Sec. 1.356-6 Rules for treatment of nonqualified preferred stock as other property.
(a) In general.
For purposes of sections 1.354-1(e), 1.355-1(c), and 1.356-3(b), the terms stock and securities do not include--
(1) Nonqualified preferred stock, as defined in section 351(g)(2), received in exchange for (or in a distribution with respect to) stock, or a right to acquire stock, other than nonqualified preferred stock; or
(2) A right to acquire such nonqualified preferred stock, received in exchange for (or in a distribution with respect to) stock, or a right to acquire stock, other than nonqualified preferred stock.
(b) Exceptions.
The following exceptions apply:
(1) Certain recapitalizations.
Paragraph (a) of this section does not apply in the case of a recapitalization under section 368(a)(1)(E) of a family-owned corporation as described in section 354(a)(2)(C)(ii)(II).
(2) Transition rule.
Paragraph (a) of this section does not apply to a transaction described in section 1014(f)(2) of the Taxpayer Relief Act of 1997, (111 Stat. 921).
(c) Effective date.
This section applies to nonqualified preferred stock, or a right to acquire such stock, received in connection with a transaction occurring on or after March 6, 1998.
[T.D. 8753, 63 FR 411-412, Jan. 6, 1998. Redesignated by T.D. 8882, 65 FR 31078-31079, May 16, 2000.]
