if subclause (I) does not apply, by using cost or market, whichever is lower.
**(5)** **Installment sales** In the case of any installment sale, earnings and profits shall be computed as if the corporation did not use the installment method.
**(6)** **Completed contract method of accounting** In the case of a taxpayer who uses the completed contract method of accounting, earnings and profits shall be computed as if such taxpayer used the percentage of completion method of accounting.
**(7)** **Redemptions** February 28, 1913
If a corporation distributes amounts in a redemption to which section 302(a) or 303 applies, the part of such distribution which is properly chargeable to earnings and profits shall be an amount which is not in excess of the ratable share of the earnings and profits of such corporation accumulated after , attributable to the stock so redeemed.
**(8)** **Special rule for certain foreign corporations** In the case of a foreign corporation described in subsection (k)(4)—
**(A)** paragraphs (4) and (6) shall apply only in the case of taxable years beginning after December 31, 1985, and
**(B)** paragraph (5) shall apply only in the case of taxable years beginning after December 31, 1987.
**(o)** **Definition of original issue discount and issue price for purposes of subsection (a)(2)** For purposes of subsection (a)(2), the terms “original issue discount” and “issue price” have the same respective meanings as when used in subpart A of part V of subchapter P of this chapter.
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**Source Credit**: (Aug. 16, 1954, ch. 736, 68A Stat. 95; Pub. L. 87–403, § 3(a), Feb. 2, 1962, 76 Stat. 6; Pub. L. 87–834, §§ 13(f)(3), 14(b)(1), Oct. 16, 1962, 76 Stat. 1035, 1040; Pub. L. 88–272, title II, § 231(b)(3), Feb. 26, 1964, 78 Stat. 105; Pub. L. 88–484, § 1(b)(1), Aug. 22, 1964, 78 Stat. 597; Pub. L. 89–570, § 1(b)(3), Sept. 12, 1966, 80 Stat. 762; Pub. L. 91–172, title II, § 211(b)(3), title IV, § 442(a), title IX, § 905(b)(2), Dec. 30, 1969, 83 Stat. 570, 628, 714; Pub. L. 94–455, title II, § 205(c)(1)(D), title XIX, §§ 1901(a)(43), (b)(32)(B)(i), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1535, 1771, 1800, 1834; Pub. L. 95–628, § 3(c), Nov. 10, 1978, 92 Stat. 3627; Pub. L. 96–589, § 5(f), Dec. 24, 1980, 94 Stat. 3406; Pub. L. 97–34, title II, § 206(a), (b), Aug. 13, 1981, 95 Stat. 224; Pub. L. 97–248, title II, §§ 205(a)(3), 222(e)(3), title III, § 310(b)(3), Sept. 3, 1982, 96 Stat. 429, 480, 597; Pub. L. 97–448, title III, § 306(a)(6)(B), Jan. 12, 1983, 96 Stat. 2402; Pub. L. 98–369, div. A, title I, §§ 61(a)–(c)(1), 63(b), 111(e)(5), July 18, 1984, 98 Stat. 579–581, 583, 633; Pub. L. 99–121, title I, § 103(b)(1)(C), Oct. 11, 1985, 99 Stat. 509; Pub. L. 99–514, title II, §§ 201(b), (d)(6), 241(b)(1), title VI, § 631(e)(1), title VIII, § 803(b)(3), title XVIII, §§ 1804(f)(1)(A)–(E), 1809(a)(2)(C)(ii), Oct. 22, 1986, 100 Stat. 2137, 2141, 2181, 2273, 2355, 2804, 2805, 2819; Pub. L. 100–647, title I, §§ 1002(a)(3), 1018(d)(4), (u)(4), Nov. 10, 1988, 102 Stat. 3353, 3578, 3590; Pub. L. 101–239, title VII, §§ 7611(f)(5)(A), 7811(m)(2), Dec. 19, 1989, 103 Stat. 2373, 2412; Pub. L. 101–508, title XI, §§ 11812(b)(5), 11813(b)(14), Nov. 5, 1990, 104 Stat. 1388–535, 1388–555; Pub. L. 105–34, title XVI, § 1604(a)(2), Aug. 5, 1997, 111 Stat. 1097; Pub. L. 108–357, title III, § 338(b)(3), title IV, § 413(c)(4), (5), Oct. 22, 2004, 118 Stat. 1481, 1507; Pub. L. 109–58, title XIII, §§ 1323(b)(3), 1331(b)(5), Aug. 8, 2005, 119 Stat. 1015, 1024; Pub. L. 109–432, div. A, title IV, § 404(b)(2), Dec. 20, 2006, 120 Stat. 2956; Pub. L. 113–295, div. A, title II, § 221(a)(34)(F), (49), Dec. 19, 2014, 128 Stat. 4042, 4045; Pub. L. 117–169, title I, § 13303(b), Aug. 16, 2022, 136 Stat. 1951.)
## Editorial Notes
### References in Text
Section 263A(f)(4)(B), referred to in subsec. (n)(1)(C), was redesignated section 263A(f)(5)(B) by , , .
### Amendments
2022—Subsec. (k)(3)(B). designated existing provisions as cl. (i), inserted heading, substituted “For purposes of computing the earnings and profits of a corporation, except as provided in clause (ii)” for “For purposes of computing the earnings and profits of a corporation”, and added cl. (ii).
2014—Subsec. (d)(2), (3). , redesignated par. (3) as (2) and struck out former par. (2) which read as follows: “In the case of a distribution of stock or securities, or property, to which section 115(h) of the Internal Revenue Code of 1939 (or the corresponding provision of prior law) applied, the effect on earnings and profits of such distribution shall be determined under such section 115(h), or the corresponding provision of prior law, as the case may be.”
Subsec. (k)(3)(B). , struck out “179A,” after “section 179,” in heading and in two places in text.
2006—Subsec. (k)(3)(B). substituted “179D, or 179E” for “or 179D” in heading and two places in text.
2005—Subsec. (k)(3)(B). , substituted “179, 179A, 179B, 179C, or 179D” for “179, 179A, 179B, or 179C” in heading and two places in text.
, substituted “179, 179A, 179B, or 179C” for “179 179A, or 179B” in heading and two places in text.
2004—Subsec. (j). , struck out subsec. (j) which related to earnings and profits of foreign investment companies.
Subsec. (k)(3)(B). , substituted “179A, or 179B” for “or 179A” in heading and two places in text.
Subsec. (m). , struck out “, a foreign investment company (within the meaning of section 1246(b)), or a foreign personal holding company (within the meaning of section 552)” before “and the issuance”.
1997—Subsec. (k)(3)(B). , in heading substituted “179 or 179A” for “179” and in text substituted “section 179 or 179A shall” for “section 179 shall” and “section 179 or 179A, as the case may be)” for “section 179)”.
1990—Subsec. (k)(2). , substituted heading for one which read: “Exceptions” and amended text generally. Prior to amendment, text read as follows: “If for any taxable year beginning after , a method of depreciation was used by the taxpayer which the Secretary has determined results in a reasonable allowance under section 167(a), and which is not—
“(A) a declining balance method,
“(B) the sum of the years-digit method, or
“(C) any other method allowable solely by reason of the application of subsection (b)(4) or (j)(1)(C) of section 167,
then the adjustment to earnings and profits for depreciation for such year shall be determined under the method so used (in lieu of under the straight line method).”
Subsec. (k)(5). , substituted “section 50(c)” for “section 48(q)”.
1989—Subsec. (b). , made clarifying amendment to directory language of , see 1988 Amendment note below.
Subsec. (n)(2)(A)(ii). , substituted “in which such amount was paid or incurred” for “in which the production from the well begins”.
1988—Subsec. (b). , as amended by , substituted “of any property (other than an obligation of such corporation)” for “of any property” in introductory provisions.
Subsec. (k)(4). , substituted “paragraph (1)” for “paragraphs (1) and (3)”.
Subsec. (n)(1)(B). , made technical amendment to directory language of . See 1986 Amendment note below.
1986—Subsec. (b). , amended subsec. (b) generally, substituting provisions relating to distributions of appreciated property for provisions relating to distribution of certain inventory assets.
Subsec. (c). , (C), struck out “, etc.” after “liabilities” in heading and struck out par. (3) which read as follows: “any gain recognized to the corporation on the distribution.”
Subsec. (k)(3). , amended par. (3) generally, substituting provisions relating to tangible property to which section 168 applies and amounts deductible under section 179 for provisions relating to recovery property within the meaning of section 168, amounts deductible under section 179, and flexibility if a different recovery percentage is elected under section 168 based on a longer recovery period.
Subsec. (k)(3)(A). , in subpar. (A), struck out “and rules similar to the rules under the next to the last sentence of section 168(b)(2)(A) and section 168(b)(2)(B) shall apply” after “low-income housing)”.
Subsec. (k)(4). , struck out last sentence “In determining the earnings and profits of such corporation in the case of recovery property (within the meaning of section 168), the rules of section 168(f)(2) shall apply.”
Subsec. (n)(1)(B). , as amended by , struck out “(determined without regard to section 189)” after “incurred”.
Subsec. (n)(1)(C). , added subpar. (C) and struck out former subpar. (C) which read as follows: “The term ‘construction period’ has the meaning given such term by section 189(e)(2) (determined without regard to any real property limitation).”
Subsec. (n)(3). , struck out “, 177,” after “sections 173”.
Subsec. (n)(4). , amended par. (4) generally. Prior to amendment, par. (4) read as follows: “Earnings and profits shall be increased or decreased by the amount of any increase or decrease in the LIFO recapture amount (determined under section 336(b)(3)) as of the close of each taxable year; except that any decrease below the LIFO recapture amount as of the close of the taxable year preceding the first taxable year to which this paragraph applies to the taxpayer shall be taken into account only to the extent provided in regulations prescribed by the Secretary.”
, redesignated par. (5) as (4). Former par. (4), relating to certain untaxed appreciation of distributed property, was struck out.
Subsec. (n)(5) to (7). , redesignated pars. (6) to (8) as (5) to (7), respectively. Former par. (5) redesignated (4).
Subsec. (n)(8), (9). , (E), redesignated par. (9) as (8) and substituted provisions of subpars. (A) and (B) for “paragraphs (5), (6), and (7) shall apply only in the case of taxable years beginning after .” Former par. (8) redesignated (7).
1985—Subsec. (k)(3)(A). substituted “19-year real property” for “18-year real property” wherever appearing.
1984—Subsec. (a)(2). , inserted “(or, in the case of obligations having original issue discount, the aggregate issue price of such obligations)”.
Subsec. (e). , struck out subsec. (e) which provided: “In the case of amounts distributed in a redemption to which section 302(a) or 303 applies, the part of such distribution which is properly chargeable to capital account shall not be treated as a distribution of earnings and profits.”
Subsec. (h). , amended subsec. (h) generally, designating existing provisions as par. (1) and adding par. (2).
Subsec. (j)(3). , struck out par. (3) which provided: “If a foreign investment company (as defined in section 1246) distributes amounts in a redemption to which section 302(a) or 303 applies, the part of such distribution which is properly chargeable to earnings and profits shall be an amount which is not in excess of the ratable share of the earnings and profits of the company accumulated after , attributable to the stock so redeemed.”
Subsec. (k)(3)(A). , substituted “18-year real property and low-income housing” for “15-year real property” in three places.
, substituted “40 years” for “35 years” in table item relating to 15-year real property. Directory language that table be amended by substituting “40 years” for “35 years” in item relating to 15-year real property and 20-year real property, was executed by making the substitution in item relating to 15-year real property. The table contained no item relating to 20-year real property.
Subsec. (n). , added subsec. (n).
Subsec. (). , added subsec. ().
1983—Subsec. (j)(3). substituted “Redemptions” for “Partial liquidations and redemptions” in heading, and in text struck out “in partial liquidation or” after “distributes amounts”.
1982—Subsec. (e). , struck out “partial liquidations and” in heading, and in text struck out “in partial liquidation (whether before, on, or after ) or” after “amounts distributed”.
Subsec. (k)(5). , added par. (5).
Subsec. (m). , added subsec. (m).
1981—Subsec. (k)(3), (4). added par. (3), redesignated former par. (3) as (4) substituted “The provisions of paragraphs (1) and (3)” for “The provisions of paragraph (1)”, and inserted provision that the rules of section 168(f)(2) shall apply in determining the earnings and profits of the corporation in the case of recovery property (within the meaning of section 168).
1980—Subsec. (). added subsec. ().
1978—Subsec. (c)(3). substituted “gain recognized to the corporation on the distribution” for “gain to the corporation recognized under subsection (b), (c), or (d) of section 311, under section 341(f), or under section 617(d)(1), 1245(a), 1250(a), 1251(c), 1252(a), or 1254(a)”.
1976—Subsec. (c)(3). , substituted “1252(a), or 1254(a)” for “or 1252(a)”.
Subsec. (d)(1). , substituted “this title” for “this Code” wherever appearing.
Subsec. (h). , §§ 1901(a)(43)(B), 1906(b)(13)(A), redesignated subsec. (i) as (h) and struck out “or his delegate” after “Secretary”. Former subsec. (h), which related to earnings and profits of personal service corporations, was struck out.
Subsec. (i). , (C), redesignated subsec. (j) as (i), and, among other changes, substituted “paragraph (2)” for “subparagraph (B) of the preceding sentence” and “of this subsection” for “of this paragraph”, and struck out provisions relating to the effective date of this subsec. Former subsec. (i) redesignated (h).
Subsec. (j). , §§ 1901(a)(43)(D), (b)(32)(B)(i), 1906(b)(13)(A), redesignated subsec. () as (j), struck out “or his delegate” after “Secretary” in par. (1) and in par. (3) provision relating to the effective date of such paragraph. Former subsec. (j) redesignated (i).
Subsec. (k). , §§ 1901(b)(32)(B)(i), 1906(b)(13)(A), redesignated subsec. (m) as (k) and struck out “or his delegate” after “Secretary” in par. (2). Former subsec. (k), relating to special adjustment on disposition of antitrust stock received as a dividend, was struck out.
Subsec. (). , redesignated subsec. () as (j).
Subsec. (m). , redesignated subsec. (m) as (k).
1969—Subsec. (c)(3). , §§ 211(b)(3), 905(b)(2), substituted “1250(a), 1251(c), or 1252(a)”, for “or 1250(a)” and inserted reference to section 311(d).
Subsec. (m). , added subsec. (m).
1966—Subsec. (c)(3). inserted reference to section 617(d)(1).
1964—Subsec. (c)(3). authorized adjustment for amount of gain recognized under section 341(f).
inserted reference to section 1250(a).
1962—Subsec. (c)(3). , included any gain recognized under section 1245(a).
Subsec. (k). added subsec. (k).
Subsec. (). , added subsec. ().
## Statutory Notes and Related Subsidiaries
### Effective Date of 2022 Amendment
Amendment by applicable to taxable years beginning after , see , set out as a note under .
### Effective Date of 2014 Amendment
Amendment by effective , subject to a savings provision, see , set out as a note under .
### Effective Date of 2006 Amendment
Amendment by applicable to costs paid or incurred after , see , set out as an Effective Date note under .
### Effective Date of 2005 Amendment
Amendment by applicable to properties placed in service after , see , set out as an Effective Date note under .
Amendment by applicable to property placed in service after , see , set out as an Effective Date note under .
### Effective Date of 2004 Amendment
Amendment by applicable to expenses paid or incurred after , in taxable years ending after such date, see , set out as an Effective Date note under .
Amendment by section 413(c)(4), (5) of applicable to taxable years of foreign corporations beginning after , and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end, see , set out as an Effective and Termination Dates of 2004 Amendments note under .
### Effective Date of 1997 Amendment
Amendment by effective as if included in the amendments made by section 1913 of the Energy Policy Act of 1992, , see , set out as a note under .
### Effective Date of 1990 Amendment
Amendment by applicable to property placed in service after , but not applicable to any property to which does not apply by reason of subsec. (f)(5) of section 168, and not applicable to rehabilitation expenditures described in , see , set out as a note under .
Amendment by applicable to property placed in service after , but not applicable to any transition property (as defined in ), any property with respect to which qualified progress expenditures were previously taken into account under , and any property described in , as such sections were in effect on , see , set out as a note under .
### Effective Date of 1989 Amendment
Amendment by applicable to costs paid or incurred in taxable years beginning after , see , set out as a note under .
Amendment by effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, , to which such amendment relates, see , set out as a note under .
### Effective Date of 1988 Amendment
Amendment by effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, , to which such amendment relates, see , set out as a note under .
### Effective Date of 1986 Amendment
If any interest costs incurred after , are attributable to costs incurred before , the amendment by is applicable to such interest costs only to the extent such interest costs are attributable to costs which were required to be capitalized under section 263 of the Internal Revenue Code of 1954 and which would have been taken into account in applying section 189 of the Internal Revenue Code of 1954 (as in effect before its repeal by ) or, if applicable, section 266 of such Code, see , set out as an Effective Date note under .
Amendment by section 201(b), (d)(6) of applicable to property placed in service after , in taxable years ending after such date, with exceptions, see sections 203 and 204 of , set out as a note under .
Amendment by section 201(b), (d)(6) of not applicable to any property placed in service before , if such property placed in service as part of specified rehabilitations, and not applicable to certain additional rehabilitations, see section 251(d)(2), (3) of , set out as a note under .
Amendment by applicable to expenditures paid or incurred after , except as otherwise provided, see , set out as an Effective Date of Repeal note under former .
Amendment by applicable to any distribution in complete liquidation, and any sale or exchange, made by a corporation after , unless such corporation is completely liquidated before , any transaction described in for which the acquisition date occurs after , and any distribution, not in complete liquidation, made after , with exceptions and special and transitional rules, see , set out as an Effective Date note under .
Amendment by applicable to costs incurred after , in taxable years ending after such date, except as otherwise provided, see , set out as an Effective Date note under .
Amendment by sections 1804(f)(1)(A)–(E) and 1809(a)(2)(C)(ii) of effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, , to which such amendment relates, see , set out as a note under .
> “Paragraph (7) of section 312(n) of the Internal Revenue Code of 1954 [now 1986] (as redesignated by paragraph (1)(D) of this subsection), and the amendments made by section 61(a)(2) of the Tax Reform Act of 1984 [amending this section], shall apply to distributions in taxable years beginning after
>
> .”
, , , provided that:
### Effective Date of 1985 Amendment
Amendment by applicable with respect to property placed in service by the taxpayer after , with specified exceptions, see , set out as a note under .
### Effective Date of 1984 Amendment
> **“(1)** **Adjustments to earnings and profits.—**
>
> **“(A)** **Paragraphs (1), (2), and (3) of section 312(n).—** The provisions of paragraphs (1), (2), and (3) of section 312(n) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by subsection (a)) shall apply to amounts paid or incurred in taxable years beginning after September 30, 1984.
>
> **“(B)** **Paragraph (4) of section 312(n).—** The provisions of paragraph (4) of section 312(n) of such Code (as so added) shall apply to distributions after September 30, 1984; except that such provisions shall not apply to any distribution to which the amendments made by section 54(a) of this Act [amending section 311 of this title] do not apply.
>
> **“(C)** **LIFO inventory.—** The provisions of paragraph (5) of section 312(n) of such Code (as so added) shall apply to taxable years beginning after September 30, 1984.
>
> **“(D)** **Installment sales.—** The provisions of paragraph (6) of section 312(n) of such Code (as so added) shall apply to sales after September 30, 1984, in taxable years ending after such date.
>
> **“(E)** **Completed contract method.—** The provisions of paragraph (7) of section 312(n) of such Code (as so added) shall apply to contracts entered into after September 30, 1984, in taxable years ending after such date.
>
> **“(2)** **Subsection (b).—** The amendments made by subsection (b) [amending this section] shall apply to property placed in service in taxable years beginning after September 30, 1984.
>
> **“(3)** **Subsection (c).—** The amendments made by subsection (c) [amending this section and section 1275 of this title] shall apply with respect to distributions declared after March 15, 1984, in taxable years ending after such date.”
–(3), , , 583, as amended by , , , provided that:
Amendment by applicable to distributions in taxable years beginning after , see , set out as an Effective Date of 1986 Amendment note above.
> “Any reference in subsection (e) of section 61 of the Tax Reform Act of 1984 [set out above] to a paragraph of section 312(n) of the Internal Revenue Code of 1954 [now 1986] shall be treated as a reference to such paragraph as in effect before its redesignation by subparagraph (D) [see 1986 Amendment note above].”
, , , provided that:
> “The amendment made by this section [amending this section and
>
> ] shall apply to transactions pursuant to plans adopted after the date of the enactment of this Act [
>
> ].”
, , , provided that:
Amendment by applicable with respect to property placed in service by the taxpayer after , subject to certain exceptions, see , set out as a note under .
### Effective Date of 1983 Amendment
Amendment by effective as if included in the provisions of the Tax Equity and Fiscal Responsibility Act of 1982, , to which such amendment relates, see , set out as a note under .
### Effective Date of 1982 Amendment
Amendment by applicable to periods after , under rules similar to the rules of , with certain qualifications, see , set out as an Effective Date note under .
Amendment by applicable to distributions after , with exceptions for certain partial liquidations, see , set out as a note under .
Amendment by applicable to obligations issued after , with exceptions for certain warrants, see , set out as a note under .
### Effective Date of 1981 Amendment
Amendment by applicable to property placed in service after , in taxable years ending after that date, see , set out as an Effective Date note under .
### Effective Date of 1980 Amendment
Amendment by applicable to transactions which occur after , other than transactions which occur in proceedings in bankruptcy cases or similar judicial proceedings or in proceedings under Title 11, Bankruptcy, commencing on or before , except as otherwise provided, see , set out as a note under .
### Effective Date of 1978 Amendment
Amendment by applicable to distributions made after , see , set out as a note under .
### Effective Date of 1976 Amendment
Amendment by effective for taxable years ending after , see , set out as a note under .
Amendment by effective for taxable years beginning after , see , set out as a note under .
Amendment by effective for taxable years beginning after , see , set out as a note under .
### Effective Date of 1969 Amendment
Amendment by applicable to taxable years beginning after , see , set out as a note under .
Amendment by section 905(b)(2) effective with respect to distributions made after , see , set out as a note under .
### Effective Date of 1966 Amendment
Amendment by applicable to taxable years ending after , but only in respect of expenditures paid or incurred after such date, see , set out as an Effective Date note under .
### Effective Date of 1964 Amendment
Amendment by applicable with respect to transactions after in taxable years ending after such date, see , set out as a note under .
Amendment by applicable to dispositions after , in taxable years ending after such date, see , set out as an Effective Date note under .
### Effective Date of 1962 Amendment
Amendment by applicable to taxable years beginning after , see , set out as an Effective Date note under .
> “The amendments made by this section [enacting sections 1246 and 1247 of this title and amending this section and sections 751 and 1223 of this title] shall apply with respect to taxable years beginning after
>
> .”
, , , provided that:
> “The amendments made by this section [amending this section and sections 535, 543, 545, 556 and 561 of this title] shall apply only with respect to distributions made after the date of the enactment of this Act [
>
> ].”
, , , provided that:
### Savings Provision
For provisions that nothing in amendment by be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to , for purposes of determining liability for tax for periods ending after , see , set out as a note under .
### Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after , see , as amended, set out as a note under .