The Secretary is authorized to prescribe such regulations as may be necessary or appropriate to determine whether an interest in a corporation is to be treated for purposes of this title as stock or indebtedness (or as in part stock and in part indebtedness).
The regulations prescribed under this section shall set forth factors which are to be taken into account in determining with respect to a particular factual situation whether a debtor-creditor relationship exists or a corporation-shareholder relationship exists. The factors so set forth in the regulations may include among other factors:
The characterization (as of the time of issuance) by the issuer as to whether an interest in a corporation is stock or indebtedness shall be binding on such issuer and on all holders of such interest (but shall not be binding on the Secretary).
Except as provided in regulations, paragraph (1) shall not apply to any holder of an interest if such holder on his return discloses that he is treating such interest in a manner inconsistent with the characterization referred to in paragraph (1).
The Secretary is authorized to require such information as the Secretary determines to be necessary to carry out the provisions of this subsection.
26 U.S.C. § 385
EDITORIAL NOTES
AMENDMENTS1992-Subsec. (c). Pub. L. 102-486 added subsec. (c).1989-Subsec. (a). Pub. L. 101-239 inserted "(or as in part stock and in part indebtedness)" before period at end.1976-Subsec. (a). Pub. L. 94-455 struck out "or his delegate" after "Secretary".
STATUTORY NOTES AND RELATED SUBSIDIARIES
EFFECTIVE DATE OF 1992 AMENDMENT Pub. L. 102-486, §1936(b), Oct. 24, 1992, 106 Stat. 3032, provided that: "The amendment made by subsection (a) [amending this section] shall apply to instruments issued after the date of the enactment of this Act [Oct. 24, 1992]."
REGULATIONS NOT TO BE APPLIED RETROACTIVELY Pub. L. 101-239, §7208(a)(2), Dec. 19, 1989, 103 Stat. 2337, provided that: "Any regulations issued pursuant to the authority granted by the amendment made by paragraph (1) [amending this section] shall only apply with respect to instruments issued after the date on which the Secretary of the Treasury or his delegate provides public guidance as to the characterization of such instruments whether by regulation, ruling, or otherwise."
- Secretary of the Treasury
- The term "Secretary of the Treasury" means the Secretary of the Treasury, personally, and shall not include any delegate of his.
- Secretary
- The term "Secretary" means the Secretary of the Treasury or his delegate.
- corporation
- The term "corporation" includes associations, joint-stock companies, and insurance companies.
- shareholder
- The term "shareholder" includes a member in an association, joint-stock company, or insurance company.
- stock
- The term "stock" includes shares in an association, joint-stock company, or insurance company.