§135.  Exclusion from income; property received in certain corporate liquidations

A.  If:

(1)  A corporation adopts a plan of complete liquidation on or after January 1, 1960; and

(2)  Within the twelve (12) month period beginning on the date of the adoption of such plan, all of the assets of the corporation are distributed in complete liquidation (less assets retained to meet claims) the following provisions of this Section shall be applicable.

B.  There shall be excluded from the gross income of any shareholder receiving all or a part of the assets of the corporation in exchange for the cancellation or surrender of stock of the corporation, so much of the gain, if any, as is recognized with respect to such exchange as does not exceed an amount equal to that portion of the net gain of the corporation which the value of all the assets of the corporation received in liquidation by such shareholder bears to the total value of all of the assets of the corporation received in liquidation by all the shareholders thereof.

C.  As used in this Section:

(1)  The term "net gain of the corporation" shall mean that portion as is allocated to Louisiana pursuant to R.S. 47:243 or apportioned to Louisiana pursuant to R.S. 47:244 of such gain as is recognized to the corporation from the sale or exchange by it of property within the twelve-month period beginning on the date of adoption of a plan of liquidation less the amount of loss realized by the corporation during such period from the sale or exchange of property; provided that in no case shall the net gain of the corporation exceed the taxable net income of the corporation for the year in which the gain is realized.

(2)  The term "property" as used herein does not include

(a)  stock in trade of the corporation, or other property of a kind which would properly be included in the inventory of the corporation if on hand at the close of the taxable year, and property held by the corporation primarily for sale to customers in the ordinary course of its trade or business,

(b)  installment obligations acquired in respect of the sale or exchange (without regard to whether such sale or exchange occurred before, on, or after the date of the adoption of the plan referred to in Subsection A) of stock in trade or other property described in Subsection C(2)(a) of this section, and

(c)  installment obligations acquired in respect of property (other than property described in Subsection C(2)(a)) sold or exchanged before the date of the adoption of such plan of liquidation.

D.  Notwithstanding Subsection C(2) of this Section, if substantially all of the property described in Subsection C(2)(a) which is attributable to a trade or business of the corporation is, in accordance with this Section, sold or exchanged to one person in one transaction, then for purposes of Subsection "A" the term "property" includes

(1)  such property so sold or exchanged, and

(2)  installment obligations acquired in respect of such sale or exchange.

E.  The gain excluded solely by reason of this section shall not be considered gain not taxable in whole or in part under the law under the provisions of Section 152 of this Title.

Added by Acts 1960, No. 178, §1.  Amended by Acts 1968, No. 106, §4; Acts 1972, No. 604, §1.