### Question
How is the term disqualified distribution defined?


### Answer
The term **disqualified distribution** is defined in *26 U.S.C. § 355* as the following:

> any distribution to which this section (or so much of section 356 as relates to this section) applies if, immediately after the distribution—


(A) any person holds disqualified stock in the distributing corporation which constitutes a 50-percent or greater interest in such corporation, or


(B) any person holds disqualified stock in the controlled corporation (or, if stock of more than 1 controlled corporation is distributed, in any controlled corporation) which constitutes a 50-percent or greater interest in such corporation

#### Citation:
  - *26 U.S.C. § 355*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter C-Corporate Distributions and Adjustments > PART III-CORPORATE ORGANIZATIONS AND REORGANIZATIONS > Subpart B-Effects on Shareholders and Security Holders**

