Rev. Rul. 65-80

Advice has been requested whether a shareholder will be denied the income tax treatment provided by section 331(a)(2) of the Internal Revenue Code of 1954 for amounts distributed by a corporation in partial liquidation as defined in section 346 of the Code, solely as a result of the corporation's failure to file or the late filing of Form 966, Return of Information Under Section 6043 of the Internal Revenue Code of 1954, as required by section 6043 of the Code and section 1.6043-1 of the Income Tax Regulations.

Section 6043(1) of the Code states that every corporation shall, within 30 days after the adoption by the corporation of a resolution or plan for the dissolution of the corporation or for the liquidation of the whole or any part of its capital stock, make a return setting forth the terms of such resolution or plan and such other information as the Secretary of the Treasury or his delegate shall by forms or regulations prescribe.

Section 1.6043-1(a) of the regulations states that within 30 days after the adoption of any resolution or plan for or in respect of the dissolution of a corporation or the liquidation of the whole or any part of its capital stock, the corporation shall file a return on Form 966 with the District Director of Internal Revenue for the district in which the income tax return of the corporation is filed.

Since section 331(a)(2) of the Code is not elective, its application is mandatory to any transaction fitting the definition of a partial liquidation as described in section 346 of the Code, and section 6043 of the Code was not intended to impose a further condition upon the application of section 331(a)(2) of the Code.

Accordingly, it is held that a shareholder will not be denied the income tax treatment provided under section 331(a)(2) of the Code solely by reason of the corporation's failure to file or the late filing of Form 966 as required by section 6043 of the Code and section 1.6043-1 of the regulations.

However, under certain circumstances, failure to furnish the information required by section 1.6043-1 of the regulations may subject the taxpayer to the provisions of section 7203 of the Code, pertaining to criminal penalties for willful failure to supply information required by the regulations.

¹ Also released as Technical Information Release 702, dated Mar. 2, 1965.