Delaware General Assembly


CHAPTER 64

INCOME TAX

AN ACT TO AMEND CHAPTER 6 OF THE REVISED CODE OF DELAWARE, 1935, BY PROVIDING FOR DETERMINATION OF AMOUNT OF GAIN OR LOSS IN RESPECT TO PROPERTY DISTRIBUTED IN LIQUIDATION OF CORPORATIONS.

Be it enacted by the Senate and House of Representatives of the State of Delaware in General Assembly met:

Section 1. That Section 116 of Chapter 6 of the Revised Code of Delaware, 1935, as amended, being Code Section 150 of said Code, be and the same hereby is amended by adding at the end of said Section 116 a new subdivision designated and reading as follows:

(k) In the case of property distributed in liquidation of a corporation, if (1) the liquidation is made in pursuance of a Plan of Liquidation adopted after the date of the enactment of this Act, and (2) the distribution is in complete cancellation or redemption of all the stock of the corporation, no gain or loss upon the stock thus cancelled or redeemed shall be recognized (at the time of such distribution) except to the extent that money received as part of the distribution shall be in an amount in excess of the basis of the stock redeemed or cancelled, which such excess shall constitute taxable income at the date of distribution in liquidation. A distribution in complete liquidation shall be deemed to have been made even though the corporation has reserved cash in a reasonable amount for the payment of unmatured, unascertained or contingent liabilities or expenses. The basis of the stock cancelled or redeemed, reduced in an amount equal to the amount of money received as part of the distribution, shall become the basis for the property (other than money) received in liquidation or distribution. Each unit of property distributed shall have a basis in the hands of the distributee equivalent to that proportion on the basis of the stock cancelled or redeemed which the fair value of each such unit shall bear to the total market or fair value of all the property (other than money) so received in liquidation.

Section 2. All acts or parts of acts inconsistent with this Act are hereby repealed only to the extent of such inconsistency.

Approved April 25, 1939.