Rev. Rul. 56-179

The nonrecognition provisions of section 1036 of the Code do not apply to an exchange between individual shareholders of common stock for preferred stock of the same corporation; O.D. 1008 superseded.

The purpose of this Revenue Ruling is to update and restate, under the current statute and regulations, the position set forth in O.D. 1008, C.B. 5, 56.

The question presented is whether an exchange between individual shareholders of common stock for preferred stock of the same corporation is within the provisions of section 1036 of the Internal Revenue Code of 1954, so that no gain or loss will be recognized.

It is held that gain or loss is recognized to each shareholder on the exchange measured by the difference between the cost or other basis of the stock surrendered and the fair market value of the stock received.

O.D. 1008 is superseded, since the position set forth therein is restated under current law in the Revenue Ruling.

FN1 Prepared pursuant to Rev. Proc. 67-6, C.B. 1967-1, 576.