This section says when gain or loss on property transactions is recognized, and lists several specific nonrecognition or reference rules tied to federal tax provisions.
(a) General rule. Except as provided in this section, upon the sale or exchange of property, the entire amount of the gain or loss determined under Section 40-18-7 shall be recognized. (b) Exchange of stock for stock of same corporation. No gain or loss shall be recognized if common stock in a corporation is exchanged solely for common stock in the same corporation, or if preferred stock in a corporation is exchanged solely for preferred stock in the same corporation. (c) Like-kind exchanges. If an exchange of property satisfies the requirements of 26 U.S.C. § 1031, relating to like-kind exchanges, then the amount of gain or loss recognized in the exchange shall be determined in accordance with 26 U.S.C. § 1031. (d) Involuntary conversions. If a taxpayer validly elects to determine the amount of gain recognized for federal income tax purposes under 26 U.S.C. § 1033, relating to involuntary conversions, the amount of gain recognized shall be determined in accordance with 26 U.S.C. § 1033. (e) Transfer of property to corporation controlled by transferor. If property is transferred to a corporation in a transaction which satisfies the requirements of 26 U.S.C. § 351, relating to transfers to corporations controlled by the transferor, the amount of gain or loss recognized shall be determined in accordance with 26 U.S.C. § 351, as modified by 26 U.S.C. § 357, relating to the recognition of gain as a result of the transferee corporation’s assumption of liabilities. (f) Reorganizations. In the case of a reorganization defined in 26 U.S.C. § 368, relating to definitions applicable to corporate reorganizations, or a distribution, other than a reorganization, subject to 26 U.S.C. § 355, the amount of gain or loss recognized shall be determined in accordance with 26 U.S.C. §§ 354, 355, 356, 361, 371, and 374. (g) Exchange of stock for property. No gain or loss shall be recognized by a corporation on the receipt of money or other property in exchange for stock, including treasury stock, of the corporation or with respect to the acquisition or lapse of an option to buy or sell its stock. (h) Complete liquidation of subsidiaries. No gain or loss shall be recognized on the receipt by a corporation of property on the complete liquidation of a subsidiary corporation when the requirements of 26 U.S.C. § 332, relating to complete liquidation of subsidiaries, are satisfied. (i) Gain or loss on sales or exchanges in connection with certain liquidations. The amount of gain or loss recognized by a corporation on the sale or exchange of property shall be determined in accordance with 26 U.S.C. § 337 if every requirement for the application of 26 U.S.C. § 337 is satisfied. (j) Election under 26 U.S.C. § 338. If a valid election under 26 U.S.C. § 338 is made, the amount of gain recognized by the target corporation shall be determined in accordance with 26 U.S.C. § 338. (k) Taxability of corporation on distribution. The amount of gain recognized by a corporation on the distribution of its stock, rights to acquire its stock, or property shall be determined in accordance with 26 U.S.C. § 311, relating to taxability of corporations on distributions. (l) Gain recognized on liquidation. The amount of gain recognized by a liquidating corporation on the distribution of its property in complete liquidation shall be determined in accordance with 26 U.S.C. § 336. (m) Gain or loss on property transferred to spouse or former spouse. The amount of gain or loss on the transfer of property to a spouse or former spouse shall be determined in accordance with 26 U.S.C. § 1041. (n) Sales of stock to employee stock ownership plans or certain cooperatives. The amount of gain recognized by a taxpayer who has validly elected to determine the amount of gain recognized for federal income tax purposes under 26 U.S.C. § 1042, relating to sales of stock to employee stock ownership plans or certain cooperatives, shall be determined in accordance with 26 U.S.C. § 1042. If a taxpayer disposes of any qualified replacement property and recognizes gain under 26 U.S.C. § 1042(e), then, notwithstanding any other provision of this chapter, gain, if any, shall be recognized to the same extent and at the same time for purposes of this chapter as under 26 U.S.C. § 1042(e). The term “qualified replacement property” shall have the meaning set forth in 26 U.S.C. § 1042. (o) Contribution of property to subchapter K entity. The amount of gain or loss recognized on the contribution of property to a subchapter K entity in exchange for an interest in the subchapter K entity shall be determined in accordance with 26 U.S.C. § 721. (p) Distribution of property by subchapter K entity. The amount of gain or loss recognized on the distribution of property by a subchapter K entity shall be determined in accordance with 26 U.S.C. § 731. (q) Transfer of property to trust. Gain or loss shall not be recognized on the transfer of property to a trust. (r) Nonrecognition treatment for certain transfers from common trust funds to regulated investment companies. The tax consequences of the transfer of assets of a common trust fund in exchange for stock in one or more regulated investment companies and the tax consequences of the distribution of the stock to the participants of the common trust fund shall be determined in accordance with 26 U.S.C. § 584.