Rev. Rul. 82-75

ISSUE

When does the holding period begin for corporate stock distributed by a profit-sharing plan to a participant?

FACTS

Corporation X adopted a contributory profit-sharing plan that is qualified under section 401(a) of the Internal Revenue Code. The plan's related trust is exempt from tax under section 501(a). Under the plan, a participant may contribute a certain percentage of compensation and X will match the participant's contribution. Additional contributions may be made by the participant but X will not match those contributions. The contributions to the plan may be allocated by the participant between shares of X common stock and an income fund. The stock certificates are held in the trustee's name. After an amount is in the plan for 2 years, a participant may withdraw cash or stock from the accounts upon retirement, disability, occurrence of a hardship, or written demand to the trustee. Cash or stock may also be withdrawn upon the participant's death.

A, a participant in X's plan, requested that shares of X stock be withdrawn from A's stock account. In response to A's request, the plan trustee delivered shares of X common stock to the transfer agent and instructed the agent to reissue the shares in A's name. A subsequently received the stock certificates.

LAW AND ANALYSIS

Rev. Rul. 81-158, 1981-1 C.B. 205, holds that, for purposes of section 402 of the Code, a cash-method taxpayer receives a distribution from a stock bonus plan when the trustee delivers stock certificates to the transfer agent with instructions to reissue them in the name of the distributee. Rev. Rul. 81-158 also holds that a distribution from a profit sharing plan occurs upon delivery to a transfer agent of an order to cancel a "confirmation" representing shares owned by the bank custodian and to reissue them in the name of the distributee.

Rev. Rul. 54-607, 1954-2 C.B. 177, holds that, in determining the holding period of property for capital gain or loss purposes, the date the property is acquired is excluded and the date the property is disposed of is included.

For purposes of section 402 of the Code, A is considered to have received the distribution of the shares of X stock on the date the plan trustee delivered the stock to the transfer agent with instructions to reissue the stock in A's name. See Rev. Rul. 81-158. However, in determining the holding period for the shares of X stock received by A, the date the property was acquired is excluded. See Rev. Rul. 54-607.

HOLDING

A's holding period for the shares of X stock begins on the date following the date the plan trustee delivered the stock to the transfer agent with instructions to reissue the stock in A's name.