Jo 
"V 
+ 
INCOME TAXES 
shareholders, whether in money or in other property, out 
of its earnings or profits accumulated after February 
08,1913. 
(b) For the purposes of this act every distribution is 
nade out of earnings or profits to the extent thereof, and 
trom the most recently accumulated earnings or profits. 
Any earnings or profits accumulated, or increase in value 
of property accrued, before March 1, 1913, may be dis- 
sributed exempt from tax, after the earnings and profits 
secumulated after February 28, 1913, have been distrib- 
ated, but any such tax-free distribution shall be applied 
against and reduce the basis of the stock provided in 
section 204. 
(c) Amounts distributed in complete liquidation of a 
sorporation shall be treated as in full payment in ex- 
-hange for the stock, and amounts distributed in partial 
liquidation of a corporation shall be treated as in part 
or full payment in exchange for the stock. The gain or 
‘oss to the distributee resulting from such exchange shall 
se determined under section 202, but shall be recognized 
only to the extent provided in section 203. In the case 
5f amounts distributed in partial liquidation (other than 
2 distribution within the provisions of subdivision (g) 
of section 203 of stock or securities in connection with a 
reorganization) the part of such distribution which is 
properly chargeable to capital account shall not be con- 
sidered a distribution of earnings or profits within the 
neaning of subdivision (b) of this section for the pur- 
pose of determining the taxability of subsequent distribu- 
sions by the corporation. 
Distributions (d) If any distribution (not in partial or complete 
not from increase (0 nidation) made by a corporation to its shareholders 
oo To is not out of increase in value of property accrued before 
profits. March 1, 1918, and is not out of earnings or profits, then 
the amount of such distribution shall be applied against 
and reduce the basis of the stock provided in section 204, 
and if in excess of such basis, such excess shall be taxable 
in the same manner as a gain from the sale or exchange 
of property. The provisions of this paragraph shall also 
apply to distributions from depletion reserves based on 
the discovery value of mines. 
WE. (e) Any distribution made by a corporation, which was 
Be  Cearanie Classified as a personal service corporation under the pro- 
sarnings of per” visions of the Revenue Act of 1918 or the Revenue Act 
porations. of 1921, out of its earnings or profits which were taxable 
in accordance with the provisions of section 218 of the 
Revenue Act of 1918 or section 218 of the Revenue Act 
of 1921, shall be exempt from tax to the distributees. 
Suk diviaencs (£) A stock dividend shall not be subject to tax. 
ot re (2) If a corporation cancels or redeems its stock 
Jeemed oto ok (whether or not such stock was issued as a stock dividend) 
dividends. at such time and in such manner as to make the distribu- 
tion and cancellation or redemption in whole or in part 
Acenmulations, 
ste., before Mar. 
1, 1913, tax free. 
Condition. 
Distribution in 
iquidation. 
D et ermination 
of gain or loss. 
Partial liqui: 
dation.