---
kind: "section"
citation: "26 U.S.C. § 307"
title: "26"
title_heading: "Internal Revenue Code"
number: "307"
heading: "Basis of stock and stock rights acquired in distributions"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/26/307"
units:
  - "Subtitle A — Income Taxes"
  - "Chapter 1 — Normal Taxes and Surtaxes"
  - "Subchapter C — Corporate Distributions and Adjustments"
  - "Part I — Distributions by Corporations"
  - "Subpart A — Effects on Recipients"
---

# §307. Basis of stock and stock rights acquired in distributions

- (a) **General rule—** If a shareholder in a corporation receives its [stock](/usc/26/1504.md?p=a-4) or rights to acquire its [stock](/usc/26/1504.md?p=a-4) (referred to in this subsection as “new [stock](/usc/26/1504.md?p=a-4)”) in a distribution to which [section 305(a)](/usc/26/305.md?p=a) applies, then the basis of such new [stock](/usc/26/1504.md?p=a-4) and of the [stock](/usc/26/1504.md?p=a-4) with respect to which it is distributed (referred to in this section as “old [stock](/usc/26/1504.md?p=a-4)”), respectively, shall, in the shareholder’s hands, be determined by allocating between the old [stock](/usc/26/1504.md?p=a-4) and the new [stock](/usc/26/1504.md?p=a-4) the adjusted basis of the old [stock](/usc/26/1504.md?p=a-4). Such allocation shall be made under regulations prescribed by the Secretary.
- (b) **Exception for certain stock rights—**
  - (1) **In general—** If—
    - (A) a corporation distributes rights to acquire its [stock](/usc/26/1504.md?p=a-4) to a shareholder in a distribution to which [section 305(a)](/usc/26/305.md?p=a) applies, and
    - (B) the fair market [value](/usc/26/851.md?p=c-4) of such rights at the time of the distribution is less than 15 percent of the fair market [value](/usc/26/851.md?p=c-4) of the old [stock](/usc/26/1504.md?p=a-4) at such time,

    then [subsection (a)](#a) shall not apply and the basis of such rights shall be zero, unless the [taxpayer](/usc/26/1313.md?p=b) elects under paragraph (2) of this subsection to determine the basis of the old [stock](/usc/26/1504.md?p=a-4) and of the [stock](/usc/26/1504.md?p=a-4) rights under the method of allocation provided in [subsection (a)](#a).

  - (2) **Election—** The election referred to in [paragraph (1)](#b-1) shall be made in the return filed within the time prescribed by law (including extensions thereof) for the taxable year in which such rights were received. Such election shall be made in such manner as the Secretary may by regulations prescribe, and shall be irrevocable when made.
- (c) **Cross reference—** For basis of [stock](/usc/26/1504.md?p=a-4) and [stock](/usc/26/1504.md?p=a-4) rights distributed before June 22, 1954, see section 1052.

## Source credit

(Aug. 16, 1954, ch. 736, 68A Stat. 93; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.)

## Notes

### Editorial Notes

### Amendments

1976—Subsecs. (a), (b)(2). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.