-CITE-
26 USC Subchapter O - Gain or Loss on Disposition of
Property 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
-HEAD-
SUBCHAPTER O - GAIN OR LOSS ON DISPOSITION OF PROPERTY
-MISC1-
Part
I. Determination of amount of and recognition of gain or
loss.
II. Basis rules of general application.
III. Common nontaxable exchanges.
IV. Special rules.
[V. Repealed.]
VI. Exchanges in obedience to S.E.C. orders.
VII. Wash sales; straddles.
AMENDMENTS
1995 - Pub. L. 104-7, Sec. 2(c), Apr. 11, 1995, 109 Stat. 93,
struck out item for part V "Changes to effectuate F.C.C. policy".
1990 - Pub. L. 101-508, title XI, Sec. 11801(b)(9), Nov. 5, 1990,
104 Stat. 1388-522, struck out item for part VIII "Distributions
pursuant to Bank Holding Company Act".
1981 - Pub. L. 97-34, title V, Sec. 501(d)(3), Aug. 13, 1981, 95
Stat. 327, substituted "Wash sales; straddles" for "Wash sales of
stock or securities" in item for part VII.
1976 - Pub. L. 94-455, title XIX, Sec. 1901(b)(32)(I), Oct. 4,
1976, 90 Stat. 1800, struck out item for part IX "Distributions
pursuant to orders enforcing the antitrust laws".
Pub. L. 94-452, Sec. 2(c), Oct. 2, 1976, 90 Stat. 1512, struck
out "of 1956" after "Bank Holding Company Act" in item for part
VIII.
1962 - Pub. L. 87-403, Sec. 1(b), Feb. 2, 1962, 76 Stat. 5, added
item for part IX.
1956 - Act May 9, 1956, ch. 240, Sec. 10(b), 70 Stat. 146, added
item for part VIII.
-End-
-CITE-
26 USC PART I - DETERMINATION OF AMOUNT OF AND
RECOGNITION OF GAIN OR LOSS 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART I - DETERMINATION OF AMOUNT OF AND RECOGNITION OF GAIN OR LOSS
-HEAD-
PART I - DETERMINATION OF AMOUNT OF AND RECOGNITION OF GAIN OR LOSS
-MISC1-
Sec.
1001. Determination of amount of and recognition of gain or
loss.
[1002. Repealed.]
AMENDMENTS
1976 - Pub. L. 94-455, title XIX, Sec. 1901(b)(28)(B)(ii), Oct.
4, 1976, 90 Stat. 1799, struck out item 1002 "Recognition of gain
or loss".
-SECREF-
PART REFERRED TO IN OTHER SECTIONS
This part is referred to in section 742 of this title.
-End-
-CITE-
26 USC Sec. 1001 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART I - DETERMINATION OF AMOUNT OF AND RECOGNITION OF GAIN OR LOSS
-HEAD-
Sec. 1001. Determination of amount of and recognition of gain or
loss
-STATUTE-
(a) Computation of gain or loss
The gain from the sale or other disposition of property shall be
the excess of the amount realized therefrom over the adjusted basis
provided in section 1011 for determining gain, and the loss shall
be the excess of the adjusted basis provided in such section for
determining loss over the amount realized.
(b) Amount realized
The amount realized from the sale or other disposition of
property shall be the sum of any money received plus the fair
market value of the property (other than money) received. In
determining the amount realized -
(1) there shall not be taken into account any amount received
as reimbursement for real property taxes which are treated under
section 164(d) as imposed on the purchaser, and
(2) there shall be taken into account amounts representing real
property taxes which are treated under section 164(d) as imposed
on the taxpayer if such taxes are to be paid by the purchaser.
(c) Recognition of gain or loss
Except as otherwise provided in this subtitle, the entire amount
of the gain or loss, determined under this section, on the sale or
exchange of property shall be recognized.
(d) Installment sales
Nothing in this section shall be construed to prevent (in the
case of property sold under contract providing for payment in
installments) the taxation of that portion of any installment
payment representing gain or profit in the year in which such
payment is received.
(e) Certain term interests
(1) In general
In determining gain or loss from the sale or other disposition
of a term interest in property, that portion of the adjusted
basis of such interest which is determined pursuant to section
1014, 1015, or 1041 (to the extent that such adjusted basis is a
portion of the entire adjusted basis of the property) shall be
disregarded.
(2) Term interest in property defined
For purposes of paragraph (1), the term "term interest in
property" means -
(A) a life interest in property,
(B) an interest in property for a term of years, or
(C) an income interest in a trust.
(3) Exception
Paragraph (1) shall not apply to a sale or other disposition
which is a part of a transaction in which the entire interest in
property is transferred to any person or persons.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 295; Pub. L. 91-172, title II,
Sec. 231(c)(2), title V, Sec. 516(a), Dec. 30, 1969, 83 Stat. 579,
646; Pub. L. 94-455, title XIX, Sec. 1901(a)(121), Oct. 4, 1976, 90
Stat. 1784; Pub. L. 95-600, title VII, Sec. 702(c)(9), Nov. 6,
1978, 92 Stat. 2928; Pub. L. 96-223, title IV, Sec. 401(a), Apr. 2,
1980, 94 Stat. 299; Pub. L. 98-369, div. A, title IV, Sec.
421(b)(4), July 18, 1984, 98 Stat. 794; Pub. L. 103-66, title XIII,
Sec. 13213(a)(2)(E), Aug. 10, 1993, 107 Stat. 474.)
-MISC1-
AMENDMENTS
1993 - Subsec. (f). Pub. L. 103-66 struck out heading and text of
subsec. (f). Text read as follows: "For treatment of certain
expenses incident to the sale of a residence which were deducted as
moving expenses by the taxpayer or his spouse under section 217(a),
see section 217(e)."
1984 - Subsec. (e)(1). Pub. L. 98-369 inserted reference to
section 1041.
1980 - Subsec. (e)(1). Pub. L. 96-223 repealed the amendment made
by Pub. L. 95-600. See 1978 Amendment note below.
1978 - Subsec. (e)(1). Pub. L. 95-600 inserted reference to
section 1023. See Repeals note below.
1976 - Subsec. (c). Pub. L. 94-455 substituted provision
recognizing the entire amount of gain or loss, except as otherwise
provided, for provision referring to section 1002 for the
determination of the extent of gain or loss to be recognized.
1969 - Subsec. (e). Pub. L. 91-172, Sec. 516(a), added subsec.
(e).
Subsec. (f). Pub. L. 91-172, Sec. 231(c)(2), added subsec. (f).
EFFECTIVE DATE OF 1993 AMENDMENT
Amendment by Pub. L. 103-66 applicable to expenses incurred after
Dec. 31, 1993, see section 13213(e) of Pub. L. 103-66 set out as a
note under section 62 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to transfers after July
18, 1984, in taxable years ending after such date, subject to
election to have amendment apply to transfers after 1983 or to
transfers pursuant to existing decrees, see section 421(d) of Pub.
L. 98-369, set out as an Effective Date note under section 1041 of
this title.
EFFECTIVE DATE OF 1980 AMENDMENT AND REVIVAL OF PRIOR LAW
Amendment by Pub. L. 96-223 (repealing section 702(c)(9) of Pub.
L. 95-600 and the amendment made thereby, which had amended this
section) applicable in respect of decedents dying after Dec. 31,
1976, and except for certain elections, this title to be applied
and administered as if those repealed provisions had not been
enacted, see section 401(b), (e) of Pub. L. 96-223, set out as a
note under section 1023 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by Pub. L. 95-600 effective as if included in the
amendments and additions made by, and the appropriate provisions of
Pub. L. 94-455, see section 702(c)(10) of Pub. L. 95-600, set out
as a note under section 1014 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by Pub. L. 94-455 effective for taxable years beginning
after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out
as a note under section 2 of this title.
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by section 231(c)(2) of Pub. L. 91-172 applicable to
taxable years beginning after Dec. 31, 1969, see section 231(d) of
Pub. L. 91-172, set out as a note under section 217 of this title.
Section 516(d) of Pub. L. 91-172, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) The amendment made by subsection (a) [amending this section]
shall apply to sales or other dispositions after October 9, 1969.
"(2) The amendment made by subsection (b) [amending section 1231
of this title] shall apply to taxable years beginning after
December 31, 1969.
"(3) The amendments made by subsection (c) [enacting section 1253
and amending sections 162 and 1016 of this title] shall apply to
transfers after December 31, 1969, except that section 1253(d)(1)
of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as
added by subsection (c) shall, at the election of the taxpayer
(made at such time and in such manner as the Secretary or his
delegate may by regulations prescribe), apply to transfers before
January 1, 1970, but only with respect to payments made in taxable
years ending after December 31, 1969, and beginning before January
1, 1980."
REPEALS
Pub. L. 95-600, Sec. 702(c)(9), cited as a credit to this
section, and the amendment made thereby, were repealed by Pub. L.
96-223, title IV, Sec. 401(a), 94 Stat. 299, resulting in the text
of this section reading as it read prior to enactment of section
702(c)(9). See Effective Date of 1980 Amendment and Revival of
Prior Law note set out above.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 167, 331, 368 of this
title.
-End-
-CITE-
26 USC Sec. 1002 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART I - DETERMINATION OF AMOUNT OF AND RECOGNITION OF GAIN OR LOSS
-HEAD-
[Sec. 1002. Repealed. Pub. L. 94-455, title XIX, Sec.
1901(b)(28)(B)(i), Oct. 4, 1976, 90 Stat. 1799]
-MISC1-
Section, act Aug. 16, 1954, ch. 736, 68A Stat. 295, related to
the recognition of the entire amount of gain or loss determined
under section 1001 on the sale or exchange of property.
EFFECTIVE DATE OF REPEAL
Repeal effective for taxable years beginning after Dec. 31, 1976,
see section 1901(d) of Pub. L. 94-455, set out as an Effective Date
of 1976 Amendment note under section 2 of this title.
-End-
-CITE-
26 USC PART II - BASIS RULES OF GENERAL APPLICATION 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART II - BASIS RULES OF GENERAL APPLICATION
-HEAD-
PART II - BASIS RULES OF GENERAL APPLICATION
-MISC1-
Sec.
1011. Adjusted basis for determining gain or loss.
1012. Basis of property - cost.
1013. Basis of property included in inventory.
1014. Basis of property acquired from a decedent.
1015. Basis of property acquired by gifts and transfers in
trust.
1016. Adjustments to basis.
1017. Discharge of indebtedness.
[1018. Repealed.]
1019. Property on which lessee has made improvements.
[1020. Repealed.]
1021. Sale of annuities.
1022. Treatment of property acquired from a decedent dying
after December 31, 2009.
1023. Cross references.
AMENDMENTS
2001 - Pub. L. 107-16, title V, Sec. 542(e)(6), June 7, 2001, 115
Stat. 86, added item 1022.
1980 - Pub. L. 96-589, Sec. 6(h)(2), Dec. 24, 1980, 94 Stat.
3410, struck out item 1018 "Adjustments of capital structure before
September 22, 1938".
Pub. L. 96-223, title IV, Sec. 401(a), Apr. 2, 1980, 94 Stat.
299, repealed section 2005(e)(1) of Pub. L. 94-455 and the
amendment made thereby. See 1986 Amendment note below.
1978 - Pub. L. 95-600, title V, Sec. 515(5), Nov. 6, 1978, 92
Stat. 2884, substituted "December 31, 1979" for "December 31, 1976"
in item 1023.
1976 - Pub. L. 94-455, title XX, Sec. 2005(e)(1), Oct. 4, 1976,
90 Stat. 1878, which added item 1023 and redesignated former item
1023 as 1024, was repealed by Pub. L. 96-223, Sec. 401(a). See
section 401(b), (e) of Pub. L. 96-223, set out as an Effective Date
of 1980 Amendments and Revival of Prior Law note under section 1023
of this title.
Pub. L. 94-455, title XIX, Sec. 1901(b)(29)(B), (30)(C), Oct. 4,
1976, 90 Stat. 1799, struck out item 1020 "Election in respect of
depreciation, etc., allowed before 1952", and item 1022 "Increase
in basis with respect to certain foreign personal holding company
stock or securities".
1964 - Pub. L. 88-272, title II, Sec. 225(j)(3), Feb. 26, 1964,
78 Stat. 93, added item 1022 and redesignated former item 1022 as
1023.
-SECREF-
PART REFERRED TO IN OTHER SECTIONS
This part is referred to in section 742 of this title.
-End-
-CITE-
26 USC Sec. 1011 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART II - BASIS RULES OF GENERAL APPLICATION
-HEAD-
Sec. 1011. Adjusted basis for determining gain or loss
-STATUTE-
(a) General rule
The adjusted basis for determining the gain or loss from the sale
or other disposition of property, whenever acquired, shall be the
basis (determined under section 1012 or other applicable sections
of this subchapter and subchapters C (relating to corporate
distributions and adjustments), K (relating to partners and
partnerships), and P (relating to capital gains and losses)),
adjusted as provided in section 1016.
(b) Bargain sale to a charitable organization
If a deduction is allowable under section 170 (relating to
charitable contributions) by reason of a sale, then the adjusted
basis for determining the gain from such sale shall be that portion
of the adjusted basis which bears the same ratio to the adjusted
basis as the amount realized bears to the fair market value of the
property.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 296; Pub. L. 91-172, title II,
Sec. 201(f), Dec. 30, 1969, 83 Stat. 564.)
-MISC1-
AMENDMENTS
1969 - Pub. L. 91-172 redesignated existing provisions as subsec.
(a) and added subsec. (b).
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by Pub. L. 91-172 applicable with respect to sales made
after Dec. 19, 1969, see section 201(g)(6) of Pub. L. 91-172, set
out as a note under section 170 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 165, 166, 612, 1001 of
this title.
-End-
-CITE-
26 USC Sec. 1012 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART II - BASIS RULES OF GENERAL APPLICATION
-HEAD-
Sec. 1012. Basis of property - cost
-STATUTE-
The basis of property shall be the cost of such property, except
as otherwise provided in this subchapter and subchapters C
(relating to corporate distributions and adjustments), K (relating
to partners and partnerships), and P (relating to capital gains and
losses). The cost of real property shall not include any amount in
respect of real property taxes which are treated under section
164(d) as imposed on the taxpayer.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 296.)
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1011, 1033, 1043, 1044,
1045, 1278, 1361, 1397B of this title.
-End-
-CITE-
26 USC Sec. 1013 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART II - BASIS RULES OF GENERAL APPLICATION
-HEAD-
Sec. 1013. Basis of property included in inventory
-STATUTE-
If the property should have been included in the last inventory,
the basis shall be the last inventory value thereof.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 296.)
-End-
-CITE-
26 USC Sec. 1014 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART II - BASIS RULES OF GENERAL APPLICATION
-HEAD-
Sec. 1014. Basis of property acquired from a decedent
-STATUTE-
(a) In general
Except as otherwise provided in this section, the basis of
property in the hands of a person acquiring the property from a
decedent or to whom the property passed from a decedent shall, if
not sold, exchanged, or otherwise disposed of before the decedent's
death by such person, be -
(1) the fair market value of the property at the date of the
decedent's death,
(2) in the case of an election under either section 2032 or
section 811(j) of the Internal Revenue Code of 1939 where the
decedent died after October 21, 1942, its value at the applicable
valuation date prescribed by those sections,
(3) in the case of an election under section 2032A, its value
determined under such section, or
(4) to the extent of the applicability of the exclusion
described in section 2031(c), the basis in the hands of the
decedent.
(b) Property acquired from the decedent
For purposes of subsection (a), the following property shall be
considered to have been acquired from or to have passed from the
decedent:
(1) Property acquired by bequest, devise, or inheritance, or by
the decedent's estate from the decedent;
(2) Property transferred by the decedent during his lifetime in
trust to pay the income for life to or on the order or direction
of the decedent, with the right reserved to the decedent at all
times before his death to revoke the trust;
(3) In the case of decedents dying after December 31, 1951,
property transferred by the decedent during his lifetime in trust
to pay the income for life to or on the order or direction of the
decedent with the right reserved to the decedent at all times
before his death to make any change in the enjoyment thereof
through the exercise of a power to alter, amend, or terminate the
trust;
(4) Property passing without full and adequate consideration
under a general power of appointment exercised by the decedent by
will;
(5) In the case of decedents dying after August 26, 1937,
property acquired by bequest, devise, or inheritance or by the
decedent's estate from the decedent, if the property consists of
stock or securities of a foreign corporation, which with respect
to its taxable year next preceding the date of the decedent's
death was, under the law applicable to such year, a foreign
personal holding company. In such case, the basis shall be the
fair market value of such property at the date of the decedent's
death or the basis in the hands of the decedent, whichever is
lower;
(6) In the case of decedents dying after December 31, 1947,
property which represents the surviving spouse's one-half share
of community property held by the decedent and the surviving
spouse under the community property laws of any State, or
possession of the United States or any foreign country, if at
least one-half of the whole of the community interest in such
property was includible in determining the value of the
decedent's gross estate under chapter 11 of subtitle B (section
2001 and following, relating to estate tax) or section 811 of the
Internal Revenue Code of 1939;
(7) In the case of decedents dying after October 21, 1942, and
on or before December 31, 1947, such part of any property,
representing the surviving spouse's one-half share of property
held by a decedent and the surviving spouse under the community
property laws of any State, or possession of the United States or
any foreign country, as was included in determining the value of
the gross estate of the decedent, if a tax under chapter 3 of the
Internal Revenue Code of 1939 was payable on the transfer of the
net estate of the decedent. In such case, nothing in this
paragraph shall reduce the basis below that which would exist if
the Revenue Act of 1948 had not been enacted;
(8) In the case of decedents dying after December 31, 1950, and
before January 1, 1954, property which represents the survivor's
interest in a joint and survivor's annuity if the value of any
part of such interest was required to be included in determining
the value of decedent's gross estate under section 811 of the
Internal Revenue Code of 1939;
(9) In the case of decedents dying after December 31, 1953,
property acquired from the decedent by reason of death, form of
ownership, or other conditions (including property acquired
through the exercise or non-exercise of a power of appointment),
if by reason thereof the property is required to be included in
determining the value of the decedent's gross estate under
chapter 11 of subtitle B or under the Internal Revenue Code of
1939. In such case, if the property is acquired before the death
of the decedent, the basis shall be the amount determined under
subsection (a) reduced by the amount allowed to the taxpayer as
deductions in computing taxable income under this subtitle or
prior income tax laws for exhaustion, wear and tear,
obsolescence, amortization, and depletion on such property before
the death of the decedent. Such basis shall be applicable to the
property commencing on the death of the decedent. This paragraph
shall not apply to -
(A) annuities described in section 72;
(B) property to which paragraph (5) would apply if the
property had been acquired by bequest; and
(C) property described in any other paragraph of this
subsection.
(10) Property includible in the gross estate of the decedent
under section 2044 (relating to certain property for which
marital deduction was previously allowed). In any such case, the
last 3 sentences of paragraph (9) shall apply as if such property
were described in the first sentence of paragraph (9).
(c) Property representing income in respect of a decedent
This section shall not apply to property which constitutes a
right to receive an item of income in respect of a decedent under
section 691.
(d) Special rule with respect to DISC stock
If stock owned by a decedent in a DISC or former DISC (as defined
in section 992(a)) acquires a new basis under subsection (a), such
basis (determined before the application of this subsection) shall
be reduced by the amount (if any) which would have been included in
gross income under section 995(c) as a dividend if the decedent had
lived and sold the stock at its fair market value on the estate tax
valuation date. In computing the gain the decedent would have had
if he had lived and sold the stock, his basis shall be determined
without regard to the last sentence of section 996(e)(2) (relating
to reductions of basis of DISC stock). For purposes of this
subsection, the estate tax valuation date is the date of the
decedent's death or, in the case of an election under section 2032,
the applicable valuation date prescribed by that section.
(e) Appreciated property acquired by decedent by gift within 1 year
of death
(1) In general
In the case of a decedent dying after December 31, 1981, if -
(A) appreciated property was acquired by the decedent by gift
during the 1-year period ending on the date of the decedent's
death, and
(B) such property is acquired from the decedent by (or passes
from the decedent to) the donor of such property (or the spouse
of such donor),
the basis of such property in the hands of such donor (or spouse)
shall be the adjusted basis of such property in the hands of the
decedent immediately before the death of the decedent.
(2) Definitions
For purposes of paragraph (1) -
(A) Appreciated property
The term "appreciated property" means any property if the
fair market value of such property on the day it was
transferred to the decedent by gift exceeds its adjusted basis.
(B) Treatment of certain property sold by estate
In the case of any appreciated property described in
subparagraph (A) of paragraph (1) sold by the estate of the
decedent or by a trust of which the decedent was the grantor,
rules similar to the rules of paragraph (1) shall apply to the
extent the donor of such property (or the spouse of such donor)
is entitled to the proceeds from such sale.
(f) Termination
This section shall not apply with respect to decedents dying
after December 31, 2009.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 296; Pub. L. 85-320, Sec. 2,
Feb. 11, 1958, 72 Stat. 5; Pub. L. 92-178, title V, Sec. 502(f),
Dec. 10, 1971, 85 Stat. 550; Pub. L. 94-455, title XIX, Sec.
1901(c)(8), title XX, Sec. 2005(a)(1), Oct. 4, 1976, 90 Stat. 1803,
1872; Pub. L. 95-600, title V, Sec. 515(1), title VII, Sec.
702(c)(1)(A), Nov. 6, 1978, 92 Stat. 2884, 2926; Pub. L. 96-222,
title I, Sec. 107(a)(2)(A), Apr. 1, 1980, 94 Stat. 222; Pub. L.
96-223, title IV, Sec. 401(a), Apr. 2, 1980, 94 Stat. 299; Pub. L.
97-34, title IV, Sec. 425(a), Aug. 13, 1981, 95 Stat. 318; Pub. L.
97-448, title I, Sec. 104(a)(1)(A), Jan. 12, 1983, 96 Stat. 2379;
Pub. L. 105-34, title V, Sec. 508(b), Aug. 5, 1997, 111 Stat. 860;
Pub. L. 107-16, title V, Sec. 541, June 7, 2001, 115 Stat. 76.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Termination Date of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
Section 811 of the Internal Revenue Code of 1939, referred to in
subsecs. (a)(2) and (b)(6), (8), was classified to section 811 of
former Title 26, Internal Revenue Code. For table of comparisons of
the 1939 Code to the 1986 Code, see Table I preceding section 1 of
this title. See, also, section 7851(e) of this title for provision
that references in the 1986 Code to a provision of the 1939 Code,
not then applicable, shall be deemed a reference to the
corresponding provision of the 1986 Code, which is then applicable.
Chapter 3 of the Internal Revenue Code of 1939, referred to in
subsec. (b)(7), was comprised of sections 800 to 951 of former
Title 26, Internal Revenue Code. For table of comparisons of the
1939 Code to the 1986 Code, see Table I preceding section 1 of this
title. See also section 7851(a)(2)(A) of this title for
applicability of chapter 3 of former title 26. See also section
7851(e) of this title for provision that references in the 1986
Code to a provision of the 1939 Code, not then applicable, shall be
deemed a reference to the corresponding provision of the 1986 Code,
which is then applicable.
Revenue Act of 1948, referred to in subsec. (b)(7), is act Apr.
2, 1948, ch. 168, 62 Stat. 110. For complete classification of this
Act to the Code, see Tables.
The Internal Revenue Code of 1939, referred to in subsec. (b)(9),
is act Feb. 10, 1939, ch. 2, 53 Stat. 1, as amended. Prior to the
enactment of the Internal Revenue Code of 1986 [formerly I.R.C.
1954], the 1939 Code was classified to former Title 26, Internal
Revenue Code. For table of comparisons of the 1939 Code to the 1986
Code, see Table I preceding section 1 of this title.
-MISC1-
AMENDMENTS
2001 - Subsec. (f). Pub. L. 107-16, Secs. 541, 901, temporarily
added subsec. (f). See Termination Date of 2001 Amendment note
below.
1997 - Subsec. (a). Pub. L. 105-34 struck out "or" at end of
pars. (1) and (2), struck out the period at end of par. (3) and
inserted ", or", and added par. (4).
1983 - Subsec. (b)(10). Pub. L. 97-448 added par. (10).
1981 - Subsec. (e). Pub. L. 97-34 added subsec. (e).
1980 - Subsec. (a)(3). Pub. L. 96-222 substituted "section 2032A"
for "section 2032.1".
Subsec. (d). Pub. L. 96-223 repealed the amendment made by Pub.
L. 94-455, Sec. 2005(a)(1). See 1976 Amendment note below.
1978 - Subsec. (a). Pub. L. 95-600, Sec. 702(c)(1)(A), designated
existing provisions as pars. (1) and (2) and added par. (3).
Subsec. (d). Pub. L. 95-600, Sec. 515(1), substituted "December
31, 1979" for "December 31, 1976" in heading and text.
1976 - Subsec. (b)(6), (7). Pub. L. 94-455, Sec. 1901(c)(8),
struck out "Territory," after "under the community property laws of
any State,".
Subsec. (d). Pub. L. 94-455, Sec. 2005(a)(1), substituted
provision relating to the applicability of this section to
decedents dying after 1976 for provision relating to a special rule
with respect to DISC stock. See Repeals note below.
1971 - Subsec. (d). Pub. L. 92-178 added subsec. (d).
1958 - Subsec. (d). Pub. L. 85-320 repealed subsec. (d) which
made section inapplicable to restricted stock options described in
section 421 which the employee has not exercised at death.
TERMINATION DATE OF 2001 AMENDMENT
Amendment by Pub. L. 107-16 inapplicable to estates of decedents
dying, gifts made, or generation skipping transfers, after Dec. 31,
2010, and the Internal Revenue Code of 1986 to be applied and
administered to such estates, gifts, and transfers as if such
amendment had never been enacted, see section 901 of Pub. L.
107-16, set out as an Effective and Termination Dates of 2001
Amendment note under section 1 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 508(e)(1) of Pub. L. 105-34 provided that: "The
amendments made by subsections (a) and (b) [amending this section
and section 2031 of this title] shall apply to estates of decedents
dying after December 31, 1997."
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 97-448 effective, except as otherwise
provided, as if it had been included in the provision of the
Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Section 425(b) of Pub. L. 97-34 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
property acquired after the date of the enactment of this Act [Aug.
13, 1981] by decedents dying after December 31, 1981."
EFFECTIVE DATE OF 1980 AMENDMENTS AND REVIVAL OF PRIOR LAW
Amendment by Pub. L. 96-223 (repealing section 2005(a)(1) of Pub.
L. 94-455 and the amendment made thereby, which had amended this
section) applicable in respect of decedents dying after Dec. 31,
1976, and except for certain elections, this title to be applied
and administered as if those repealed provisions had not been
enacted, see section 401(b), (e) of Pub. L. 96-223, set out as a
note under section 1023 of this title.
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provisions of the
Revenue Act of 1978, Pub. L. 95-600, to which such amendment
relates, see section 201 of Pub. L. 96-222, set out as an Effective
Date of 1980 Amendment note under section 32 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Section 702(c)(10) of Pub. L. 95-600 provided that: "The
amendments made by this subsection [amending this section and
sections 1001, 1223, and 2614 of this title] shall take effect as
if included in the amendments and additions made by, and the
appropriate provisions of the Tax Reform Act of 1976 [Pub. L.
94-455, Oct. 4, 1976, 90 Stat 1525]."
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(c)(8) of Pub. L. 94-455 applicable with
respect to taxable years beginning after Dec. 31, 1976, see section
1901(d) of Pub. L. 94-455, set out as a note under section 2 of
this title.
Amendment by section 2005(a)(1) of Pub. L. 94-455 applicable in
respect of decedents dying after Dec. 31, 1976, see section 2005(f)
of Pub. L. 94-455, set out as an Effective Date note under section
1015 of this title.
EFFECTIVE DATE OF 1971 AMENDMENT
Amendment by Pub. L. 92-178 applicable with respect to taxable
years ending after Dec. 31, 1971, except that a corporation may not
be a DISC for any taxable year beginning before Jan. 1972, see
section 507 of Pub. L. 92-178, set out as a note under section 991
of this title.
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by Pub. L. 85-320 applicable with respect to taxable
years ending after Dec. 31, 1956, but only in the case of employees
dying after such date, see section 3 of Pub. L. 85-320, set out as
a note under section 421 of this title.
REPEALS
Pub. L. 94-455, Sec. 2005(a)(1), cited as a credit to this
section, and the amendment made thereby, were repealed by Pub. L.
96-223, title IV, Sec. 401(a), 94 Stat. 299, resulting in the text
of this section reading as it read prior to enactment of section
2005(a)(1). See Effective Date of 1980 Amendments and Revival of
Prior Law note above.
ELECTION OF CARRYOVER BASIS RULES BY CERTAIN ESTATES
Pub. L. 96-223, title IV, Sec. 401(d), Apr. 2, 1980, 94 Stat.
300, as amended by Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat.
2095, provided that: "Notwithstanding any other provision of law,
in the case of a decedent dying after December 31, 1976, and before
November 7, 1978, the executor (within the meaning of section 2203
of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) of
such decedent's estate may irrevocably elect, within 120 days
following the date of enactment of this Act [Apr. 2, 1980] and in
such manner as the Secretary of the Treasury or his delegate shall
prescribe, to have the basis of all property acquired from or
passing from the decedent (within the meaning of section 1014(b) of
the Internal Revenue Code of 1986) determined for all purposes
under such Code as though the provisions of section 2005 of the Tax
Reform Act of 1976 [Pub. L. 94-455] (as amended by the provisions
of section 702(c) of the Revenue Act of 1978 [Pub. L. 95-600]
applied to such property acquired or passing from such decedent."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 42, 179, 197, 338, 355,
382, 551, 1001, 1223, 1246, 1291, 1296, 1367, 1400C, 2032A, 2654 of
this title.
-End-
-CITE-
26 USC Sec. 1015 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART II - BASIS RULES OF GENERAL APPLICATION
-HEAD-
Sec. 1015. Basis of property acquired by gifts and transfers in
trust
-STATUTE-
(a) Gifts after December 31, 1920
If the property was acquired by gift after December 31, 1920, the
basis shall be the same as it would be in the hands of the donor or
the last preceding owner by whom it was not acquired by gift,
except that if such basis (adjusted for the period before the date
of the gift as provided in section 1016) is greater than the fair
market value of the property at the time of the gift, then for the
purpose of determining loss the basis shall be such fair market
value. If the facts necessary to determine the basis in the hands
of the donor or the last preceding owner are unknown to the donee,
the Secretary shall, if possible, obtain such facts from such donor
or last preceding owner, or any other person cognizant thereof. If
the Secretary finds it impossible to obtain such facts, the basis
in the hands of such donor or last preceding owner shall be the
fair market value of such property as found by the Secretary as of
the date or approximate date at which, according to the best
information that the Secretary is able to obtain, such property was
acquired by such donor or last preceding owner.
(b) Transfer in trust after December 31, 1920
If the property was acquired after December 31, 1920, by a
transfer in trust (other than by a transfer in trust by a gift,
bequest, or devise), the basis shall be the same as it would be in
the hands of the grantor increased in the amount of gain or
decreased in the amount of loss recognized to the grantor on such
transfer under the law applicable to the year in which the transfer
was made.
(c) Gift or transfer in trust before January 1, 1921
If the property was acquired by gift or transfer in trust on or
before December 31, 1920, the basis shall be the fair market value
of such property at the time of such acquisition.
(d) Increased basis for gift tax paid
(1) In general
If -
(A) the property is acquired by gift on or after September 2,
1958, the basis shall be the basis determined under subsection
(a), increased (but not above the fair market value of the
property at the time of the gift) by the amount of gift tax
paid with respect to such gift, or
(B) the property was acquired by gift before September 2,
1958, and has not been sold, exchanged, or otherwise disposed
of before such date, the basis of the property shall be
increased on such date by the amount of gift tax paid with
respect to such gift, but such increase shall not exceed an
amount equal to the amount by which the fair market value of
the property at the time of the gift exceeded the basis of the
property in the hands of the donor at the time of the gift.
(2) Amount of tax paid with respect to gift
For purposes of paragraph (1), the amount of gift tax paid with
respect to any gift is an amount which bears the same ratio to
the amount of gift tax paid under chapter 12 with respect to all
gifts made by the donor for the calendar year (or preceding
calendar period) in which such gift is made as the amount of such
gift bears to the taxable gifts (as defined in section 2503(a)
but computed without the deduction allowed by section 2521) made
by the donor during such calendar year or period. For purposes of
the preceding sentence, the amount of any gift shall be the
amount included with respect to such gift in determining (for the
purposes of section 2503(a)) the total amount of gifts made
during the calendar year or period, reduced by the amount of any
deduction allowed with respect to such gift under section 2522
(relating to charitable deduction) or under section 2523
(relating to marital deduction).
(3) Gifts treated as made one-half by each spouse
For purposes of paragraph (1), where the donor and his spouse
elected, under section 2513 to have the gift considered as made
one-half by each, the amount of gift tax paid with respect to
such gift under chapter 12 shall be the sum of the amounts of tax
paid with respect to each half of such gift (computed in the
manner provided in paragraph (2)).
(4) Treatment as adjustment to basis
For purposes of section 1016(b), an increase in basis under
paragraph (1) shall be treated as an adjustment under section
1016(a).
(5) Application to gifts before 1955
With respect to any property acquired by gift before 1955,
references in this subsection to any provision of this title
shall be deemed to refer to the corresponding provision of the
Internal Revenue Code of 1939 or prior revenue laws which was
effective for the year in which such gift was made.
(6) Special rule for gifts made after December 31, 1976
(A) In general
In the case of any gift made after December 31, 1976, the
increase in basis provided by this subsection with respect to
any gift for the gift tax paid under chapter 12 shall be an
amount (not in excess of the amount of tax so paid) which bears
the same ratio to the amount of tax so paid as -
(i) the net appreciation in value of the gift, bears to
(ii) the amount of the gift.
(B) Net appreciation
For purposes of paragraph (1), the net appreciation in value
of any gift is the amount by which the fair market value of the
gift exceeds the donor's adjusted basis immediately before the
gift.
(e) Gifts between spouses
In the case of any property acquired by gift in a transfer
described in section 1041(a), the basis of such property in the
hands of the transferee shall be determined under section
1041(b)(2) and not this section.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 298; Pub. L. 85-866, title I,
Sec. 43(a), Sept. 2, 1958, 72 Stat. 1640; Pub. L. 91-614, title I,
Sec. 102(d)(1), Dec. 31, 1970, 84 Stat. 1841; Pub. L. 94-455, title
XIX, Secs. 1901(a)(122), 1906(b) (13)(A), title XX, Sec. 2005(c),
Oct. 4, 1976, 90 Stat. 1784, 1834, 1877; Pub. L. 97-34, title IV,
Sec. 442(d)(1), Aug. 13, 1981, 95 Stat. 322; Pub. L. 98-369, div.
A, title IV, Sec. 421(b)(5), July 18, 1984, 98 Stat. 794.)
-REFTEXT-
REFERENCES IN TEXT
Section 2521, referred to in subsec. (d)(2), was repealed by Pub.
L. 94-455, title XX, Sec. 2001(b)(3), Oct. 4, 1976, 90 Stat. 1849.
The Internal Revenue Code of 1939, referred to in subsec. (d)(5),
is act Feb. 10, 1939, ch. 2, 53 Stat. 1, as amended. Prior to the
enactment of the Internal Revenue Code of 1986 [formerly I.R.C.
1954], the 1939 Code was classified to former Title 26, Internal
Revenue Code. For table of comparisons of the 1939 Code to the 1986
Code, see Table I preceding section 1 of this title.
-MISC1-
AMENDMENTS
1984 - Subsec. (e). Pub. L. 98-369 added subsec. (e).
1981 - Subsec. (d)(2). Pub. L. 97-34 substituted "calendar year
(or preceding calendar period)" for "calendar quarter (or calendar
year if the gift was made before January 1, 1971)" and "calendar
year or period" for "calendar quarter or year" in two places.
1976 - Subsec. (a). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck
out "or his delegate" after "Secretary" in four places.
Subsec. (d)(1)(A), (B). Pub. L. 94-455, Sec. 1901(a)(122),
substituted "September 2, 1958" for "the date of enactment of the
Technical Amendments Act of 1958".
Subsec. (d)(6). Pub. L. 94-455, Sec. 2005(c), added par. (6).
1970 - Subsec. (d)(2). Pub. L. 91-614 substituted "calendar
quarter (or calendar year if the gift was made before January 1,
1971)" for "calendar year" the first place it appears and "calendar
quarter or year" for "calendar year" every other place it appears.
1958 - Subsec. (d). Pub. L. 85-866 added subsec. (d).
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to transfers after July
18, 1984, in taxable years ending after such date, subject to
election to have amendment apply to transfers after 1983 or to
transfers pursuant to existing decrees, see section 421(d) of Pub.
L. 98-369, set out as an Effective Date note under section 1041 of
this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by Pub. L. 97-34 applicable with respect to gifts made
after Dec. 31, 1981, see section 442(e) of Pub. L. 97-34, set out
as a note under section 2501 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(122) of Pub. L. 94-455 applicable
with respect to taxable years beginning after Dec. 31, 1976, see
section 1901(d) of Pub. L. 94-455, set out as a note under section
2 of this title.
Section 2005(f) of Pub. L. 94-455, as amended by Pub. L. 95-600,
title V, Sec. 515(6), Nov. 6, 1978, 92 Stat. 2884, provided that:
"(1) Except as provided in paragraph (2), the amendments made by
this section [enacting sections 1023, 1040, 6039A, and 6694 of this
title, amending sections 691, 1016, and 1246 of this title, and
renumbering former section 1023 as 1024] shall apply in respect of
decedents dying after December 31, 1979.
"(2) The amendment made by subsection (c) [amending this section]
shall apply to gifts made after December 31, 1976."
EFFECTIVE DATE OF 1970 AMENDMENT
Amendment by Pub. L. 91-614 applicable with respect to gifts made
after Dec. 31, 1970, see section 102(e) of Pub. L. 91-614, set out
as a note under section 2501 of this title.
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by Pub. L. 85-866 applicable to taxable years beginning
after Dec. 31, 1953, and ending after Aug. 16, 1954, see section
1(c)(1) of Pub. L. 85-866, set out as a note under section 165 of
this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 382, 1001, 1312, 2056A,
2511, 2654 of this title.
-End-
-CITE-
26 USC Sec. 1016 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART II - BASIS RULES OF GENERAL APPLICATION
-HEAD-
Sec. 1016. Adjustments to basis
-STATUTE-
(a) General rule
Proper adjustment in respect of the property shall in all cases
be made -
(1) for expenditures, receipts, losses, or other items,
properly chargeable to capital account, but no such adjustment
shall be made -
(A) for taxes or other carrying charges described in section
266, or
(B) for expenditures described in section 173 (relating to
circulation expenditures),
for which deductions have been taken by the taxpayer in
determining taxable income for the taxable year or prior taxable
years;
(2) in respect of any period since February 28, 1913, for
exhaustion, wear and tear, obsolescence, amortization, and
depletion, to the extent of the amount -
(A) allowed as deductions in computing taxable income under
this subtitle or prior income tax laws, and
(B) resulting (by reason of the deductions so allowed) in a
reduction for any taxable year of the taxpayer's taxes under
this subtitle (other than chapter 2, relating to tax on
self-employment income), or prior income, war-profits, or
excess-profits tax laws,
but not less than the amount allowable under this subtitle or
prior income tax laws. Where no method has been adopted under
section 167 (relating to depreciation deduction), the amount
allowable shall be determined under the straight line method.
Subparagraph (B) of this paragraph shall not apply in respect of
any period since February 28, 1913, and before January 1, 1952,
unless an election has been made under section 1020 (as in effect
before the date of the enactment of the Tax Reform Act of 1976).
Where for any taxable year before the taxable year 1932 the
depletion allowance was based on discovery value or a percentage
of income, then the adjustment for depletion for such year shall
be based on the depletion which would have been allowable for
such year if computed without reference to discovery value or a
percentage of income;
(3) in respect of any period -
(A) before March 1, 1913,
(B) since February 28, 1913, during which such property was
held by a person or an organization not subject to income
taxation under this chapter or prior income tax laws,
(C) since February 28, 1913, and before January 1, 1958,
during which such property was held by a person subject to tax
under part I of subchapter L (or the corresponding provisions
of prior income tax laws), to the extent that paragraph (2)
does not apply, and
(D) since February 28, 1913, during which such property was
held by a person subject to tax under part II (!1) of
subchapter L (or the corresponding provisions of prior income
tax laws), to the extent that paragraph (2) does not apply,
for exhaustion, wear and tear, obsolescence, amortization, and
depletion, to the extent sustained;
(4) in the case of stock (to the extent not provided for in the
foregoing paragraphs) for the amount of distributions previously
made which, under the law applicable to the year in which the
distribution was made, either were tax-free or were applicable in
reduction of basis (not including distributions made by a
corporation which was classified as a personal service
corporation under the provisions of the Revenue Act of 1918 (40
Stat. 1057), or the Revenue Act of 1921 (42 Stat. 227), out of
its earnings or profits which were taxable in accordance with the
provisions of section 218 of the Revenue Act of 1918 or 1921);
(5) in the case of any bond (as defined in section 171(d)) the
interest on which is wholly exempt from the tax imposed by this
subtitle, to the extent of the amortizable bond premium
disallowable as a deduction pursuant to section 171(a)(2), and in
the case of any other bond (as defined in section 171(d)) to the
extent of the deductions allowable pursuant to section 171(a)(1)
(or the amount applied to reduce interest payments under section
171(e)(2)) with respect thereto;
(6) in the case of any municipal bond (as defined in section
75(b)), to the extent provided in section 75(a)(2);
(7) in the case of a residence the acquisition of which
resulted, under section 1034 (as in effect on the day before the
date of the enactment of the Taxpayer Relief Act of 1997), in the
nonrecognition of any part of the gain realized on the sale,
exchange, or involuntary conversion of another residence, to the
extent provided in section 1034(e) (as so in effect);
(8) in the case of property pledged to the Commodity Credit
Corporation, to the extent of the amount received as a loan from
the Commodity Credit Corporation and treated by the taxpayer as
income for the year in which received pursuant to section 77, and
to the extent of any deficiency on such loan with respect to
which the taxpayer has been relieved from liability;
(9) for amounts allowed as deductions as deferred expenses
under section 616(b) (relating to certain expenditures in the
development of mines) and resulting in a reduction of the
taxpayer's taxes under this subtitle, but not less than the
amounts allowable under such section for the taxable year and
prior years;
[(10) Repealed. Pub. L. 94-455, title XIX, Sec. 1901(b)(21)(G),
Oct. 4, 1976, 90 Stat. 1798.]
(11) for deductions to the extent disallowed under section 268
(relating to sale of land with unharvested crops),
notwithstanding the provisions of any other paragraph of this
subsection;
(12) to the extent provided in section 28(h) of the Internal
Revenue Code of 1939 in the case of amounts specified in a
shareholder's consent made under section 28 of such code;
(13) to the extent provided in section 551(e) in the case of
the stock of United States shareholders in a foreign personal
holding company;
(14) for amounts allowed as deductions as deferred expenses
under section 174(b)(1) (relating to research and experimental
expenditures) and resulting in a reduction of the taxpayers'
taxes under this subtitle, but not less than the amounts
allowable under such section for the taxable year and prior
years;
(15) for deductions to the extent disallowed under section 272
(relating to disposal of coal or domestic iron ore),
notwithstanding the provisions of any other paragraph of this
subsection;
(16) in the case of any evidence of indebtedness referred to in
section 811(b) (relating to amortization of premium and accrual
of discount in the case of life insurance companies), to the
extent of the adjustments required under section 811(b) (or the
corresponding provisions of prior income tax laws) for the
taxable year and all prior taxable years;
(17) to the extent provided in section 1367 in the case of
stock of, and indebtedness owed to, shareholders of an S
corporation;
(18) to the extent provided in section 961 in the case of stock
in controlled foreign corporations (or foreign corporations which
were controlled foreign corporations) and of property by reason
of which a person is considered as owning such stock;
(19) to the extent provided in section 50(c), in the case of
expenditures with respect to which a credit has been allowed
under section 38;
(20) for amounts allowed as deductions under section 59(e)
(relating to optional 10-year writeoff of certain tax
preferences);
(21) to the extent provided in section 1059 (relating to
reduction in basis for extraordinary dividends);
(22) in the case of qualified replacement property the
acquisition of which resulted under section 1042 in the
nonrecognition of any part of the gain realized on the sale or
exchange of any property, to the extent provided in section
1042(d),(!2)
(23) in the case of property the acquisition of which resulted
under section 1043, 1044, 1045, or 1397B in the nonrecognition of
any part of the gain realized on the sale of other property, to
the extent provided in section 1043(c), 1044(d), 1045(b)(4), or
1397B(b)(4), as the case may be,(!2)
(24) to the extent provided in section 179A(e)(6)(A),(!2)
(25) to the extent provided in section 30(d)(1),(!2)
(26) to the extent provided in sections 23(g) and 137(e),(!2)
(27) in the case of a residence with respect to which a credit
was allowed under section 1400C, to the extent provided in
section 1400C(h),(!2) and
(28) in the case of a facility with respect to which a credit
was allowed under section 45F, to the extent provided in section
45F(f)(1).
(b) Substituted basis
Whenever it appears that the basis of property in the hands of
the taxpayer is a substituted basis, then the adjustments provided
in subsection (a) shall be made after first making in respect of
such substituted basis proper adjustments of a similar nature in
respect of the period during which the property was held by the
transferor, donor, or grantor, or during which the other property
was held by the person for whom the basis is to be determined. A
similar rule shall be applied in the case of a series of
substituted bases.
(c) Increase in basis of property on which additional estate tax is
imposed
(1) Tax imposed with respect to entire interest
If an additional estate tax is imposed under section
2032A(c)(1) with respect to any interest in property and the
qualified heir makes an election under this subsection with
respect to the imposition of such tax, the adjusted basis of such
interest shall be increased by an amount equal to the excess of -
(A) the fair market value of such interest on the date of the
decedent's death (or the alternate valuation date under section
2032, if the executor of the decedent's estate elected the
application of such section), over
(B) the value of such interest determined under section
2032A(a).
(2) Partial dispositions
(A) In general
In the case of any partial disposition for which an election
under this subsection is made, the increase in basis under
paragraph (1) shall be an amount -
(i) which bears the same ratio to the increase which would
be determined under paragraph (1) (without regard to this
paragraph) with respect to the entire interest, as
(ii) the amount of the tax imposed under section
2032A(c)(1) with respect to such disposition bears to the
adjusted tax difference attributable to the entire interest
(as determined under section 2032A(c)(2)(B)).
(B) Partial disposition
For purposes of subparagraph (A), the term "partial
disposition" means any disposition or cessation to which
subsection (c)(2)(D), (h)(1)(B), or (i)(1)(B) of section 2032A
applies.
(3) Time adjustment made
Any increase in basis under this subsection shall be deemed to
have occurred immediately before the disposition or cessation
resulting in the imposition of the tax under section 2032A(c)(1).
(4) Special rule in the case of substituted property
If the tax under section 2032A(c)(1) is imposed with respect to
qualified replacement property (as defined in section
2032A(h)(3)(B)) or qualified exchange property (as defined in
section 2032A(i)(3)), the increase in basis under paragraph (1)
shall be made by reference to the property involuntarily
converted or exchanged (as the case may be).
(5) Election
(A) In general
An election under this subsection shall be made at such time
and in such manner as the Secretary shall by regulations
prescribe. Such an election, once made, shall be irrevocable.
(B) Interest on recaptured amount
If an election is made under this subsection with respect to
any additional estate tax imposed under section 2032A(c)(1),
for purposes of section 6601 (relating to interest on
underpayments), the last date prescribed for payment of such
tax shall be deemed to be the last date prescribed for payment
of the tax imposed by section 2001 with respect to the estate
of the decedent (as determined for purposes of section 6601).
(d) Reduction in basis of automobile on which gas guzzler tax was
imposed
If -
(1) the taxpayer acquires any automobile with respect to which
a tax was imposed by section 4064, and
(2) the use of such automobile by the taxpayer begins not more
than 1 year after the date of the first sale for ultimate use of
such automobile,
the basis of such automobile shall be reduced by the amount of the
tax imposed by section 4064 with respect to such automobile. In the
case of importation, if the date of entry or withdrawal from
warehouse for consumption is later than the date of the first sale
for ultimate use, such later date shall be substituted for the date
of such first sale in the preceding sentence.
(e) Cross reference
For treatment of separate mineral interests as one property,
see section 614.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 299; June 29, 1956, ch. 464,
Sec. 4(c), 70 Stat. 407; Pub. L. 85-866, title I, Secs. 2(b),
64(d)(2), Sept. 2, 1958, 72 Stat. 1607, 1656; Pub. L. 86-69, Sec.
3(d), June 25, 1959, 73 Stat. 139; Pub. L. 87-834, Secs. 2(f),
8(g)(2), 12(b)(4), Oct. 16, 1962, 76 Stat. 972, 998, 1031; Pub. L.
88-272, title II, Secs. 203(a)(3)(C), 225(j)(2), 227(b)(5), Feb.
26, 1964, 78 Stat. 34, 93, 98; Pub. L. 91-172, title II, Sec.
231(c)(3), title V, Secs. 504(c)(4), 516(c)(2)(B), Dec. 30, 1969,
83 Stat. 580, 633, 648; Pub. L. 94-455, title XIX, Sec.
1901(a)(123), (b)(1)(F)(ii), (21)(G), (29)(A), (30)(A), title XX,
Sec. 2005(a)(3), Oct. 4, 1976, 90 Stat. 1784, 1790, 1798, 1799,
1876; Pub. L. 95-472, Sec. 4(b), Oct. 17, 1978, 92 Stat. 1335; Pub.
L. 95-600, title V, Sec. 515(2), title VI, Sec. 601(b)(3), title
VII, Sec. 702(r)(3), Nov. 6, 1978, 92 Stat. 2884, 2896, 2938; Pub.
L. 95-618, title I, Sec. 101(b)(3), title II, Sec. 201(b), Nov. 9,
1978, 92 Stat. 3179, 3183; Pub. L. 96-222, title I, Secs.
106(a)(2), (3), 107(a)(2)(C), Apr. 1, 1980, 94 Stat. 221, 222; Pub.
L. 96-223, title IV, Sec. 401(a), (c)(1), Apr. 2, 1980, 94 Stat.
299, 300; Pub. L. 97-34, title II, Sec. 212(d)(2)(G), title IV,
Sec. 421(g), Aug. 13, 1981, 95 Stat. 239, 310; Pub. L. 97-248,
title II, Secs. 201(c)(2), 205(a)(5)(B), Sept. 3, 1982, 96 Stat.
418, 429; Pub. L. 97-354, Sec. 5(a)(33), Oct. 19, 1982, 96 Stat.
1695; Pub. L. 98-369, div. A, title I, Secs. 43(a)(2), 53(d)(3),
title II, Sec. 211(b)(14), title IV, Sec. 474(r)(23), title V, Sec.
541(b)(2), July 18, 1984, 98 Stat. 558, 568, 756, 844, 890; Pub. L.
99-514, title II, Sec. 241(b)(2), title VII, Sec. 701(e)(4)(D),
title XIII, Sec. 1303(b)(3), title XVIII, Sec. 1899A(25), Oct. 22,
1986, 100 Stat. 2181, 2343, 2658, 2959; Pub. L. 100-647, title I,
Secs. 1006(j)(1)(B), 1018(u)(22), Nov. 10, 1988, 102 Stat. 3411,
3591; Pub. L. 101-194, title V, Sec. 502(b)(2), Nov. 30, 1989, 103
Stat. 1755; Pub. L. 101-508, title XI, Secs. 11801(c)(1),
11812(b)(10), 11813(b)(19), Nov. 5, 1990, 104 Stat. 1388-522,
1388-535, 1388-555; Pub. L. 102-486, title XIX, Sec. 1913(a)(3)(A),
(b)(2)(B), Oct. 24, 1992, 106 Stat. 3019, 3020; Pub. L. 103-66,
title XIII, Secs. 13114(b), 13213(a)(2)(F), 13261(f)(3), Aug. 10,
1993, 107 Stat. 431, 474, 539; Pub. L. 104-188, title I, Secs.
1704(t)(56), 1807(c)(5), Aug. 20, 1996, 110 Stat. 1890, 1902; Pub.
L. 105-34, title III, Secs. 312(d)(6), 313(b)(1), title VII, Sec.
701(b)(2), Aug. 5, 1997, 111 Stat. 840, 842, 869; Pub. L. 106-554,
Sec. 1(a)(7) [title I, Sec. 116(b)(1)], Dec. 21, 2000, 114 Stat.
2763, 2763A-603; Pub. L. 107-16, title II, Sec. 205(b)(3), June 7,
2001, 115 Stat. 53.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
Section 1020, referred to in subsec. (a)(2), was repealed by Pub.
L. 94-455, title XIX, Sec. 1901(a)(125), Oct. 4, 1976, 90 Stat.
1784.
The Tax Reform Act of 1976, referred to in subsec. (a)(2), is
Pub. L. 94-455, Oct. 4, 1976, 90 Stat. 1520, as amended, which was
enacted Oct. 4, 1976. For complete classification of this Act to
the Code, see Tables.
Part II of subchapter L, referred to in subsec. (a)(3)(D), was
repealed and part III of subchapter L was redesignated as part II
by Pub. L. 99-514, title X, Sec. 1024(a)(1), (2), Oct. 22, 1986,
100 Stat. 2405.
The Revenue Act of 1918 (40 Stat. 1057), referred to in subsec.
(a)(4), is act Feb. 24, 1919, ch. 18, 40 Stat. 1057. For complete
classification of this Act to the Code, see Tables.
The Revenue Act of 1921 (42 Stat. 227), referred to in subsec.
(a)(4), is act Nov. 23, 1921, ch. 136, 42 Stat. 227. For complete
classification of this Act to the Code, see Tables.
Section 218 of the Revenue Act of 1918 or 1921, referred to in
subsec. (a)(4), was not classified to the Code.
The date of the enactment of the Taxpayer Relief Act of 1997,
referred to in subsec. (a)(7), is the date of enactment of Pub. L.
105-34, which was approved Aug. 5, 1997.
Section 28 of the Internal Revenue Code of 1939, referred to in
subsec. (a)(12), was classified to section 28 of former Title 26,
Internal Revenue Code. Section 28 was repealed by section
7851(a)(1)(A) of this title. For table of comparisons of the 1939
Code to the 1986 Code, see Table I preceding section 1 of this
title. See, also, section 7851(e) of this title for provision that
references in the 1986 Code to a provision of the 1939 Code, not
then applicable, shall be deemed a reference to the corresponding
provision of the 1986 Code, which is then applicable.
-MISC1-
AMENDMENTS
2001 - Subsec. (a)(28). Pub. L. 107-16, Secs. 205(b)(3), 901,
temporarily added par. (28). See Effective and Termination Dates of
2001 Amendment note below.
2000 - Subsec. (a)(23). Pub. L. 106-554 substituted "1045, or
1397B" for "or 1045" and "1045(b)(4), or 1397B(b)(4)" for "or
1045(b)(4)".
1997 - Subsec. (a)(7). Pub. L. 105-34, Sec. 312(d)(6), inserted
"(as in effect on the day before the date of the enactment of the
Taxpayer Relief Act of 1997)" after "section 1034" and "(as so in
effect)" after "section 1034(e)".
Subsec. (a)(23). Pub. L. 105-34, Sec. 313(b)(1), substituted ",
1044, or 1045" for "or 1044" and ", 1044(d), or 1045(b)(4)" for "or
1044(d)".
Subsec. (a)(27). Pub. L. 105-34, Sec. 701(b)(2), added par. (27).
1996 - Subsec. (a)(20). Pub. L. 104-188, Sec. 1704(t)(56),
provided that section 11813(b)(19) of Pub. L. 101-508 shall be
applied as if "Paragraph (20) of section 1016(a), as redesignated
by section 11801," appeared instead of "paragraph (21) of section
1016(a)". See 1990 Amendment note below.
Subsec. (a)(26). Pub. L. 104-188, Sec. 1807(c)(5), added par.
(26).
1993 - Subsec. (a)(19) to (23). Pub. L. 103-66, Sec. 13261(f)(3),
redesignated pars. (20) to (24) as (19) to (23), respectively, and
struck out former par. (19) which read as follows: "for amounts
allowed as deductions for payments made on account of transfers of
franchises, trademarks, or trade names under section 1253(d)(2);".
Subsec. (a)(24). Pub. L. 103-66, Sec. 13261(f)(3), redesignated
par. (25) as (24). Former par. (24) redesignated (23).
Pub. L. 103-66, Sec. 13114(b), substituted "section 1043 or 1044"
for "section 1043" and "section 1043(c) or 1044(d), as the case may
be" for "section 1043(c)".
Subsec. (a)(25), (26). Pub. L. 103-66, Sec. 13261(f)(3),
redesignated pars. (25) and (26) as (24) and (25), respectively.
Subsec. (e). Pub. L. 103-66, Sec. 13213(a)(2)(F), amended heading
and text of subsec. (e) generally. Prior to amendment, text read as
follows:
"(1) For treatment of certain expenses incident to the purchase
of a residence which were deducted as moving expenses by the
taxpayer or his spouse under section 217(a), see section 217(e).
"(2) For treatment of separate mineral interests as one property,
see section 614."
1992 - Subsec. (a)(25), (26). Pub. L. 102-486 added pars. (25)
and (26).
1990 - Subsec. (a)(2). Pub. L. 101-508, Sec. 11812(b)(10),
substituted "under the straight line method" for "under section
167(b)(1)" in concluding provisions.
Subsec. (a)(20). Pub. L. 101-508, Sec. 11813(b)(19), which
directed the amendment of subsec. (a)(21) by striking "section
48(q)" and inserting "section 50(c)", was executed to subsec.
(a)(20). See 1996 Amendment note above.
Pub. L. 101-508, Sec. 11801(c)(1), redesignated par. (21) as (20)
and struck out former par. (20) which read as follows: "to the
extent provided in section 23(e), in the case of property with
respect to which a credit has been allowed under section 23;".
Subsec. (a)(21) to (25). Pub. L. 101-508, Sec. 11801(c)(1),
redesignated pars. (21) to (25) as (20) to (24), respectively.
1989 - Subsec. (a)(25). Pub. L. 101-194 added par. (25).
1988 - Subsec. (a)(5). Pub. L. 100-647, Sec. 1006(j)(1)(B),
inserted "(or the amount applied to reduce interest payments under
section 171(e)(2))" after "allowable pursuant to section
171(a)(1)".
Subsec. (a)(21) to (26). Pub. L. 100-647, Sec. 1018(u)(22), added
pars. (21) to (24) and struck out former pars. (23) to (26) which
read as follows:
"(23) to the extent provided in section 48(q) in the case of
expenditures with respect to which a credit has been allowed under
section 38;
"(24) for amounts allowed as deductions under section 59(d)
(relating to optional 10-year writeoff of certain tax preferences);
"(25) to the extent provided in section 1059 (relating to
reduction in basis for extraordinary dividends); and
"(26) in the case of qualified replacement property, the
acquisition of which resulted under section 1042 in the
nonrecognition of any part of the gain realized on the sale or
exchange of any property, to the extent provided in section
1042(c)."
Former pars. (21) and (22) had been struck out previously.
1986 - Subsec. (a). Pub. L. 99-514, Sec. 1899A(25), which
directed the amendment of pars. (23) to (26) by substituting a
semicolon for a comma at the end thereof was executed to pars. (24)
to (26) in view of the prior repeal of par. (23).
Pub. L. 99-514, Sec. 1303(b)(3), which directed the amendment of
subsec. (a) by striking out par. (22) and redesignating pars. (23)
to (27) as (22) to (26), respectively, was executed by striking out
par. (21) to reflect the probable intent of Congress in view of the
amendment by section 241(b)(2) of Pub. L. 99-514. Prior to the
amendment, par. (21) read as follows: "to the extent provided in
section 1395 in the case of stock of shareholders of a general
stock ownership corporation (as defined in section 1391) which
makes the election provided by section 1392;".
Pub. L. 99-514, Sec. 241(b)(2), redesignated pars. (17) to (27)
as (16) to (26), respectively, and struck out former par. (16)
which read as follows: "for amounts allowed as deductions for
expenditures treated as deferred expenses under section 177
(relating to trademark and trade name expenditures) and resulting
in a reduction of the taxpayer's taxes under this subtitle, but not
less than the amounts allowable under such section for the taxable
year and prior years;".
Subsec. (a)(24). Pub. L. 99-514, Sec. 701(e)(4)(D), substituted
"section 59(d)" for "section 58(i)".
1984 - Subsec. (a)(17). Pub. L. 98-369, Sec. 211(b)(14),
substituted "section 811(b)" for "section 818(b)" in two places.
Subsec. (a)(21). Pub. L. 98-369, Sec. 474(r)(23), substituted
"section 23(e)" for "section 44C(e)" and "section 23" for "section
44C".
Subsec. (a)(26). Pub. L. 98-369, Sec. 53(d)(3), added par. (26).
Subsec. (a)(27). Pub. L. 98-369, Sec. 541(b)(2), added par. (27).
Subsec. (b). Pub. L. 98-369, Sec. 43(a)(2), struck out "The term
'substituted basis' as used in this section means a basis
determined under any provision of this subchapter and subchapters C
(relating to corporate distributions and adjustments), K (relating
to partners and partnerships), and P (relating to capital gains and
losses), or under any corresponding provision of a prior income tax
law, providing that the basis shall be determined (1) by reference
to the basis in the hands of a transferor, donor, or grantor, or
(2) by reference to other property held at any time by the person
for whom the basis is to be determined." See section 7701(a)(42) of
this title.
1982 - Subsec. (a)(18). Pub. L. 97-354 substituted "section 1367"
for "section 1376", "indebtedness owed to" for "indebtedness
owing", and "an S corporation" for "an electing small business
corporation (as defined in section 1371(b))".
Subsec. (a)(24). Pub. L. 97-248, Sec. 205(a)(5)(B), substituted
"to the extent provided in section 48(q)" for "to the extent
provided in section 48(g)(5)".
Subsec. (a)(25). Pub. L. 97-248, Sec. 201(c)(2), added par. (25).
1981 - Subsec. (a)(24). Pub. L. 97-34, Sec. 212(d)(2)(G), added
par. (24).
Subsec. (c). Pub. L. 97-34, Sec. 421(g), substituted provisions
respecting increase in basis of property on which additional estate
tax is imposed for provisions for increase in basis in the case of
certain involuntary conversions, if such compulsory or involuntary
conversions are within the meaning of section 1033, and an
additional estate tax is imposed under section 2032A, and
provisions respecting time adjustment made.
1980 - Subsec. (a)(22). Pub. L. 96-222, Sec. 106(a)(2),
redesignated par. (21), relating to the extent provided in section
1395 in the case of stock of shareholders of a general stock
ownership corporation, as (22).
Subsec. (a)(23). Pub. L. 96-223, Sec. 401(a), repealed the
amendments made by Pub. L. 94-455, Sec. 2005(a)(3), and Pub. L.
95-600, Sec. 702(r)(3). See 1976 and 1978 Amendment notes below.
Subsec. (c). Pub. L. 96-223, Sec. 401(c)(1), struck out provision
relating to the net appreciation of in value of certain property
and struck out references to section 1023 of this title.
1978 - Subsec. (a)(21). Pub. L. 95-618, Sec. 101(b)(3), added
par. (21) relating to an adjustment to the extent provided in
section 44C.
Pub. L. 95-600, Sec. 601(b)(3), as amended by Pub. L. 96-222,
Sec. 106(a)(3), added par. (21) relating to an adjustment to the
extent provided in section 1395.
Subsec. (a)(23). Pub. L. 95-600, Sec. 702(r)(3), which
redesignated par. (23) as (21), was repealed by Pub. L. 96-222,
Sec. 107(a)(2)(C), and Pub. L. 96-223, Sec. 401(a). See Repeals
note below.
Pub. L. 95-600, Sec. 515(2), substituted "December 31, 1979" for
"December 31, 1976".
Subsec. (c). Pub. L. 95-472 added subsec. (c). Former subsec. (c)
redesignated (d).
Subsec. (d). Pub. L. 95-618, Sec. 201(b), added subsec. (d).
Former subsec. (d) redesignated (e).
Pub. L. 95-472 redesignated former subsec. (c) as (d).
Subsec. (e). Pub. L. 95-618, Sec. 201(b), redesignated former
subsec. (d) as (e).
1976 - Subsec. (a)(2). Pub. L. 94-455, Sec. 1901(b)(29)(A),
inserted "(as in effect before the date of the enactment of the Tax
Reform Act of 1976)" after "under section 1020".
Subsec. (a)(10). Pub. L. 94-455, Sec. 1901(b)(21)(G), struck out
par. (10) which related to adjustment for the amounts allowed as
deductions as deferred expenses under section 615(b) of this title.
Subsec. (a)(13). Pub. L. 94-455, Sec. 1901(b)(1)(F)(ii),
substituted "section 551(e)" for "section 551(f)".
Subsec. (a)(19). Pub. L. 94-455, Sec. 1901(a)(123), (b)(30)(A),
redesignated par. (20) as (19). Former par. (19), which related to
adjustment of section 38 property to the extent provided in
sections 48(g) and 203 of this title, was struck out.
Subsec. (a)(20). Pub. L. 94-455, Sec. 1901(b)(30)(A),
redesignated par. (22) as (20). Former par. (20) redesignated (19).
Subsec. (a)(21). Pub. L. 94-455, Sec. 1901(b)(30)(A), struck out
par. (21) which related to property adjustment to the extent
provided in section 1022 of this title.
Subsec. (a)(22). Pub. L. 94-455, Sec. 1901(b)(30)(A),
redesignated par. (22) as (20).
Subsec. (a)(23). Pub. L. 94-455, Sec. 2005(a)(3), added par.
(23). See Repeals note below.
1969 - Subsec. (a)(22). Pub. L. 91-172, Sec. 516(c)(2)(B), added
par. (22).
Subsec. (a)(10). Pub. L. 91-172, Sec. 504(c)(4), limited
exploration expenditures referred to in this par. to pre-1970
exploration expenditures.
Subsec. (c). Pub. L. 91-172, Sec. 231(c)(3), redesignated
existing provisions as par. (2) and added par. (1).
1964 - Subsec. (a)(15). Pub. L. 88-272, Sec. 227(b)(5), inserted
"or domestic iron ore".
Subsec. (a)(19). Pub. L. 88-272, Sec. 203(a)(3)(C), inserted "and
in section 203(a)(2) of the Revenue Act of 1964".
Subsec. (a)(21). Pub. L. 88-272, Sec. 225(j)(2), added par. (21).
1962 - Subsec. (a)(3)(D). Pub. L. 87-834, Sec. 8(g)(2), added
subpar. (D).
Subsec. (a)(19). Pub. L. 87-834, Sec. 2(f), added par. (19).
Subsec. (a)(20). Pub. L. 87-834, Sec. 12(b)(4), added par. (20).
1959 - Subsec. (a)(3)(C). Pub. L. 86-69, Sec. 3(d)(1), added
subpar. (C).
Subsec. (a)(17). Pub. L. 86-69, Sec. 3(d)(2), added par. (17).
1958 - Subsec. (a)(6). Pub. L. 85-866, Sec. 2(b), struck out
"short-term" before "municipal bond".
Subsec. (a)(18). Pub. L. 85-866, Sec. 64(d)(2), added par. (18).
1956 - Subsec. (a)(16). Act June 29, 1956, added par. (16).
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by Pub. L. 107-16 applicable to taxable years beginning
after Dec. 31, 2001, see section 205(c) of Pub. L. 107-16, set out
as a note under section 38 of this title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 2000 AMENDMENT
Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec. 116(c)], Dec. 21,
2000, 114 Stat. 2763, 2763A-604, provided that: "The amendments
made by this section [enacting subpart C of part III of subchapter
U of this chapter, amending this section and sections 1223, 1394,
1400, and 1400B of this title, redesignating subpart C of part III
of subchapter U of this chapter as subpart D of part III of
subchapter U of this chapter, and renumbering sections 1397B and
1397C of this title as 1397C and 1397D, respectively, of this
title] shall apply to qualified empowerment zone assets acquired
after the date of the enactment of this Act [Dec. 21, 2000]."
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by section 312(d)(6) of Pub. L. 105-34 applicable to
sales and exchanges after May 6, 1997, with certain exceptions, see
section 312(d) of Pub. L. 105-34, set out as a note under section
121 of this title.
Section 313(c) of Pub. L. 105-34 provided that: "The amendments
made by this section [enacting section 1045 of this title and
amending this section and section 1223 of this title] shall apply
to sales after the date of enactment of this Act [Aug. 5, 1997]."
Amendment by section 701(b)(2) of Pub. L. 105-34 effective Aug.
5, 1997, see section 701(d) of Pub. L. 105-34, set out as a note
under section 39 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 1807(c)(5) of Pub. L. 104-188 applicable to
taxable years beginning after Dec. 31, 1996, see section 1807(e) of
Pub. L. 104-188, set out as an Effective Date note under section 23
of this title.
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13114(d) of Pub. L. 103-66 provided that: "The amendments
made by this section [enacting section 1044 of this title and
amending this section] shall apply to sales on and after the date
of the enactment of this Act [Aug. 10, 1993], in taxable years
ending on and after such date."
Amendment by section 13213(a)(2)(F) of Pub. L. 103-66 applicable
to expenses incurred after Dec. 31, 1993, see section 13213(e) of
Pub. L. 103-66 set out as a note under section 62 of this title.
Amendment by section 13261(f)(3) of Pub. L. 103-66 applicable,
except as otherwise provided, with respect to property acquired
after Aug. 10, 1993, see section 13261(g) of Pub. L. 103-66, set
out as an Effective Date note under section 197 of this title.
EFFECTIVE DATE OF 1992 AMENDMENT
Amendment by Pub. L. 102-486 applicable to property placed in
service after June 30, 1993, see section 1913(c) of Pub. L.
102-486, set out as an Effective Date note under section 30 of this
title.
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by section 11812(b)(10) of Pub. L. 101-508 applicable
to property placed in service after Nov. 5, 1990, but not
applicable to any property to which section 168 of this title does
not apply by reason of subsec. (f)(5) of section 168, and not
applicable to rehabilitation expenditures described in section
252(f)(5) of Pub. L. 99-514, see section 11812(c) of Pub. L.
101-508, set out as a note under section 42 of this title.
Amendment by section 11813(b)(19) of Pub. L. 101-508 applicable
to property placed in service after Dec. 31, 1990, but not
applicable to any transition property (as defined in section 49(e)
of this title), any property with respect to which qualified
progress expenditures were previously taken into account under
section 46(d) of this title, and any property described in section
46(b)(2)(C) of this title, as such sections were in effect on Nov.
4, 1990, see section 11813(c) of Pub. L. 101-508, set out as a note
under section 29 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Section 502(c) of Pub. L. 101-194 provided that: "The amendments
made by this section [enacting section 1043 of this title and
amending this section and section 1223 of this title] shall apply
to sales after the date of the enactment of this Act [Nov. 30,
1989]."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1006(j)(1)(B) of Pub. L. 100-647 applicable
in the case of obligations acquired after Dec. 31, 1987, with
exception allowing taxpayer to elect to have amendment apply to
obligations acquired after Oct. 22, 1986, see section 1006(j)(1)(C)
of Pub. L. 100-647, set out as a note under section 171 of this
title.
Amendment by section 1018(u)(22) of Pub. L. 100-647 effective,
except as otherwise provided, as if included in the provision of
the Tax Reform Act of 1986, Pub. L. 99-514, to which such amendment
relates, see section 1019(a) of Pub. L. 100-647, set out as a note
under section 1 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 241(b)(2) of Pub. L. 99-514 applicable to
expenditures paid or incurred after Dec. 31, 1986, except as
otherwise provided, see section 241(c) of Pub. L. 99-514, set out
as an Effective Date of Repeal note under former section 177 of
this title.
Amendment by section 701(e)(4)(D) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, with certain
exceptions and qualifications, see section 701(f) of Pub. L.
99-514, set out as an Effective Date note under section 55 of this
title.
Amendment by section 1303(b)(3) of Pub. L. 99-514 effective Oct.
22, 1986, see section 1311(f) of Pub. L. 99-514, as amended, set
out as an Effective Date; Transitional Rules note under section 141
of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 43(a)(2) of Pub. L. 98-369 applicable to
taxable years ending after July 18, 1984, see section 44 of Pub. L.
98-369, set out as an Effective Date note under section 1271 of
this title.
Amendment by section 53(d)(3) of Pub. L. 98-369 applicable to
distribution after Mar. 1, 1984, in taxable years ending after such
date, see section 53(e)(1) of Pub. L. 98-369, set out as an
Effective Date note under section 1059 of this title.
Amendment by section 211(b)(14) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, see section 215 of
Pub. L. 98-369, set out as an Effective Date note under section 801
of this title.
Amendment by section 474(r)(23) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, and to carrybacks from
such years, see section 475(a) of Pub. L. 98-369, set out as a note
under section 21 of this title.
Amendment by section 541(b)(2) of Pub. L. 98-369 applicable to
sales of securities in taxable years beginning after July 18, 1984,
see section 541(c) of Pub. L. 98-369, set out as an Effective Date
note under section 1042 of this title.
EFFECTIVE DATE OF 1982 AMENDMENTS
Amendment by Pub. L. 97-354 applicable to taxable years beginning
after Dec. 31, 1982, see section 6(a) of Pub. L. 97-354, set out as
an Effective Date note under section 1361 of this title.
Amendment by section 201(c)(2) of Pub. L. 97-248 applicable to
taxable years beginning after Dec. 31, 1982, see section 201(e)(1)
of Pub. L. 97-248, set out as a note under section 5 of this title.
Amendment by section 205(a)(5)(B) of Pub. L. 97-248 applicable to
periods after Dec. 31, 1982, under rules similar to the rules of
section 48(m) of this title, with certain qualifications, see
section 205(c)(1) of Pub. L. 97-248, set out as an Effective Date
note under section 196 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by section 212(d)(2)(G) of Pub. L. 97-34 applicable to
expenditures incurred after Dec. 31, 1981, in taxable years ending
after that date, see section 212(e) of Pub. L. 97-34, set out as a
note under section 46 of this title.
Amendment by section 421(g) of Pub. L. 97-34 applicable with
respect to the estates of decedents dying after Dec. 31, 1981, see
section 421(k) of Pub. L. 97-34, set out as a note under section
2032A of this title.
EFFECTIVE DATE OF 1980 AMENDMENTS AND REVIVAL OF PRIOR LAW
Amendment by section 401(a) of Pub. L. 96-223 (repealing section
2005(a)(3) of Pub. L. 94-455 and section 702(r)(3) of Pub. L.
96-500 and the amendments made thereby, which had amended this
section) applicable in respect of decedents dying after Dec. 31,
1976, and except for certain elections, this title to be applied as
if those repealed provisions had not been enacted, see section
401(b), (e) of Pub. L. 96-223, set out as a note under section 1023
of this title.
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provisions of the
Revenue Act of 1978, Pub. L. 95-600, to which such amendment
relates, see section 201 of Pub. L. 96-222, set out as an Effective
Date of 1980 Amendment note under section 32 of this title.
EFFECTIVE DATE OF 1978 AMENDMENTS
Section 101(c) of Pub. L. 95-618 provided that: "The amendments
made by this section [enacting section 23 of this title and
amending this section and sections 56 and 6096 of this title] shall
apply to taxable years ending on or after April 20, 1977."
Amendment by section 201(b) of Pub. L. 95-618 applicable with
respect to 1980 and later model year automobiles, see section
201(g) of Pub. L. 95-618, set out as an Effective Date note under
section 4064 of this title.
Amendment by section 601(b)(3) of Pub. L. 95-600 effective with
respect to corporations chartered after Dec. 31, 1978, and before
Jan. 1, 1984, see section 601(d) of Pub. L. 95-600, set out as a
note under section 172 of this title.
Amendment by section 702(r)(3) of Pub. L. 95-600 applicable to
estates of decedents dying after Dec. 31, 1976, see section
702(r)(5) of Pub. L. 95-600, set out as a note under section 2051
of this title.
Section 4(d) of Pub. L. 95-472 provided that: "The amendments
made by this section [amending this section and section 2032A of
this title] shall apply to involuntary conversions after December
31, 1976."
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(123), (b)(1)(F)(ii), (21)(G),
(29)(A) of Pub. L. 94-455 applicable with respect to taxable years
beginning after Dec. 31, 1976, see section 1901(d) of Pub. L.
94-455, set out as a note under section 2 of this title.
Section 1901(b)(30)(B) of Pub. L. 94-455 provided that: "The
amendment made by subparagraph (A)(i) [amending this section] shall
apply with respect to stock or securities acquired from a decedent
dying after the date of the enactment of this Act [Oct. 4, 1976]."
Amendment by section 2005(a)(3) of Pub. L. 94-455 applicable in
respect of decedents dying after Dec. 31, 1976, see section 2005(f)
of Pub. L. 94-455 set out as an Effective Date note under section
1015 of this title.
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by section 231(c)(3) of Pub. L. 91-172 applicable to
taxable years beginning after Dec. 31, 1969, see section 231(d) of
Pub. L. 91-172, set out as a note under section 217 of this title.
Amendment by section 504(c)(4) of Pub. L. 91-172 applicable with
respect to exploration expenditures paid or incurred after Dec. 31,
1969, see section 504(d)(1) of Pub. L. 91-172, set out as a note
under section 243 of this title.
Amendment by section 516(c)(2)(B) of Pub. L. 91-172 applicable to
transfers after Dec. 31, 1969, see section 516(d)(3) of Pub. L.
91-172, set out as an Effective Date note under section 1001 of
this title.
EFFECTIVE DATE OF 1964 AMENDMENT
Amendment by section 203(a)(3)(C) of Pub. L. 88-272 applicable in
case of property placed in service after Dec. 31, 1963, with
respect to taxable years ending after such date, and in case of
property placed in service before Jan. 1, 1964, with respect to
taxable years beginning after Dec. 31, 1963, see section 203(a)(4)
of Pub. L. 88-272, set out as a note under section 48 of this
title.
Amendment by section 225(j)(2) of Pub. L. 88-272 applicable in
respect of decedents dying after Dec. 31, 1963, see section 225(l)
of Pub. L. 88-272, set out as a note under section 316 of this
title.
Amendment by section 227(b)(5) of Pub. L. 88-272 applicable with
respect to amounts received or accrued in taxable years beginning
after Dec. 31, 1963, attributable to iron ore mined in such years,
see section 227(c) of Pub. L. 88-272, set out as a note under
section 272 of this title.
EFFECTIVE DATE OF 1962 AMENDMENT
Amendment by section 2(f) of Pub. L. 87-834 applicable with
respect to taxable years ending after Dec. 31, 1961, see section
2(h) of Pub. L. 87-834, set out as an Effective Date note under
section 46 of this title.
Amendment by section 8(g)(2) of Pub. L. 87-834 applicable with
respect to taxable years beginning after Dec. 31, 1962, see section
8(h) of Pub. L. 87-834, set out as a note under section 501 of this
title.
Amendment by section 12(b)(1) of Pub. L. 87-834 applicable with
respect to taxable years of foreign corporations beginning after
Dec. 31, 1962, and to taxable years of United States shareholders
within which or with which such taxable years of such foreign
corporations end, see section 12(c) of Pub. L. 87-834, set out as
an Effective Date note under section 951 of this title.
EFFECTIVE DATE OF 1959 AMENDMENT
Amendment by Pub. L. 86-69 applicable only with respect to
taxable years beginning after Dec. 31, 1957, see section 4 of Pub.
L. 86-69, set out as a note under section 381 of this title.
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by section 2(b) of Pub. L. 85-866 applicable with
respect to taxable years ending after December 31, 1957, but only
with respect to obligations acquired after such date, see section
2(c) of Pub. L. 85-866, set out as a note under section 75 of this
title.
Amendment by section 64(d)(2) of Pub. L. 85-866 applicable only
with respect to taxable years beginning after Dec. 31, 1957, see
section 64(e) of Pub. L. 85-866, set out as a note under section
172 of this title.
REPEALS
Section 2005(a)(3) of Pub. L. 94-455 and section 702(r)(3) of
Pub. L. 95-600, cited as credits to this section, and the
amendments made by those sections, were repealed by Pub. L. 96-223,
title IV, Sec. 401(a), 94 Stat. 299, resulting in the text of this
section reading as it read prior to enactment of sections
2005(a)(3) and 702(r)(3). See Effective Date of 1980 Amendments and
Revival of Prior Law note above.
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
APPLICABILITY OF CERTAIN AMENDMENTS BY PUB. L. 99-514 IN RELATION
TO TREATY OBLIGATIONS OF UNITED STATES
For applicability of amendment by section 701(e)(4)(D) of Pub. L.
99-514 notwithstanding any treaty obligation of the United States
in effect on Oct. 22, 1986, with provision that for such purposes
any amendment by title I of Pub. L. 100-647 be treated as if it had
been included in the provision of Pub. L. 99-514 to which such
amendment relates, see section 1012(aa)(2), (4) of Pub. L. 100-647,
set out as a note under section 861 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
CHANGE FROM RETIREMENT TO STRAIGHT LINE METHOD OF COMPUTING
DEPRECIATION IN CERTAIN CASES
Section 94 of Pub. L. 85-866, as amended by Pub. L. 99-514, Sec.
2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(a) Short Title. - This section may be cited as the
'Retirement-Straight Line Adjustment Act of 1958'.
"(b) Making of Election. - Any taxpayer who held
retirement-straight line property on his 1956 adjustment date may
elect to have this section apply. Such an election shall be made at
such time and in such manner as the Secretary shall prescribe. Any
election under this section shall be irrevocable and shall apply to
all retirement-straight line property as hereinafter provided in
this section (including such property for periods when held by
predecessors of the taxpayer).
"(c) Retirement-Straight Line Property Defined. - For purposes of
this section, the term 'retirement-straight line property' means
any property of a kind or class with respect to which the taxpayer
or a predecessor (under the terms and conditions prescribed for him
by the Commissioner) for any taxable year beginning after December
31, 1940, and before January 1, 1956, changed from the retirement
to the straight line method of computing the allowance of
deductions for depreciation.
"(d) Basis Adjustments as of 1956 Adjustment Date. - If the
taxpayer has made an election under this section, then in
determining the adjusted basis on his 1956 adjustment date of all
retirement-straight line property held by the taxpayer, in lieu of
the adjustments for depreciation provided in section 1016(a)(2) and
(3) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954],
the following adjustments shall be made (effective as of his 1956
adjustment date) in respect of all periods before the 1956
adjustment date:
"(1) Depreciation sustained before march 1, 1913. - For
depreciation sustained before March 1, 1913, on
retirement-straight line property held by the taxpayer or a
predecessor on such date for which cost was or is claimed as
basis and which either -
"(A) Retired before changeover. - Was retired by the taxpayer
or a predecessor before the changeover date, but only if (i) a
deduction was allowed in computing net income by reason of such
retirement, and (ii) such deduction was computed on the basis
of cost without adjustment for depreciation sustained before
March 1, 1913. In the case of any such property retired during
any taxable year beginning after December 31, 1929, the
adjustment under this subparagraph shall not exceed that
portion of the amount attributable to depreciation sustained
before March 1, 1913, which resulted (by reason of the
deduction so allowed) in a reduction in taxes under the
Internal Revenue Code of 1986 or prior income, war-profits, or
excess-profits tax laws.
"(B) Held on changeover date. - Was held by the taxpayer or a
predecessor on the changeover date. This subparagraph shall not
apply to property to which paragraph (2) applies.
The adjustment determined under this paragraph shall be allocated
(in the manner prescribed by the Secretary) among all
retirement-straight line property held by the taxpayer on his
1956 adjustment date.
"(2) Property disposed of after changeover and before 1956
adjustment date. - For that portion of the reserve prescribed by
the Commissioner in connection with the changeover which was
applicable to property -
"(A) sold, or
"(B) with respect to which a deduction was allowed for
Federal income tax purposes by reason of casualty or 'abnormal'
retirement in the nature of special obsolescence,
if such sale occurred in, or such deduction was allowed for, a
period on or after the changeover date and before the taxpayer's
1956 adjustment date.
"(3) Depreciation allowable from changeover to 1956 adjustment
date. - For depreciation allowable, under the terms and
conditions prescribed by the Commissioner in connection with the
changeover, for all periods on and after the changeover date and
before the taxpayer's 1956 adjustment date.
This subsection shall apply only with respect to taxable years
beginning after December 31, 1955.
"(e) Effect on Period From Changeover to 1956 Adjustment Date. -
If the taxpayer has made an election under this section, then in
determining the adjusted basis of any retirement-straight line
property as of any time on or after the changeover date and before
the taxpayer's 1956 adjustment date, in lieu of the adjustments for
depreciation provided in section 1016(a)(2) and (3) of the Internal
Revenue Code of 1986 and the corresponding provisions of prior
revenue laws, the following adjustments shall be made:
"(1) For prescribed reserve. - For the amount of the reserve
prescribed by the Commissioner in connection with the changeover.
"(2) For allowable depreciation. - For the depreciation
allowable under the terms and conditions prescribed by the
Commissioner in connection with the changeover.
This subsection shall not apply in determining adjusted basis for
purposes of section 437(c) of the Internal Revenue Code of 1939.
This subsection shall apply only with respect to taxable years
beginning on or after the changeover date and before the taxpayer's
1956 adjustment date.
"(f) Equity Invested Capital, etc. - If an election is made under
this section, then (not withstanding the terms and conditions
prescribed by the Commissioner in connection with the changeover) -
"(1) Equity invested capital. - In determining equity invested
capital under sections 458 and 718 of the Internal Revenue Code
of 1939, accumulated earnings and profits as of the changeover
date, and as of the beginning of each taxable year thereafter,
shall be reduced by the depreciation sustained before March 1,
1913, as computed under subsection (d)(1)(B); and
"(2) Definition of equity capital. - In determining the
adjusted basis of assets for the purpose of section 437(c) of the
Internal Revenue Code of 1939 (and in addition to any other
adjustments required by such Code), the basis shall be reduced by
depreciation sustained before March 1, 1913 (as computed under
subsection (d)), together with any depreciation allowable under
subsection (e)(2) for any period before the year for which the
excess profits credit is being computed.
"(g) Definitions. - For purposes of this section -
"(1) Depreciation. - The term 'depreciation' means exhaustion,
wear and tear, and obsolescence.
"(2) Changeover. - The term 'changeover' means a change from
the retirement to the straight line method of computing the
allowance of deductions for depreciation.
"(3) Changeover date. - The term 'changeover date' means the
first day of the first taxable year for which the changeover was
effective.
"(4) 1956 adjustment date. - The term '1956 adjustment date'
means, in the case of any taxpayer, the first day of his first
taxable year beginning after December 31, 1955.
"(5) Predecessor. - The term 'predecessor' means any person
from whom property of a kind or class to which this section
refers was acquired, if the basis of such property is determined
by reference to its basis in the hands of such person. Where a
series of transfers of property has occurred and where in each
instance the basis of the property was determined by reference to
its basis in the hands of the prior holder, the term includes
each such prior holder.
"(6) The term 'Secretary' means the Secretary of the Treasury
or his delegate.
"(7) The term 'Commissioner' means the Commissioner of Internal
Revenue."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 42, 75, 126, 174, 264,
265, 291, 312, 616, 818, 1011, 1015, 1053, 1250, 1400I of this
title; title 43 section 1620.
-FOOTNOTE-
(!1) See References in Text note below.
(!2) So in original. The comma probably should be a semicolon.
-End-
-CITE-
26 USC Sec. 1017 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART II - BASIS RULES OF GENERAL APPLICATION
-HEAD-
Sec. 1017. Discharge of indebtedness
-STATUTE-
(a) General rule
If -
(1) an amount is excluded from gross income under subsection
(a) of section 108 (relating to discharge of indebtedness), and
(2) under subsection (b)(2)(E), (b)(5), or (c)(1) of section
108, any portion of such amount is to be applied to reduce basis,
then such portion shall be applied in reduction of the basis of any
property held by the taxpayer at the beginning of the taxable year
following the taxable year in which the discharge occurs.
(b) Amount and properties determined under regulations
(1) In general
The amount of reduction to be applied under subsection (a) (not
in excess of the portion referred to in subsection (a)), and the
particular properties the bases of which are to be reduced, shall
be determined under regulations prescribed by the Secretary.
(2) Limitation in title 11 case or insolvency
In the case of a discharge to which subparagraph (A) or (B) of
section 108(a)(1) applies, the reduction in basis under
subsection (a) of this section shall not exceed the excess of -
(A) the aggregate of the bases of the property held by the
taxpayer immediately after the discharge, over
(B) the aggregate of the liabilities of the taxpayer
immediately after the discharge.
The preceding sentence shall not apply to any reduction in basis
by reason of an election under section 108(b)(5).
(3) Certain reductions may only be made in the basis of
depreciable property
(A) In general
Any amount which under subsection (b)(5) or (c)(1) of section
108 is to be applied to reduce basis shall be applied only to
reduce the basis of depreciable property held by the taxpayer.
(B) Depreciable property
For purposes of this section, the term "depreciable property"
means any property of a character subject to the allowance for
depreciation, but only if a basis reduction under subsection
(a) will reduce the amount of depreciation or amortization
which otherwise would be allowable for the period immediately
following such reduction.
(C) Special rule for partnership interests
For purposes of this section, any interest of a partner in a
partnership shall be treated as depreciable property to the
extent of such partner's proportionate interest in the
depreciable property held by such partnership. The preceding
sentence shall apply only if there is a corresponding reduction
in the partnership's basis in depreciable property with respect
to such partner.
(D) Special rule in case of affiliated group
For purposes of this section, if -
(i) a corporation holds stock in another corporation
(hereinafter in this subparagraph referred to as the
"subsidiary"), and
(ii) such corporations are members of the same affiliated
group which file a consolidated return under section 1501 for
the taxable year in which the discharge occurs,
then such stock shall be treated as depreciable property to the
extent that such subsidiary consents to a corresponding
reduction in the basis of its depreciable property.
(E) Election to treat certain inventory as depreciable property
(i) In general
At the election of the taxpayer, for purposes of this
section, the term "depreciable property" includes any real
property which is described in section 1221(a)(1).
(ii) Election
An election under clause (i) shall be made on the
taxpayer's return for the taxable year in which the discharge
occurs or at such other time as may be permitted in
regulations prescribed by the Secretary. Such an election,
once made, may be revoked only with the consent of the
Secretary.
(F) Special rules for qualified real property business
indebtedness
In the case of any amount which under section 108(c)(1) is to
be applied to reduce basis -
(i) depreciable property shall only include depreciable
real property for purposes of subparagraphs (A) and (C),
(ii) subparagraph (E) shall not apply, and
(iii) in the case of property taken into account under
section 108(c)(2)(B), the reduction with respect to such
property shall be made as of the time immediately before
disposition if earlier than the time under subsection (a).
(4) Special rules for qualified farm indebtedness
(A) In general
Any amount which under subsection (b)(2)(E) of section 108 is
to be applied to reduce basis and which is attributable to an
amount excluded under subsection (a)(1)(C) of section 108 -
(i) shall be applied only to reduce the basis of qualified
property held by the taxpayer, and
(ii) shall be applied to reduce the basis of qualified
property in the following order:
(I) First the basis of qualified property which is
depreciable property.
(II) Second the basis of qualified property which is land
used or held for use in the trade or business of farming.
(III) Then the basis of other qualified property.
(B) Qualified property
For purposes of this paragraph, the term "qualified property"
has the meaning given to such term by section 108(g)(3)(C).
(C) Certain rules made applicable
Rules similar to the rules of subparagraphs (C), (D), and (E)
of paragraph (3) shall apply for purposes of this paragraph and
section 108(g).
(c) Special rules
(1) Reduction not to be made in exempt property
In the case of an amount excluded from gross income under
section 108(a)(1)(A), no reduction in basis shall be made under
this section in the basis of property which the debtor treats as
exempt property under section 522 of title 11 of the United
States Code.
(2) Reductions in basis not treated as dispositions
For purposes of this title, a reduction in basis under this
section shall not be treated as a disposition.
(d) Recapture of reductions
(1) In general
For purposes of sections 1245 and 1250 -
(A) any property the basis of which is reduced under this
section and which is neither section 1245 property nor section
1250 property shall be treated as section 1245 property, and
(B) any reduction under this section shall be treated as a
deduction allowed for depreciation.
(2) Special rule for section 1250
For purposes of section 1250(b), the determination of what
would have been the depreciation adjustments under the straight
line method shall be made as if there had been no reduction under
this section.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 301; Pub. L. 94-455, title XIX,
Secs. 1906(b)(13)(A), 1951(c)(1), Oct. 4, 1976, 90 Stat. 1834,
1840; Pub. L. 96-589, Sec. 2(b), Dec. 24, 1980, 94 Stat. 3394; Pub.
L. 99-514, title IV, Sec. 405(b), title VIII, Sec. 822(b)(4), (5),
Oct. 22, 1986, 100 Stat. 2224, 2373; Pub. L. 100-647, title I, Sec.
1004(a)(5), Nov. 10, 1988, 102 Stat. 3386; Pub. L. 101-508, title
XI, Sec. 11704(a)(12), Nov. 5, 1990, 104 Stat. 1388-518; Pub. L.
103-66, title XIII, Sec. 13150(c)(6)-(8), Aug. 10, 1993, 107 Stat.
448; Pub. L. 104-188, title I, Sec. 1703(n)(5), Aug. 20, 1996, 110
Stat. 1877; Pub. L. 105-206, title VI, Sec. 6023(11), July 22,
1998, 112 Stat. 825; Pub. L. 106-170, title V, Sec. 532(c)(2)(S),
Dec. 17, 1999, 113 Stat. 1931.)
-MISC1-
AMENDMENTS
1999 - Subsec. (b)(3)(E)(i). Pub. L. 106-170 substituted
"1221(a)(1)" for "1221(1)".
1998 - Subsec. (a)(2). Pub. L. 105-206 substituted "(b)(2)(E)"
for "(b)(2)(D)".
1996 - Subsec. (b)(4)(A). Pub. L. 104-188 substituted "subsection
(b)(2)(E)" for "subsection (b)(2)(D)".
1993 - Subsec. (a)(2). Pub. L. 103-66, Sec. 13150(c)(6),
substituted ", (b)(5), or (c)(1)" for "or (b)(5)".
Subsec. (b)(3)(A). Pub. L. 103-66, Sec. 13150(c)(7), inserted "or
(c)(1)" after "subsection (b)(5)".
Subsec. (b)(3)(F). Pub. L. 103-66, Sec. 13150(c)(8), added
subpar. (F).
1990 - Subsec. (b)(4)(C). Pub. L. 101-508 substituted
"subparagraphs" for "subparagraph".
1988 - Subsec. (b)(4). Pub. L. 100-647 substituted "Special rules
for" for "Ordering rule in the case of" in heading, and amended
text generally. Prior to amendment, text read as follows: "Any
amount which is excluded from gross income under section 108(a) by
reason of the discharge of qualified farm indebtedness (within the
meaning of section 108(g)(2)) and which under subsection (b) of
section 108 is to be applied to reduce basis shall be applied -
"(A) first to reduce the tax attributes described in section
108(b)(2) (other than subparagraph (D) thereof),
"(B) then to reduce basis of property other than property
described in subparagraph (C), and
"(C) then to reduce the basis of land used or held for use in
the trade or business of farming."
1986 - Subsec. (a)(2). Pub. L. 99-514, Sec. 822(b)(4),
substituted "or (b)(5)" for ", (b)(5), or (c)(1)(A)".
Subsec. (b)(3)(A). Pub. L. 99-514, Sec. 822(b)(5), struck out "or
(c)(1)(A)" after "subsection (b)(5)".
Subsec. (b)(4). Pub. L. 99-514, Sec. 405(b), added par. (4).
1980 - Pub. L. 96-589 generally revised and expanded the section
to specify the amount of reduction of basis of property under
different subsections of section 108 of this title and the property
to which such reduction is applicable, and provided for recapture
of reductions for purposes of gains from depreciable property.
1976 - Pub. L. 94-455, Secs. 1906(b)(13)(A), 1951(c)(1),
substituted "section 108" for "section 108(a)" in three places and
struck out "or his delegate" after "Secretary".
EFFECTIVE DATE OF 1999 AMENDMENT
Amendment by Pub. L. 106-170 applicable to any instrument held,
acquired, or entered into, any transaction entered into, and
supplies held or acquired on or after Dec. 17, 1999, see section
532(d) of Pub. L. 106-170, set out as a note under section 170 of
this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by Pub. L. 104-188 effective as if included in the
provision of the Revenue Reconciliation Act of 1993, Pub. L.
103-66, Secs. 13001-13444, to which such amendment relates, see
section 1703(o) of Pub. L. 104-188, set out as a note under section
39 of this title.
EFFECTIVE DATE OF 1993 AMENDMENT
Amendment by Pub. L. 103-66 applicable to discharges after Dec.
31, 1992, in taxable years ending after such date, see section
13150(d) of Pub. L. 103-66, set out as a note under section 108 of
this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 405(b) of Pub. L. 99-514 applicable to
discharges of indebtedness occurring after Apr. 9, 1986, in taxable
years ending after such date, see section 405(c) of Pub. L. 99-514,
set out as a note under section 108 of this title.
Amendment by section 822(b)(4), (5) of Pub. L. 99-514 applicable
to discharges after Dec. 31, 1986, see section 822(c) of Pub. L.
99-514, set out as a note under section 108 of this title.
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96-589 applicable to transactions which
occur after Dec. 31, 1980, other than transactions which occur in a
proceeding in a bankruptcy case or similar judicial proceeding or
in a proceeding under Title 11 commencing on or after Dec. 31,
1980, with an exception permitting the debtor to make the amendment
applicable to transactions occurring after Sept. 30, 1979 in a
specified manner, see section 7(a) and (f) of Pub. L. 96-589, set
out as a note under section 108 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 108, 312, 1033 of this
title.
-End-
-CITE-
26 USC Sec. 1018 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART II - BASIS RULES OF GENERAL APPLICATION
-HEAD-
[Sec. 1018. Repealed. Pub. L. 96-589, Sec. 6(h)(1), Dec. 24, 1980,
94 Stat. 3410]
-MISC1-
Section, acts Aug. 16, 1954, ch. 736, 68A Stat. 301; Oct. 4,
1976, Pub. L. 94-455, title XIX, Sec. 1901(a)(124), 90 Stat. 1784,
provided for adjustment of capital structure before Sept. 22, 1938.
EFFECTIVE DATE OF REPEAL
Repeal effective Oct. 1, 1979, but not to apply to proceedings
under Title 11, Bankruptcy, commenced before Oct. 1, 1979, see
section 7(e) of Pub. L. 96-589, set out as an Effective Date of
1980 Amendment note under section 108 of this title.
-End-
-CITE-
26 USC Sec. 1019 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART II - BASIS RULES OF GENERAL APPLICATION
-HEAD-
Sec. 1019. Property on which lessee has made improvements
-STATUTE-
Neither the basis nor the adjusted basis of any portion of real
property shall, in the case of the lessor of such property, be
increased or diminished on account of income derived by the lessor
in respect of such property and excludable from gross income under
section 109 (relating to improvements by lessee on lessor's
property). If an amount representing any part of the value of real
property attributable to buildings erected or other improvements
made by a lessee in respect of such property was included in gross
income of the lessor for any taxable year beginning before January
1, 1942, the basis of each portion of such property shall be
properly adjusted for the amount so included in gross income.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 301.)
-End-
-CITE-
26 USC Sec. 1020 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART II - BASIS RULES OF GENERAL APPLICATION
-HEAD-
[Sec. 1020. Repealed. Pub. L. 94-455, title XIX, Sec. 1901(a)(125),
Oct. 4, 1976, 90 Stat. 1784]
-MISC1-
Section, act Aug. 16, 1954, ch. 736, 68A Stat. 302, related to
election to have section 1016(a)(2)(B) of this title apply in
respect of periods since Feb. 28, 1913, and before Jan. 1, 1952.
-End-
-CITE-
26 USC Sec. 1021 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART II - BASIS RULES OF GENERAL APPLICATION
-HEAD-
Sec. 1021. Sale of annuities
-STATUTE-
In case of the sale of an annuity contract, the adjusted basis
shall in no case be less than zero.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 302.)
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 72 of this title.
-End-
-CITE-
26 USC Sec. 1022 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART II - BASIS RULES OF GENERAL APPLICATION
-HEAD-
Sec. 1022. Treatment of property acquired from a decedent dying
after December 31, 2009
-STATUTE-
(a) In general
Except as otherwise provided in this section -
(1) property acquired from a decedent dying after December 31,
2009, shall be treated for purposes of this subtitle as
transferred by gift, and
(2) the basis of the person acquiring property from such a
decedent shall be the lesser of -
(A) the adjusted basis of the decedent, or
(B) the fair market value of the property at the date of the
decedent's death.
(b) Basis increase for certain property
(1) In general
In the case of property to which this subsection applies, the
basis of such property under subsection (a) shall be increased by
its basis increase under this subsection.
(2) Basis increase
For purposes of this subsection -
(A) In general
The basis increase under this subsection for any property is
the portion of the aggregate basis increase which is allocated
to the property pursuant to this section.
(B) Aggregate basis increase
In the case of any estate, the aggregate basis increase under
this subsection is $1,300,000.
(C) Limit increased by unused built-in losses and loss
carryovers
The limitation under subparagraph (B) shall be increased by -
(i) the sum of the amount of any capital loss carryover
under section 1212(b), and the amount of any net operating
loss carryover under section 172, which would (but for the
decedent's death) be carried from the decedent's last taxable
year to a later taxable year of the decedent, plus
(ii) the sum of the amount of any losses that would have
been allowable under section 165 if the property acquired
from the decedent had been sold at fair market value
immediately before the decedent's death.
(3) Decedent nonresidents who are not citizens of the United
States
In the case of a decedent nonresident not a citizen of the
United States -
(A) paragraph (2)(B) shall be applied by substituting
"$60,000" for "$1,300,000", and
(B) paragraph (2)(C) shall not apply.
(c) Additional basis increase for property acquired by surviving
spouse
(1) In general
In the case of property to which this subsection applies and
which is qualified spousal property, the basis of such property
under subsection (a) (as increased under subsection (b)) shall be
increased by its spousal property basis increase.
(2) Spousal property basis increase
For purposes of this subsection -
(A) In general
The spousal property basis increase for property referred to
in paragraph (1) is the portion of the aggregate spousal
property basis increase which is allocated to the property
pursuant to this section.
(B) Aggregate spousal property basis increase
In the case of any estate, the aggregate spousal property
basis increase is $3,000,000.
(3) Qualified spousal property
For purposes of this subsection, the term "qualified spousal
property" means -
(A) outright transfer property, and
(B) qualified terminable interest property.
(4) Outright transfer property
For purposes of this subsection -
(A) In general
The term "outright transfer property" means any interest in
property acquired from the decedent by the decedent's surviving
spouse.
(B) Exception
Subparagraph (A) shall not apply where, on the lapse of time,
on the occurrence of an event or contingency, or on the failure
of an event or contingency to occur, an interest passing to the
surviving spouse will terminate or fail -
(i)(I) if an interest in such property passes or has passed
(for less than an adequate and full consideration in money or
money's worth) from the decedent to any person other than
such surviving spouse (or the estate of such spouse), and
(II) if by reason of such passing such person (or his heirs
or assigns) may possess or enjoy any part of such property
after such termination or failure of the interest so passing
to the surviving spouse, or
(ii) if such interest is to be acquired for the surviving
spouse, pursuant to directions of the decedent, by his
executor or by the trustee of a trust.
For purposes of this subparagraph, an interest shall not be
considered as an interest which will terminate or fail merely
because it is the ownership of a bond, note, or similar
contractual obligation, the discharge of which would not have
the effect of an annuity for life or for a term.
(C) Interest of spouse conditional on survival for limited
period
For purposes of this paragraph, an interest passing to the
surviving spouse shall not be considered as an interest which
will terminate or fail on the death of such spouse if -
(i) such death will cause a termination or failure of such
interest only if it occurs within a period not exceeding 6
months after the decedent's death, or only if it occurs as a
result of a common disaster resulting in the death of the
decedent and the surviving spouse, or only if it occurs in
the case of either such event, and
(ii) such termination or failure does not in fact occur.
(5) Qualified terminable interest property
For purposes of this subsection -
(A) In general
The term "qualified terminable interest property" means
property -
(i) which passes from the decedent, and
(ii) in which the surviving spouse has a qualifying income
interest for life.
(B) Qualifying income interest for life
The surviving spouse has a qualifying income interest for
life if -
(i) the surviving spouse is entitled to all the income from
the property, payable annually or at more frequent intervals,
or has a usufruct interest for life in the property, and
(ii) no person has a power to appoint any part of the
property to any person other than the surviving spouse.
Clause (ii) shall not apply to a power exercisable only at or
after the death of the surviving spouse. To the extent provided
in regulations, an annuity shall be treated in a manner similar
to an income interest in property (regardless of whether the
property from which the annuity is payable can be separately
identified).
(C) Property includes interest therein
The term "property" includes an interest in property.
(D) Specific portion treated as separate property
A specific portion of property shall be treated as separate
property. For purposes of the preceding sentence, the term
"specific portion" only includes a portion determined on a
fractional or percentage basis.
(d) Definitions and special rules for application of subsections
(b) and (c)
(1) Property to which subsections (b) and (c) apply
(A) In general
The basis of property acquired from a decedent may be
increased under subsection (b) or (c) only if the property was
owned by the decedent at the time of death.
(B) Rules relating to ownership
(i) Jointly held property
In the case of property which was owned by the decedent and
another person as joint tenants with right of survivorship or
tenants by the entirety -
(I) if the only such other person is the surviving
spouse, the decedent shall be treated as the owner of only
50 percent of the property,
(II) in any case (to which subclause (I) does not apply)
in which the decedent furnished consideration for the
acquisition of the property, the decedent shall be treated
as the owner to the extent of the portion of the property
which is proportionate to such consideration, and
(III) in any case (to which subclause (I) does not apply)
in which the property has been acquired by gift, bequest,
devise, or inheritance by the decedent and any other person
as joint tenants with right of survivorship and their
interests are not otherwise specified or fixed by law, the
decedent shall be treated as the owner to the extent of the
value of a fractional part to be determined by dividing the
value of the property by the number of joint tenants with
right of survivorship.
(ii) Revocable trusts
The decedent shall be treated as owning property
transferred by the decedent during life to a qualified
revocable trust (as defined in section 645(b)(1)).
(iii) Powers of appointment
The decedent shall not be treated as owning any property by
reason of holding a power of appointment with respect to such
property.
(iv) Community property
Property which represents the surviving spouse's one-half
share of community property held by the decedent and the
surviving spouse under the community property laws of any
State or possession of the United States or any foreign
country shall be treated for purposes of this section as
owned by, and acquired from, the decedent if at least
one-half of the whole of the community interest in such
property is treated as owned by, and acquired from, the
decedent without regard to this clause.
(C) Property acquired by decedent by gift within 3 years of
death
(i) In general
Subsections (b) and (c) shall not apply to property
acquired by the decedent by gift or by inter vivos transfer
for less than adequate and full consideration in money or
money's worth during the 3-year period ending on the date of
the decedent's death.
(ii) Exception for certain gifts from spouse
Clause (i) shall not apply to property acquired by the
decedent from the decedent's spouse unless, during such
3-year period, such spouse acquired the property in whole or
in part by gift or by inter vivos transfer for less than
adequate and full consideration in money or money's worth.
(D) Stock of certain entities
Subsections (b) and (c) shall not apply to -
(i) stock or securities of a foreign personal holding
company,
(ii) stock of a DISC or former DISC,
(iii) stock of a foreign investment company, or
(iv) stock of a passive foreign investment company unless
such company is a qualified electing fund (as defined in
section 1295) with respect to the decedent.
(2) Fair market value limitation
The adjustments under subsections (b) and (c) shall not
increase the basis of any interest in property acquired from the
decedent above its fair market value in the hands of the decedent
as of the date of the decedent's death.
(3) Allocation rules
(A) In general
The executor shall allocate the adjustments under subsections
(b) and (c) on the return required by section 6018.
(B) Changes in allocation
Any allocation made pursuant to subparagraph (A) may be
changed only as provided by the Secretary.
(4) Inflation adjustment of basis adjustment amounts
(A) In general
In the case of decedents dying in a calendar year after 2010,
the $1,300,000, $60,000, and $3,000,000 dollar amounts in
subsections (b) and (c)(2)(B) shall each be increased by an
amount equal to the product of -
(i) such dollar amount, and
(ii) the cost-of-living adjustment determined under section
1(f)(3) for such calendar year, determined by substituting
"2009" for "1992" in subparagraph (B) thereof.
(B) Rounding
If any increase determined under subparagraph (A) is not a
multiple of -
(i) $100,000 in the case of the $1,300,000 amount,
(ii) $5,000 in the case of the $60,000 amount, and
(iii) $250,000 in the case of the $3,000,000 amount,
such increase shall be rounded to the next lowest multiple
thereof.
(e) Property acquired from the decedent
For purposes of this section, the following property shall be
considered to have been acquired from the decedent:
(1) Property acquired by bequest, devise, or inheritance, or by
the decedent's estate from the decedent.
(2) Property transferred by the decedent during his lifetime -
(A) to a qualified revocable trust (as defined in section
645(b)(1)), or
(B) to any other trust with respect to which the decedent
reserved the right to make any change in the enjoyment thereof
through the exercise of a power to alter, amend, or terminate
the trust.
(3) Any other property passing from the decedent by reason of
death to the extent that such property passed without
consideration.
(f) Coordination with section 691
This section shall not apply to property which constitutes a
right to receive an item of income in respect of a decedent under
section 691.
(g) Certain liabilities disregarded
(1) In general
In determining whether gain is recognized on the acquisition of
property -
(A) from a decedent by a decedent's estate or any beneficiary
other than a tax-exempt beneficiary, and
(B) from the decedent's estate by any beneficiary other than
a tax-exempt beneficiary,
and in determining the adjusted basis of such property,
liabilities in excess of basis shall be disregarded.
(2) Tax-exempt beneficiary
For purposes of paragraph (1), the term "tax-exempt
beneficiary" means -
(A) the United States, any State or political subdivision
thereof, any possession of the United States, any Indian tribal
government (within the meaning of section 7871), or any agency
or instrumentality of any of the foregoing,
(B) an organization (other than a cooperative described in
section 521) which is exempt from tax imposed by chapter 1,
(C) any foreign person or entity (within the meaning of
section 168(h)(2)), and
(D) to the extent provided in regulations, any person to whom
property is transferred for the principal purpose of tax
avoidance.
(h) Regulations
The Secretary shall prescribe such regulations as may be
necessary to carry out the purposes of this section.
-SOURCE-
(Added Pub. L. 107-16, title V, Sec. 542(a), June 7, 2001, 115
Stat. 76.)
-STATAMEND-
TERMINATION OF SECTION
For termination of section by section 901 of Pub. L. 107-16, see
Effective and Termination Dates note below.
-MISC1-
PRIOR PROVISIONS
A prior section 1022, added Pub. L. 88-272, title II, Sec.
225(j)(1), Feb. 26, 1964, 78 Stat. 92, dealt with the increase in
basis with respect to certain foreign personal holding company
stock or securities, prior to repeal by Pub. L. 94-455, title XIX,
Sec. 1901(a)(126), Oct. 4, 1976, 90 Stat. 1784, applicable with
respect to stock or securities acquired from a decedent dying after
Oct. 4, 1976.
Another prior section 1022, act Aug. 16, 1954, ch. 736, 68A Stat.
302, relating to cross references, was renumbered section 1023.
EFFECTIVE AND TERMINATION DATES
Section applicable to estates of decedents dying after Dec. 31,
2009, see section 542(f)(1) of Pub. L. 107-16, set out as an
Effective and Termination Dates of 2001 Amendment note under
section 121 of this title.
Section inapplicable to estates of decedents dying, gifts made,
or generation skipping transfers, after Dec. 31, 2010, and the
Internal Revenue Code of 1986 to be applied and administered to
such estates, gifts, and transfers as if it had never been enacted,
see section 901 of Pub. L. 107-16, set out as an Effective and
Termination Dates of 2001 Amendment note under section 1 of this
title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 121, 170, 1221, 6018 of
this title.
-End-
-CITE-
26 USC Sec. 1023 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART II - BASIS RULES OF GENERAL APPLICATION
-HEAD-
Sec. 1023. Cross references
-STATUTE-
(1) For certain distributions by a corporation which are
applied in reduction of basis of stock, see section 301(c)(2).
(2) For basis in case of construction of new vessels, see
section 511 of the Merchant Marine Act, 1936, as amended (46
U.S.C. 1161).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 302, Sec. 1022; renumbered Sec.
1023, Pub. L. 88-272, title II, Sec. 225(j)(1), Feb. 26, 1964, 78
Stat. 92; renumbered Sec. 1024 and amended Pub. L. 94-455, title
XIX, Sec. 1901(a)(127), title XX, Sec. 2005(a)(2), Oct. 4, 1976, 90
Stat. 1784, 1872; renumbered Sec. 1023, Pub. L. 96-223, title IV,
Sec. 401(a), Apr. 2, 1980, 94 Stat. 299; Pub. L. 96-589, Sec.
6(i)(4), Dec. 24, 1980, 94 Stat. 3410.)
-REFTEXT-
REFERENCES IN TEXT
Section 511 of the Merchant Marine Act, 1936, referred to in par.
(2), is classified to section 1161 of Title 46, Appendix, Shipping.
-MISC1-
PRIOR PROVISIONS
A prior section 1023, added Pub. L. 94-455, title XX, Sec.
2005(a)(2), Oct. 4, 1976, 90 Stat. 1872; amended Pub. L. 95-600,
title V, Sec. 515(3), (4), title VII, Sec. 702(c)(2)-(4), (6)-(8),
Nov. 6, 1978, 92 Stat. 2884, 2926-2928, related to carryover basis
for certain property acquired from a decedent dying after Dec. 31,
1979, prior to repeal by Pub. L. 96-223, title IV, Sec. 401(a),
Apr. 2, 1980, 94 Stat. 299. The repeal was achieved by repealing
section 2005(a)(2) of Pub. L. 94-455 and the amendment made
thereby, which had enacted prior section 1023.
AMENDMENTS
1980 - Pub. L. 96-589 redesignated par. (3) as (2). Former par.
(2), which provided reference to sections 670, 796, and 922 of
Title 11, Bankruptcy, for basis of property in case of certain
reorganizations and arrangements under the Bankruptcy Act, was
struck out.
1976 - Par. (4). Pub. L. 94-455, Sec. 1901(a)(127), struck out
par. (4) which referred to section 405 of the Defense Production
Act of 1950 for rules applicable in case of payments in violation
of that Act.
EFFECTIVE DATE OF 1980 AMENDMENTS AND REVIVAL OF PRIOR LAW
Amendment by Pub. L. 96-589 effective Oct. 1, 1979, but not to
apply to proceedings under Title 11, Bankruptcy, commenced before
Oct. 1, 1979, see section 7(e) of Pub. L. 96-589, set out as an
Effective Date of 1980 Amendment note under section 108 of this
title.
Section 401(b) of Pub. L. 96-223, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "Except to
the extent necessary to carry out subsection (d) [set out as a note
under section 1014 of this title], the Internal Revenue Code of
1986 [formerly I.R.C. 1954] shall be applied and administered as if
the provisions repealed by subsection (a), and the amendments made
by those provisions [enacting this section and sections 6039A and
6698A of this title, redesignating former section 1023 as section
1024 of this title, and amending sections 306, 691, 1001, 1014,
1016, 1223, and 1246 of this title], had not been enacted."
Section 401(e) of Pub. L. 96-223 provided that: "The amendments
made by this section [amending sections 306, 691, 1001, 1014, 1016,
1040, 1223, 1246, and 2614 of this title, repealing former section
1023 and sections 6039A and 6698A of this title, redesignating
former section 1024 of this title as 1023, and enacting provisions
set out as notes under this section and section 1014 of this title]
shall apply in respect of decedents dying after December 31, 1976."
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(127) of Pub. L. 94-455 applicable
with respect to taxable years beginning after Dec. 31, 1976, see
section 1901(d) of Pub. L. 94-455, set out as a note under section
2 of this title.
REPEALS
Pub. L. 94-455, Sec. 1901(a)(127), cited as a credit to this
section, which renumbered this section as section 1024 of this
title, was repealed by Pub. L. 96-223, title IV, Sec. 401(a), Apr.
2, 1980, 94 Stat. 299, resulting in the redesignation of this
section as section 1023 of this title. See Effective Date of 1980
Amendments and Revival of Prior Law note set out above.
-End-
-CITE-
26 USC Sec. 1024 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART II - BASIS RULES OF GENERAL APPLICATION
-HEAD-
[Sec. 1024. Renumbered Sec. 1023]
-STATUTE-
-End-
-CITE-
26 USC PART III - COMMON NONTAXABLE EXCHANGES 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART III - COMMON NONTAXABLE EXCHANGES
-HEAD-
PART III - COMMON NONTAXABLE EXCHANGES
-MISC1-
Sec.
1031. Exchange of property held for productive use or
investment.
1032. Exchange of stock for property.
1033. Involuntary conversions.
[1034. Repealed.]
1035. Certain exchanges of insurance policies.
1036. Stock for stock of same corporation.
1037. Certain exchanges of United States obligations.
1038. Certain reacquisitions of real property.
[1039. Repealed.]
1040. Transfer of certain farm, etc., real property.
1041. Transfers of property between spouses or incident to
divorce.
1042. Sales of stock to employee stock ownership plans or
certain cooperatives.
1043. Sale of property to comply with conflict-of-interest
requirements.
1044. Rollover of publicly traded securities gain into
specialized small business investment companies.
1045. Rollover of gain from qualified small business stock
to another qualified small business stock.
-STATAMEND-
AMENDMENT OF ANALYSIS
Pub. L. 107-16, title V, Sec. 542(d)(2), (f)(1), title IX, Sec.
901, June 7, 2001, 115 Stat. 84, 86, 150, provided that, applicable
to estates of decedents dying after Dec. 31, 2009, item 1040 is
temporarily amended to read as follows: "Use of appreciated
carryover basis property to satisfy pecuniary bequest".
-MISC2-
AMENDMENTS
1997 - Pub. L. 105-34, title III, Secs. 312(d)(15), 313(b)(3),
Aug. 5, 1997, 111 Stat. 841, 842, struck out item 1034 "Rollover of
gain on sale of principal residence" and added item 1045.
1993 - Pub. L. 103-66, title XIII, Sec. 13114(c), Aug. 10, 1993,
107 Stat. 431, added item 1044.
1990 - Pub. L. 101-508, title XI, Sec. 11801(b)(8), Nov. 5, 1990,
104 Stat. 1388-522, struck out item 1039 "Certain sales of
low-income housing projects".
1989 - Pub. L. 101-194, title V, Sec. 502(b)(3), Nov. 30, 1989,
103 Stat. 1755, added item 1043.
1986 - Pub. L. 99-514, title XVIII, Sec. 1854(a)(12), Oct. 22,
1986, 100 Stat. 2878, substituted "employee stock ownership plans
or certain cooperatives" for "employees" in item 1042.
1984 - Pub. L. 98-369, div. A, title IV, Sec. 421(c), title V,
Sec. 541(b)(3), July 18, 1984, 98 Stat. 794, 890, added items 1041
and 1042.
1981 - Pub. L. 97-34, title IV, Sec. 421(j)(2)(C), Aug. 13, 1981,
95 Stat. 312, substituted "Transfer of certain farm, etc., real
property" for "Use of farm, etc., real property to satisfy
pecuniary bequest" in item 1040.
1980 - Pub. L. 96-223, title IV, Sec. 401(a), (c)(2)(B), Apr. 2,
1980, 94 Stat. 299, 300, amended item 1040 generally and repealed
Pub. L. 94-455, Sec. 2005(e)(1), and the amendment made thereby.
See 1976 Amendment note below.
1978 - Pub. L. 95-600, title IV, Sec. 405(c)(2), Nov. 6, 1978, 92
Stat. 2871, substituted "Rollover of gain on sale of principal
residence" for "Sale or exchange of residence" in item 1034.
1976 - Pub. L. 94-455, title XX, Sec. 2005(e)(2), Oct. 4, 1976,
90 Stat. 1878, which added item 1040, was repealed by Pub. L.
96-223, Sec. 401(a). See section 401(b), (e) of Pub. L. 96-223, set
out as an Effective Date of 1980 Amendments and Revival of Prior
Law note under section 1023 of this title.
1969 - Pub. L. 91-172, title IX, Sec. 910(c), Dec. 30, 1969, 83
Stat. 722, added item 1039.
1964 - Pub. L. 88-570, Sec. 2(b), Sept. 2, 1964, 78 Stat. 856,
added item 1038.
1959 - Pub. L. 86-346, title II, Sec. 201(b), Sept. 22, 1959, 73
Stat. 623, added item 1037.
-End-
-CITE-
26 USC Sec. 1031 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART III - COMMON NONTAXABLE EXCHANGES
-HEAD-
Sec. 1031. Exchange of property held for productive use or
investment
-STATUTE-
(a) Nonrecognition of gain or loss from exchanges solely in kind
(1) In general
No gain or loss shall be recognized on the exchange of property
held for productive use in a trade or business or for investment
if such property is exchanged solely for property of like kind
which is to be held either for productive use in a trade or
business or for investment.
(2) Exception
This subsection shall not apply to any exchange of -
(A) stock in trade or other property held primarily for sale,
(B) stocks, bonds, or notes,
(C) other securities or evidences of indebtedness or
interest,
(D) interests in a partnership,
(E) certificates of trust or beneficial interests, or
(F) choses in action.
For purposes of this section, an interest in a partnership which
has in effect a valid election under section 761(a) to be
excluded from the application of all of subchapter K shall be
treated as an interest in each of the assets of such partnership
and not as an interest in a partnership.
(3) Requirement that property be identified and that exchange be
completed not more than 180 days after transfer of exchanged
property
For purposes of this subsection, any property received by the
taxpayer shall be treated as property which is not like-kind
property if -
(A) such property is not identified as property to be
received in the exchange on or before the day which is 45 days
after the date on which the taxpayer transfers the property
relinquished in the exchange, or
(B) such property is received after the earlier of -
(i) the day which is 180 days after the date on which the
taxpayer transfers the property relinquished in the exchange,
or
(ii) the due date (determined with regard to extension) for
the transferor's return of the tax imposed by this chapter
for the taxable year in which the transfer of the
relinquished property occurs.
(b) Gain from exchanges not solely in kind
If an exchange would be within the provisions of subsection (a),
of section 1035(a), of section 1036(a), or of section 1037(a), if
it were not for the fact that the property received in exchange
consists not only of property permitted by such provisions to be
received without the recognition of gain, but also of other
property or money, then the gain, if any, to the recipient shall be
recognized, but in an amount not in excess of the sum of such money
and the fair market value of such other property.
(c) Loss from exchanges not solely in kind
If an exchange would be within the provisions of subsection (a),
of section 1035(a), of section 1036(a), or of section 1037(a), if
it were not for the fact that the property received in exchange
consists not only of property permitted by such provisions to be
received without the recognition of gain or loss, but also of other
property or money, then no loss from the exchange shall be
recognized.
(d) Basis
If property was acquired on an exchange described in this
section, section 1035(a), section 1036(a), or section 1037(a), then
the basis shall be the same as that of the property exchanged,
decreased in the amount of any money received by the taxpayer and
increased in the amount of gain or decreased in the amount of loss
to the taxpayer that was recognized on such exchange. If the
property so acquired consisted in part of the type of property
permitted by this section, section 1035(a), section 1036(a), or
section 1037(a), to be received without the recognition of gain or
loss, and in part of other property, the basis provided in this
subsection shall be allocated between the properties (other than
money) received, and for the purpose of the allocation there shall
be assigned to such other property an amount equivalent to its fair
market value at the date of the exchange. For purposes of this
section, section 1035(a), and section 1036(a), where as part of the
consideration to the taxpayer another party to the exchange assumed
(as determined under section 357(d)) a liability of the taxpayer,
such assumption shall be considered as money received by the
taxpayer on the exchange.
(e) Exchanges of livestock of different sexes
For purposes of this section, livestock of different sexes are
not property of a like kind.
(f) Special rules for exchanges between related persons
(1) In general
If -
(A) a taxpayer exchanges property with a related person,
(B) there is nonrecognition of gain or loss to the taxpayer
under this section with respect to the exchange of such
property (determined without regard to this subsection), and
(C) before the date 2 years after the date of the last
transfer which was part of such exchange -
(i) the related person disposes of such property, or
(ii) the taxpayer disposes of the property received in the
exchange from the related person which was of like kind to
the property transferred by the taxpayer,
there shall be no nonrecognition of gain or loss under this
section to the taxpayer with respect to such exchange; except
that any gain or loss recognized by the taxpayer by reason of
this subsection shall be taken into account as of the date on
which the disposition referred to in subparagraph (C) occurs.
(2) Certain dispositions not taken into account
For purposes of paragraph (1)(C), there shall not be taken into
account any disposition -
(A) after the earlier of the death of the taxpayer or the
death of the related person,
(B) in a compulsory or involuntary conversion (within the
meaning of section 1033) if the exchange occurred before the
threat or imminence of such conversion, or
(C) with respect to which it is established to the
satisfaction of the Secretary that neither the exchange nor
such disposition had as one of its principal purposes the
avoidance of Federal income tax.
(3) Related person
For purposes of this subsection, the term "related person"
means any person bearing a relationship to the taxpayer described
in section 267(b) or 707(b)(1).
(4) Treatment of certain transactions
This section shall not apply to any exchange which is part of a
transaction (or series of transactions) structured to avoid the
purposes of this subsection.
(g) Special rule where substantial diminution of risk
(1) In general
If paragraph (2) applies to any property for any period, the
running of the period set forth in subsection (f)(1)(C) with
respect to such property shall be suspended during such period.
(2) Property to which subsection applies
This paragraph shall apply to any property for any period
during which the holder's risk of loss with respect to the
property is substantially diminished by -
(A) the holding of a put with respect to such property,
(B) the holding by another person of a right to acquire such
property, or
(C) a short sale or any other transaction.
(h) Special rules for foreign real and personal property
For purposes of this section -
(1) Real property
Real property located in the United States and real property
located outside the United States are not property of a like
kind.
(2) Personal property
(A) In general
Personal property used predominantly within the United States
and personal property used predominantly outside the United
States are not property of a like kind.
(B) Predominant use
Except as provided in subparagraph (!1) (C) and (D), the
predominant use of any property shall be determined based on -
(i) in the case of the property relinquished in the
exchange, the 2-year period ending on the date of such
relinquishment, and
(ii) in the case of the property acquired in the exchange,
the 2-year period beginning on the date of such acquisition.
(C) Property held for less than 2 years
Except in the case of an exchange which is part of a
transaction (or series of transactions) structured to avoid the
purposes of this subsection -
(i) only the periods the property was held by the person
relinquishing the property (or any related person) shall be
taken into account under subparagraph (B)(i), and
(ii) only the periods the property was held by the person
acquiring the property (or any related person) shall be taken
into account under subparagraph (B)(ii).
(D) Special rule for certain property
Property described in any subparagraph of section 168(g)(4)
shall be treated as used predominantly in the United States.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 302; Pub. L. 85-866, title I,
Sec. 44, Sept. 2, 1958, 72 Stat. 1641; Pub. L. 86-346, title II,
Sec. 201(c)-(e), Sept. 22, 1959, 73 Stat. 624; Pub. L. 91-172,
title II, Sec. 212(c)(1), Dec. 30, 1969, 83 Stat. 571; Pub. L.
98-369, div. A, title I, Sec. 77(a), July 18, 1984, 98 Stat. 595;
Pub. L. 99-514, title XVIII, Sec. 1805(d), Oct. 22, 1986, 100 Stat.
2810; Pub. L. 101-239, title VII, Sec. 7601(a), Dec. 19, 1989, 103
Stat. 2370; Pub. L. 101-508, title XI, Secs. 11701(h), 11703(d)(1),
Nov. 5, 1990, 104 Stat. 1388-508, 1388-517; Pub. L. 105-34, title
X, Sec. 1052(a), Aug. 5, 1997, 111 Stat. 940; Pub. L. 106-36, title
III, Sec. 3001(c)(2), June 25, 1999, 113 Stat. 183.)
-MISC1-
AMENDMENTS
1999 - Subsec. (d). Pub. L. 106-36, in last sentence, substituted
"assumed (as determined under section 357(d)) a liability of the
taxpayer" for "assumed a liability of the taxpayer or acquired from
the taxpayer property subject to a liability" and struck out "or
acquisition (in the amount of the liability)" after "such
assumption".
1997 - Subsec. (h). Pub. L. 105-34 amended heading and text of
subsec. (h) generally. Prior to amendment, text read as follows:
"For purposes of this section, real property located in the United
States and real property located outside the United States are not
property of a like kind."
1990 - Subsec. (a)(2). Pub. L. 101-508, Sec. 11703(d)(1),
inserted at end "For purposes of this section, an interest in a
partnership which has in effect a valid election under section
761(a) to be excluded from the application of all of subchapter K
shall be treated as an interest in each of the assets of such
partnership and not as an interest in a partnership."
Subsec. (f)(3). Pub. L. 101-508, Sec. 11701(h), substituted
"section 267(b) or 707(b)(1)" for "section 267(b)".
1989 - Subsecs. (f) to (h). Pub. L. 101-239 added subsecs. (f) to
(h).
1986 - Subsec. (a)(3)(A). Pub. L. 99-514 substituted "on or
before the day" for "before the day".
1984 - Subsec. (a). Pub. L. 98-369, Sec. 77(a), in amending
subsec. generally, designated existing provisions as par. (1),
substituted "No gain or loss shall be recognized on the exchange of
property held for productive use in a trade or business or for
investment if such property is exchanged solely for property of
like kind which is to be held either for productive use in a trade
or business or for investment" for "No gain or loss shall be
recognized if property held for productive use in trade or business
or for investment (not including stock in trade or other property
held primarily for sale, nor stocks, bonds, notes, choses in
action, certificates of trust or beneficial interest, or other
securities or evidences of indebtedness or interest) is exchanged
solely for property of a like kind to be held either for productive
use in trade or business or for investment", and added pars. (2)
and (3).
1969 - Subsec. (e). Pub. L. 91-172 added subsec. (e).
1959 - Subsecs. (b) to (d). Pub. L. 86-346 inserted references to
section 1037(a) in subsecs. (b) and (c) and in first two sentences
of subsec. (d).
1958 - Subsec. (d). Pub. L. 85-866 inserted in first sentence a
comma between "exchanged" and "decreased" and "or decreased in the
amount of loss", and substituted in second sentence "subsection"
for "paragraph".
EFFECTIVE DATE OF 1999 AMENDMENT
Amendment by Pub. L. 106-36 applicable to transfers after Oct.
18, 1998, see section 3001(e) of Pub. L. 106-36, set out as a note
under section 351 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 1052(b) of Pub. L. 105-34 provided that:
"(1) In general. - The amendment made by this section [amending
this section] shall apply to transfers after June 8, 1997, in
taxable years ending after such date.
"(2) Binding contracts. - The amendment made by this section
shall not apply to any transfer pursuant to a written binding
contract in effect on June 8, 1997, and at all times thereafter
before the disposition of property. A contract shall not fail to
meet the requirements of the preceding sentence solely because -
"(A) it provides for a sale in lieu of an exchange, or
"(B) the property to be acquired as replacement property was
not identified under such contract before June 9, 1997."
EFFECTIVE DATE OF 1990 AMENDMENT
Section 11701(h) of Pub. L. 101-508 provided that the amendment
made by that section is effective with respect to transfers after
Aug. 3, 1990.
Section 11703(d)(2) of Pub. L. 101-508 provided that: "The
amendment made by paragraph (1) [amending this section] shall apply
to transfers after July 18, 1984."
EFFECTIVE DATE OF 1989 AMENDMENT
Section 7601(b) of Pub. L. 101-239 provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section] shall apply
to transfers after July 10, 1989, in taxable years ending after
such date.
"(2) Binding contract. - The amendments made by this section
shall not apply to any transfer pursuant to a written binding
contract in effect on July 10, 1989, and at all times thereafter
before the transfer."
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 effective, except as otherwise
provided, as if included in the provisions of the Tax Reform Act of
1984, Pub. L. 98-369, div. A, to which such amendment relates, see
section 1881 of Pub. L. 99-514, set out as a note under section 48
of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Section 77(b) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendment made by subsection (a) [amending this
section] shall apply to transfers made after the date of the
enactment of this Act [July 18, 1984] in taxable years ending after
such date.
"(2) Binding contract exception for transfer of partnership
interests. - Paragraph (2)(D) of section 1031(a) of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] (as amended by
subsection (a)) shall not apply in the case of any exchange
pursuant to a binding contract in effect on March 1, 1984, and at
all times thereafter before the exchange.
"(3) Requirement that property be identified within 45 days and
that exchange be completed within 180 days. - Paragraph (3) of
section 1031(a) of the Internal Revenue Code of 1986 (as amended by
subsection (a)) shall apply -
"(A) to transfers after the date of the enactment of this Act
[July 18, 1984], and
"(B) to transfers on or before such date of enactment if the
property to be received in the exchange is not received before
January 1, 1987.
In the case of any transfer on or before the date of the enactment
of this Act which the taxpayer treated as part of a like-kind
exchange, the period for assessing any deficiency of tax
attributable to the amendment made by subsection (a) [amending this
section] shall not expire before January 1, 1988.
"(4) Special rule where property identified in binding contract.
- If the property to be received in the exchange is identified in a
binding contract in effect on June 13, 1984, and at all times
thereafter before the transfer, paragraph (3) shall be applied -
"(A) by substituting 'January 1, 1989' for 'January 1, 1987',
and
"(B) by substituting 'January 1, 1990' for 'January 1, 1988'.
"(5) Special rule for like-kind exchange of partnership
interests. - Paragraph (2)(D) of section 1031(a) of the Internal
Revenue Code of 1986 (as amended by subsection (a)) shall not apply
to any exchange of an interest as general partner pursuant to a
plan of reorganization of ownership interest under a contract which
took effect on March 29, 1984, and which was executed on or before
March 31, 1984, but only if all the exchanges contemplated by the
reorganization plan are completed on or before December 31, 1984."
EFFECTIVE DATE OF 1969 AMENDMENT
Section 212(c)(2) of Pub. L. 91-172, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The
amendment made by paragraph (1) [amending this section] shall apply
to taxable years to which the Internal Revenue Code of 1986
[formerly I.R.C. 1954] applies."
EFFECTIVE DATE OF 1959 AMENDMENT
Amendment by Pub. L. 86-346 effective for taxable years ending
after Sept. 22, 1959, see section 203 of Pub. L. 86-346, set out as
an Effective Date note under section 1037 of this title.
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by Pub. L. 85-866 applicable to taxable years beginning
after Dec. 31, 1953, and ending after Aug. 16, 1954, see section
1(c)(1) of Pub. L. 85-866, set out as a note under section 165 of
this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 83, 197, 424, 453, 454,
704, 857, 1035, 1036, 1037, 1060, 1245, 1250, 2032A, 2057 of this
title.
-FOOTNOTE-
(!1) So in original. Probably should be "subparagraphs".
-End-
-CITE-
26 USC Sec. 1032 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART III - COMMON NONTAXABLE EXCHANGES
-HEAD-
Sec. 1032. Exchange of stock for property
-STATUTE-
(a) Nonrecognition of gain or loss
No gain or loss shall be recognized to a corporation on the
receipt of money or other property in exchange for stock (including
treasury stock) of such corporation. No gain or loss shall be
recognized by a corporation with respect to any lapse or
acquisition of an option, or with respect to a securities futures
contract (as defined in section 1234B), to buy or sell its stock
(including treasury stock).
(b) Basis
For basis of property acquired by a corporation in certain
exchanges for its stock, see section 362.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 303; Pub. L. 98-369, div. A,
title I, Sec. 57(a), July 18, 1984, 98 Stat. 574; Pub. L. 106-554,
Sec. 1(a)(7) [title IV, Sec. 401(c)], Dec. 21, 2000, 114 Stat.
2763, 2763A-649.)
-MISC1-
AMENDMENTS
2000 - Subsec. (a). Pub. L. 106-554 inserted ", or with respect
to a securities futures contract (as defined in section 1234B),"
after "an option" in second sentence.
1984 - Subsec. (a). Pub. L. 98-369 inserted provision that no
gain or loss shall be recognized by a corporation with respect to
any lapse or acquisition of an option to buy or sell its stock
(including treasury stock).
EFFECTIVE DATE OF 2000 AMENDMENT
Pub. L. 106-554, Sec. 1(a)(7) [title IV, Sec. 401(j)], Dec. 21,
2000, 114 Stat. 2763, 2763A-651, provided that: "The amendments
made by this section [enacting section 1234B of this title and
amending this section and sections 1091, 1092, 1223, 1233, 1234A,
1256 and 7701 of this title] shall take effect on the date of the
enactment of this Act [Dec. 21, 2000]."
EFFECTIVE DATE OF 1984 AMENDMENT
Section 57(b) of Pub. L. 98-369 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
options acquired or lapsed after the date of the enactment of this
Act [July 18, 1984] in taxable years ending after such date."
-End-
-CITE-
26 USC Sec. 1033 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART III - COMMON NONTAXABLE EXCHANGES
-HEAD-
Sec. 1033. Involuntary conversions
-STATUTE-
(a) General rule
If property (as a result of its destruction in whole or in part,
theft, seizure, or requisition or condemnation or threat or
imminence thereof) is compulsorily or involuntarily converted -
(1) Conversion into similar property
Into property similar or related in service or use to the
property so converted, no gain shall be recognized.
(2) Conversion into money
Into money or into property not similar or related in service
or use to the converted property, the gain (if any) shall be
recognized except to the extent hereinafter provided in this
paragraph:
(A) Nonrecognition of gain
If the taxpayer during the period specified in subparagraph
(B), for the purpose of replacing the property so converted,
purchases other property similar or related in service or use
to the property so converted, or purchases stock in the
acquisition of control of a corporation owning such other
property, at the election of the taxpayer the gain shall be
recognized only to the extent that the amount realized upon
such conversion (regardless of whether such amount is received
in one or more taxable years) exceeds the cost of such other
property or such stock. Such election shall be made at such
time and in such manner as the Secretary may by regulations
prescribe. For purposes of this paragraph -
(i) no property or stock acquired before the disposition of
the converted property shall be considered to have been
acquired for the purpose of replacing such converted property
unless held by the taxpayer on the date of such disposition;
and
(ii) the taxpayer shall be considered to have purchased
property or stock only if, but for the provisions of
subsection (b) of this section, the unadjusted basis of such
property or stock would be its cost within the meaning of
section 1012.
(B) Period within which property must be replaced
The period referred to in subparagraph (A) shall be the
period beginning with the date of the disposition of the
converted property, or the earliest date of the threat or
imminence of requisition or condemnation of the converted
property, whichever is the earlier, and ending -
(i) 2 years after the close of the first taxable year in
which any part of the gain upon the conversion is realized,
or
(ii) subject to such terms and conditions as may be
specified by the Secretary, at the close of such later date
as the Secretary may designate on application by the
taxpayer. Such application shall be made at such time and in
such manner as the Secretary may by regulations prescribe.
(C) Time for assessment of deficiency attributable to gain upon
conversion
If a taxpayer has made the election provided in subparagraph
(A), then -
(i) the statutory period for the assessment of any
deficiency, for any taxable year in which any part of the
gain on such conversion is realized, attributable to such
gain shall not expire prior to the expiration of 3 years from
the date the Secretary is notified by the taxpayer (in such
manner as the Secretary may by regulations prescribe) of the
replacement of the converted property or of an intention not
to replace, and
(ii) such deficiency may be assessed before the expiration
of such 3-year period notwithstanding the provisions of
section 6212(c) or the provisions of any other law or rule of
law which would otherwise prevent such assessment.
(D) Time for assessment of other deficiencies attributable to
election
If the election provided in subparagraph (A) is made by the
taxpayer and such other property or such stock was purchased
before the beginning of the last taxable year in which any part
of the gain upon such conversion is realized, any deficiency,
to the extent resulting from such election, for any taxable
year ending before such last taxable year may be assessed
(notwithstanding the provisions of section 6212(c) or 6501 or
the provisions of any other law or rule of law which would
otherwise prevent such assessment) at any time before the
expiration of the period within which a deficiency for such
last taxable year may be assessed.
(E) Definitions
For purposes of this paragraph -
(i) Control
The term "control" means the ownership of stock possessing
at least 80 percent of the total combined voting power of all
classes of stock entitled to vote and at least 80 percent of
the total number of shares of all other classes of stock of
the corporation.
(ii) Disposition of the converted property
The term "disposition of the converted property" means the
destruction, theft, seizure, requisition, or condemnation of
the converted property, or the sale or exchange of such
property under threat or imminence of requisition or
condemnation.
(b) Basis of property acquired through involuntary conversion
(1) Conversions described in subsection (a)(1)
If the property was acquired as the result of a compulsory or
involuntary conversion described in subsection (a)(1), the basis
shall be the same as in the case of the property so converted -
(A) decreased in the amount of any money received by the
taxpayer which was not expended in accordance with the
provisions of law (applicable to the year in which such
conversion was made) determining the taxable status of the gain
or loss upon such conversion, and
(B) increased in the amount of gain or decreased in the
amount of loss to the taxpayer recognized upon such conversion
under the law applicable to the year in which such conversion
was made.
(2) Conversions described in subsection (a)(2)
In the case of property purchased by the taxpayer in a
transaction described in subsection (a)(2) which resulted in the
nonrecognition of any part of the gain realized as the result of
a compulsory or involuntary conversion, the basis shall be the
cost of such property decreased in the amount of the gain not so
recognized; and if the property purchased consists of more than 1
piece of property, the basis determined under this sentence shall
be allocated to the purchased properties in proportion to their
respective costs.
(3) Property held by corporation the stock of which is
replacement property
(A) In general
If the basis of stock in a corporation is decreased under
paragraph (2), an amount equal to such decrease shall also be
applied to reduce the basis of property held by the corporation
at the time the taxpayer acquired control (as defined in
subsection (a)(2)(E)) of such corporation.
(B) Limitation
Subparagraph (A) shall not apply to the extent that it would
(but for this subparagraph) require a reduction in the
aggregate adjusted bases of the property of the corporation
below the taxpayer's adjusted basis of the stock in the
corporation (determined immediately after such basis is
decreased under paragraph (2)).
(C) Allocation of basis reduction
The decrease required under subparagraph (A) shall be
allocated -
(i) first to property which is similar or related in
service or use to the converted property,
(ii) second to depreciable property (as defined in section
1017(b)(3)(B)) not described in clause (i), and
(iii) then to other property.
(D) Special rules
(i) Reduction not to exceed adjusted basis of property
No reduction in the basis of any property under this
paragraph shall exceed the adjusted basis of such property
(determined without regard to such reduction).
(ii) Allocation of reduction among properties
If more than 1 property is described in a clause of
subparagraph (C), the reduction under this paragraph shall be
allocated among such property in proportion to the adjusted
bases of such property (as so determined).
(c) Property sold pursuant to reclamation laws
For purposes of this subtitle, if property lying within an
irrigation project is sold or otherwise disposed of in order to
conform to the acreage limitation provisions of Federal reclamation
laws, such sale or disposition shall be treated as an involuntary
conversion to which this section applies.
(d) Livestock destroyed by disease
For purposes of this subtitle, if livestock are destroyed by or
on account of disease, or are sold or exchanged because of disease,
such destruction or such sale or exchange shall be treated as an
involuntary conversion to which this section applies.
(e) Livestock sold on account of drought, flood, or other
weather-related conditions
For purposes of this subtitle, the sale or exchange of livestock
(other than poultry) held by a taxpayer for draft, breeding, or
dairy purposes in excess of the number the taxpayer would sell if
he followed his usual business practices shall be treated as an
involuntary conversion to which this section applies if such
livestock are sold or exchanged by the taxpayer solely on account
of drought, flood, or other weather-related conditions.
(f) Replacement of livestock with other farm property where there
has been environmental contamination
For purposes of subsection (a), if, because of soil contamination
or other environmental contamination, it is not feasible for the
taxpayer to reinvest the proceeds from compulsorily or
involuntarily converted livestock in property similar or related in
use to the livestock so converted, other property (including real
property) used for farming purposes shall be treated as property
similar or related in service or use to the livestock so converted.
(g) Condemnation of real property held for productive use in trade
or business or for investment
(1) Special rule
For purposes of subsection (a), if real property (not including
stock in trade or other property held primarily for sale) held
for productive use in trade or business or for investment is (as
the result of its seizure, requisition, or condemnation, or
threat or imminence thereof) compulsorily or involuntarily
converted, property of a like kind to be held either for
productive use in trade or business or for investment shall be
treated as property similar or related in service or use to the
property so converted.
(2) Limitations
Paragraph (1) shall not apply to the purchase of stock in the
acquisition of control of a corporation described in subsection
(a)(2)(A).
(3) Election to treat outdoor advertising displays as real
property
(A) In general
A taxpayer may elect, at such time and in such manner as the
Secretary may prescribe, to treat property which constitutes an
outdoor advertising display as real property for purposes of
this chapter. The election provided by this subparagraph may
not be made with respect to any property with respect to which
an election under section 179(a) (relating to election to
expense certain depreciable business assets) is in effect.
(B) Election
An election made under subparagraph (A) may not be revoked
without the consent of the Secretary.
(C) Outdoor advertising display
For purposes of this paragraph, the term "outdoor advertising
display" means a rigidly assembled sign, display, or device
permanently affixed to the ground or permanently attached to a
building or other inherently permanent structure constituting,
or used for the display of, a commercial or other advertisement
to the public.
(D) Character of replacement property
For purposes of this subsection, an interest in real property
purchased as replacement property for a compulsorily or
involuntarily converted outdoor advertising display defined in
subparagraph (C) (and treated by the taxpayer as real property)
shall be considered property of a like kind as the property
converted without regard to whether the taxpayer's interest in
the replacement property is the same kind of interest the
taxpayer held in the converted property.
(4) Special rule
In the case of a compulsory or involuntary conversion described
in paragraph (1), subsection (a)(2)(B)(i) shall be applied by
substituting "3 years" for "2 years".
(h) Special rules for property damaged by Presidentially declared
disasters
(1) Principal residences
If the taxpayer's principal residence or any of its contents is
compulsorily or involuntarily converted as a result of a
Presidentially declared disaster -
(A) Treatment of insurance proceeds
(i) Exclusion for unscheduled personal property
No gain shall be recognized by reason of the receipt of any
insurance proceeds for personal property which was part of
such contents and which was not scheduled property for
purposes of such insurance.
(ii) Other proceeds treated as common fund
In the case of any insurance proceeds (not described in
clause (i)) for such residence or contents -
(I) such proceeds shall be treated as received for the
conversion of a single item of property, and
(II) any property which is similar or related in service
or use to the residence so converted (or contents thereof)
shall be treated for purposes of subsection (a)(2) as
property similar or related in service or use to such
single item of property.
(B) Extension of replacement period
Subsection (a)(2)(B) shall be applied with respect to any
property so converted by substituting "4 years" for "2 years".
(2) Trade or business and investment property
If a taxpayer's property held for productive use in a trade or
business or for investment is compulsorily or involuntarily
converted as a result of a Presidentially declared disaster,
tangible property of a type held for productive use in a trade or
business shall be treated for purposes of subsection (a) as
property similar or related in service or use to the property so
converted.
(3) Presidentially declared disaster
For purposes of this subsection, the term "Presidentially
declared disaster" means any disaster which, with respect to the
area in which the property is located, resulted in a subsequent
determination by the President that such area warrants assistance
by the Federal Government under the Disaster Relief and Emergency
Assistance Act.
(4) Principal residence
For purposes of this subsection, the term "principal residence"
has the same meaning as when used in section 121, except that
such term shall include a residence not treated as a principal
residence solely because the taxpayer does not own the residence.
(i) Replacement property must be acquired from unrelated person in
certain cases
(1) In general
If the property which is involuntarily converted is held by a
taxpayer to which this subsection applies, subsection (a) shall
not apply if the replacement property or stock is acquired from a
related person. The preceding sentence shall not apply to the
extent that the related person acquired the replacement property
or stock from an unrelated person during the period applicable
under subsection (a)(2)(B).
(2) Taxpayers to which subsection applies
This subsection shall apply to -
(A) a C corporation,
(B) a partnership in which 1 or more C corporations own,
directly or indirectly (determined in accordance with section
707(b)(3)), more than 50 percent of the capital interest, or
profits interest, in such partnership at the time of the
involuntary conversion, and
(C) any other taxpayer if, with respect to property which is
involuntarily converted during the taxable year, the aggregate
of the amount of realized gain on such property on which there
is realized gain exceeds $100,000.
In the case of a partnership, subparagraph (C) shall apply with
respect to the partnership and with respect to each partner. A
similar rule shall apply in the case of an S corporation and its
shareholders.
(3) Related person
For purposes of this subsection, a person is related to another
person if the person bears a relationship to the other person
described in section 267(b) or 707(b)(1).
(j) Sales or exchanges to implement microwave relocation policy
(1) In general
For purposes of this subtitle, if a taxpayer elects the
application of this subsection to a qualified sale or exchange,
such sale or exchange shall be treated as an involuntary
conversion to which this section applies.
(2) Qualified sale or exchange
For purposes of paragraph (1), the term "qualified sale or
exchange" means a sale or exchange before January 1, 2000, which
is certified by the Federal Communications Commission as having
been made by a taxpayer in connection with the relocation of the
taxpayer from the 1850-1990MHz spectrum by reason of the Federal
Communications Commission's reallocation of that spectrum for use
for personal communications services. The Commission shall
transmit copies of certifications under this paragraph to the
Secretary.
(k) Cross references
(1) For determination of the period for which the taxpayer
has held property involuntarily converted, see section 1223.
(2) For treatment of gains from involuntary conversions as
capital gains in certain cases, see section 1231(a).
(3) For exclusion from gross income of gain from involuntary
conversion of principal residence, see section 121.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 303; June 29, 1956, ch. 464,
Sec. 5(a), 70 Stat. 407; Pub. L. 85-866, title I, Secs. 45, 46(a),
Sept. 2, 1958, 72 Stat. 1641; Pub. L. 88-272, title II, Sec.
206(b)(3), Feb. 26, 1964, 78 Stat. 40; Pub. L. 91-172, title IX,
Sec. 915(a), Dec. 30, 1969, 83 Stat. 723; Pub. L. 94-455, title
XIX, Secs. 1901(a)(128), 1906(b)(13)(A), title XXI, Secs. 2127(a),
2140(a), Oct. 4, 1976, 90 Stat. 1785, 1834, 1920, 1932; Pub. L.
95-600, title IV, Sec. 404(c)(4), title V, Sec. 542(a), title VII,
Sec. 703(j)(5), Nov. 6, 1978, 92 Stat. 2870, 2888, 2941; Pub. L.
97-34, title II, Sec. 202(d)(2), Aug. 13, 1981, 95 Stat. 221; Pub.
L. 98-369, div. A, title IV, Sec. 474(r)(24), July 18, 1984, 98
Stat. 844; Pub. L. 101-508, title XI, Sec. 11813(b)(20), Nov. 5,
1990, 104 Stat. 1388-555; Pub. L. 103-66, title XIII, Sec.
13431(a), Aug. 10, 1993, 107 Stat. 567; Pub. L. 104-7, Sec.
3(a)(1), (b)(1), Apr. 11, 1995, 109 Stat. 94, 95; Pub. L. 104-188,
title I, Secs. 1119(a), (b), 1610(a), Aug. 20, 1996, 110 Stat.
1765, 1844; Pub. L. 105-34, title III, Sec. 312(d)(1), (7), title
IX, Sec. 913(b), title X, Sec. 1087(a), Aug. 5, 1997, 111 Stat.
839, 840, 878, 959.)
-REFTEXT-
REFERENCES IN TEXT
The Disaster Relief and Emergency Assistance Act, referred to in
subsec. (h)(3), is Pub. L. 93-288, May 22, 1974, 88 Stat. 143, as
amended, known as the Robert T. Stafford Disaster Relief and
Emergency Assistance Act, which is classified principally to
chapter 68 (Sec. 5121 et seq.) of Title 42, The Public Health and
Welfare. For complete classification of this Act to the Code, see
Short Title note set out under section 5121 of Title 42 and Tables.
-MISC1-
AMENDMENTS
1997 - Subsec. (e). Pub. L. 105-34, Sec. 913(b), inserted ",
flood, or other weather-related conditions" after "drought" in
heading and ", flood, or other weather-related conditions" before
period at end of text.
Subsec. (h)(4). Pub. L. 105-34, Sec. 312(d)(1), substituted
"section 121" for "section 1034".
Subsec. (i). Pub. L. 105-34, Sec. 1087(a), amended heading and
text of subsec. (i) generally. Prior to amendment, text read as
follows:
"(1) In general. - In the case of -
"(A) a C corporation, or
"(B) a partnership in which 1 or more C corporations own,
directly or indirectly (determined in accordance with section
707(b)(3)), more than 50 percent of the capital interest, or
profits interest, in such partnership at the time of the
involuntary conversion,
subsection (a) shall not apply if the replacement property or stock
is acquired from a related person. The preceding sentence shall not
apply to the extent that the related person acquired the
replacement property or stock from an unrelated person during the
period described in subsection (a)(2)(B).
"(2) Related person. - For purposes of this subsection, a person
is related to another person if the person bears a relationship to
the other person described in section 267(b) or 707(b)(1)."
Subsec. (k)(3). Pub. L. 105-34, Sec. 312(d)(7), amended par. (3)
generally. Prior to amendment, par. (3) read as follows: "For
one-time exclusion from gross income of gain from involuntary
conversion of principal residence by individual who has attained
age 55, see section 121."
1996 - Subsec. (b). Pub. L. 104-188, Sec. 1610(a), reenacted
heading without change and amended text generally. Prior to
amendment, text read as follows: "If the property was acquired,
after February 28, 1913, as the result of a compulsory or
involuntary conversion described in subsection (a)(1) or section
112(f)(2) of the Internal Revenue Code of 1939, the basis shall be
the same as in the case of the property so converted, decreased in
the amount of any money received by the taxpayer which was not
expended in accordance with the provisions of law (applicable to
the year in which such conversion was made) determining the taxable
status of the gain or loss upon such conversion, and increased in
the amount of gain or decreased in the amount of loss to the
taxpayer recognized upon such conversion under the law applicable
to the year in which such conversion was made. This subsection
shall not apply in respect of property acquired as a result of a
compulsory or involuntary conversion of property used by the
taxpayer as his principal residence if the destruction, theft,
seizure, requisition, or condemnation of such residence, or the
sale or exchange of such residence under threat or imminence
thereof, occurred after December 31, 1950, and before January 1,
1954. In the case of property purchased by the taxpayer in a
transaction described in subsection (a)(3) which resulted in the
nonrecognition of any part of the gain realized as the result of a
compulsory or involuntary conversion, the basis shall be the cost
of such property decreased in the amount of the gain not so
recognized; and if the property purchased consists of more than one
piece of property, the basis determined under this sentence shall
be allocated to the purchased properties in proportion to their
respective costs."
Subsec. (h). Pub. L. 104-188, Sec. 1119(b)(2), substituted
"property" for "principal residences" in heading.
Subsec. (h)(1). Pub. L. 104-188, Sec. 1119(b)(3), substituted
"Principal residences" for "In general" in heading.
Subsec. (h)(2). Pub. L. 104-188, Sec. 1119(a), added par. (2).
Former par. (2) redesignated (3).
Subsec. (h)(3). Pub. L. 104-188, Sec. 1119(a), (b)(1),
redesignated par. (2) as (3) and substituted "property" for
"residence" before "is located". Former par. (3) redesignated (4).
Subsec. (h)(4). Pub. L. 104-188, Sec. 1119(a), redesignated par.
(3) as (4).
1995 - Subsec. (i). Pub. L. 104-7, Sec. 3(a)(1), added subsec.
(i). Former subsec. (i) redesignated (j).
Subsec. (j). Pub. L. 104-7, Sec. 3(b)(1), added subsec. (j).
Former subsec. (j) redesignated (k).
Pub. L. 104-7, Sec. 3(a)(1), redesignated subsec. (i) as (j).
Subsec. (k). Pub. L. 104-7, Sec. 3(b)(1), redesignated subsec.
(j) as (k).
1993 - Subsecs. (h), (i). Pub. L. 103-66 added subsec. (h) and
redesignated former subsec. (h) as (i).
1990 - Subsec. (g)(3)(A). Pub. L. 101-508 struck out "with
respect to which the investment credit determined under section
46(a) is or has been claimed or" after "to any property".
1984 - Subsec. (g)(3)(A). Pub. L. 98-369 substituted "the
investment credit determined under section 46(a)" for "the credit
allowed by section 38 (relating to investment in certain
depreciable property)".
1981 - Subsec. (g)(3)(A). Pub. L. 97-34 substituted "(relating to
election to expense certain depreciable business assets)" for
"(relating to additional first-year depreciation allowance for
small business)".
1978 - Subsec. (a)(2)(A)(ii). Pub. L. 95-600, Sec. 703(j)(5),
substituted "subsection (b)" for "subsection (c)".
Subsecs. (f), (g). Pub. L. 95-600, Sec. 542(a), added subsec. (f)
and redesignated former subsecs. (f) and (g) as (g) and (h),
respectively.
Subsec. (h). Pub. L. 95-600, Secs. 404(c)(4), 542(a),
redesignated subsec. (g) as (h) and substituted in par. (3)
"one-time exclusion" for "exclusion" and "age 55" for "age 65".
1976 - Subsec. (a)(2), (3). Pub. L. 94-455, Secs.
1901(a)(128)(A), (B), 1906(b)(13)(A), redesignated par. (3) as (2),
struck out in heading "where disposition occurred after 1950" after
"Conversion into money", in provisions preceding subpar. (A) "and
the disposition of the converted property (as defined in paragraph
(2)) occurred after December 31, 1950," after "use to the converted
property," and in subpar. (B)(ii) "or his delegate" after
"Secretary" wherever appearing, and added subpar. (E). Former par.
(2), which related to involuntary conversions into money where
dispositions occurred prior to 1951, was struck out.
Subsec. (b). Pub. L. 94-455, Sec. 1901(a)(128)(C), (D),
redesignated subsec. (c) as (b) and substituted "or section
112(f)(2) of the Internal Revenue Code of 1939" for "or (2)".
Former subsec. (b), which related to application of subsec. (a) in
the case of property used by taxpayer as his principal residence,
if the destruction, theft, etc., occurred after 1950 and before
1954, was struck out.
Subsecs. (c) to (e). Pub. L. 94-455, Sec. 1901(a)(128)(C),
redesignated subsecs. (d) to (f) as (c) to (e), respectively.
Former subsec. (c) redesignated (b).
Subsec. (f). Pub. L. 94-455, Secs. 1901(a)(128)(C), (E), (F),
2127(a), 2140(a), redesignated subsec. (g) as (f), in par. (2)
struck out provisions relating to conversion of real property
before Jan. 1, 1958, and substituted reference to subsection
(a)(2)(A) for reference to subsection (a)(3)(A), and added pars.
(3) and (4). Former subsec. (f) redesignated (e).
Subsecs. (g), (h). Pub. L. 94-455, Sec. 1901(a)(128)(C),
redesignated subsec. (h) as (g). Former subsec. (g) redesignated
(f).
1969 - Subsec. (a)(3)(B). Pub. L. 91-172 substituted "2 years"
for "one year".
1964 - Subsec. (h)(3). Pub. L. 88-272 added par. (3).
1958 - Subsec. (a)(2). Pub. L. 85-866, Sec. 45, inserted
provision defining "control".
Subsecs. (g), (h). Pub. L. 85-866, Sec. 46(a), added subsec. (g)
and redesignated former subsec. (g) as (h).
1956 - Subsecs. (f), (g). Act June 29, 1956, added subsec. (f)
and redesignated former subsec. (f) as (g).
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by section 312(d)(1), (7) of Pub. L. 105-34 applicable
to sales and exchanges after May 6, 1997, with certain exceptions,
see section 312(d) of Pub. L. 105-34, set out as a note under
section 121 of this title.
Amendment by section 913(b) of Pub. L. 105-34 applicable to sales
and exchanges after Dec. 31, 1996, see section 913(c) of Pub. L.
105-34, set out as a note under section 451 of this title.
Section 1087(b) of Pub. L. 105-34 provided that: "The amendment
made by this section [amending this section] shall apply to
involuntary conversions occurring after June 8, 1997."
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1119(d)(1) of Pub. L. 104-188 provided that: "The
amendments made by this section [amending this section] shall apply
to disasters declared after December 31, 1994, in taxable years
ending after such date."
Section 1610(b) of Pub. L. 104-188 provided that: "The amendment
made by this section [amending this section] shall apply to
involuntary conversions occurring after the date of the enactment
of this Act [Aug. 20, 1996]."
EFFECTIVE DATE OF 1995 AMENDMENT
Section 3(a)(2) of Pub. L. 104-7 provided that: "The amendment
made by paragraph (1) [amending this section] shall apply to
involuntary conversions occurring on or after February 6, 1995."
Section 3(b)(2) of Pub. L. 104-7 provided that: "The amendment
made by paragraph (1) [amending this section] shall apply to sales
or exchanges after March 14, 1995."
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13431(b) of Pub. L. 103-66 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
property compulsorily or involuntarily converted as a result of
disasters for which the determination referred to in section
1033(h)(2) of the Internal Revenue Code of 1986 (as added by this
section) is made on or after September 1, 1991, and to taxable
years ending on or after such date."
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by Pub. L. 101-508 applicable to property placed in
service after Dec. 31, 1990, but not applicable to any transition
property (as defined in section 49(e) of this title), any property
with respect to which qualified progress expenditures were
previously taken into account under section 46(d) of this title,
and any property described in section 46(b)(2)(C) of this title, as
such sections were in effect on Nov. 4, 1990, see section 11813(c)
of Pub. L. 101-508, set out as a note under section 29 of this
title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to taxable years beginning
after Dec. 31, 1983, and to carrybacks from such years, see section
475(a) of Pub. L. 98-369, set out as a note under section 21 of
this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by Pub. L. 97-34 applicable to property placed in
service after Dec. 31, 1980, in taxable years ending after that
date, see section 209(a) of Pub. L. 97-34, set out as an Effective
Date note under section 168 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by section 404(c)(4) of Pub. L. 95-600 applicable to
sales or exchanges after July 26, 1978, in taxable years ending
after such date, see section 404(d)(1) of Pub. L. 95-600, set out
as a note under section 121 of this title.
Section 542(b) of Pub. L. 95-600 provided that: "The amendments
made by subsection (a) [amending this section] shall apply with
respect to taxable years beginning after December 31, 1974."
Amendment by section 703(j)(5) of Pub. L. 95-600 effective on
Oct. 4, 1976, see section 703(r) of Pub. L. 95-600, set out as a
note under section 46 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(128) of Pub. L. 94-455 effective for
taxable years beginning after Dec. 31, 1976, see section 1901(d) of
Pub. L. 94-455, set out as a note under section 2 of this title.
Section 2127(b) of Pub. L. 94-455 provided that: "The amendment
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1970."
Section 2140(b) of Pub. L. 94-455, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The
amendment made by this section [amending this section] shall apply
with respect to any disposition of converted property (within the
meaning of section 1033(a)(2) of the Internal Revenue Code of 1986
[formerly I.R.C. 1954]) after December 31, 1974, unless a
condemnation proceeding with respect to such property began before
the date of the enactment of this Act [Oct. 4, 1976]."
EFFECTIVE DATE OF 1969 AMENDMENT
Section 915(b) of Pub. L. 91-172, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The
amendment made by this section [amending this section] shall apply
only if the disposition of the converted property (within the
meaning of section 1033(a)(2) of the Internal Revenue Code of 1986
[formerly I.R.C. 1954]) occurs after the date of the enactment of
this Act [Dec. 30, 1969]."
EFFECTIVE DATE OF 1964 AMENDMENT
Amendment by Pub. L. 88-272 applicable to dispositions after Dec.
31, 1963, in taxable years ending after such date, see section
206(c) of Pub. L. 88-272, set out as an Effective Date note under
section 121 of this title.
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by Pub. L. 85-866 applicable to taxable years beginning
after Dec. 31, 1953, and ending after Aug. 16, 1954, see section
1(c)(1) of Pub. L. 85-866, set out as a note under section 165 of
this title.
EFFECTIVE DATE OF 1956 AMENDMENT
Section 5(b) of act June 29, 1956, provided that: "The amendment
made by this section [amending this section] shall apply with
respect to taxable years ending after December 31, 1955, but only
in the case of sales and exchanges of livestock after December 31,
1955."
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 121, 139, 143, 165, 172,
197, 381, 453, 857, 1016, 1031, 1223, 1245, 1250, 1351, 1400L,
2032A, 2057, 6212, 6504, 7508A of this title; title 25 sections
1716, 1729, 1754; title 29 sections 1148, 1302.
-End-
-CITE-
26 USC Sec. 1034 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART III - COMMON NONTAXABLE EXCHANGES
-HEAD-
[Sec. 1034. Repealed. Pub. L. 105-34, title III, Sec. 312(b), Aug.
5, 1997, 111 Stat. 839]
-MISC1-
Section, acts Aug. 16, 1954, ch. 736, 68A Stat. 306; Sept. 2,
1958, Pub. L. 85-866, title I, Sec. 46(b), 72 Stat. 1642; Feb. 26,
1964, Pub. L. 88-272, title II, Sec. 206(b)(4), 78 Stat. 40; Jan.
2, 1975, Pub. L. 93-597, Sec. 6(a), 88 Stat. 1953; Mar. 29, 1975,
Pub. L. 94-12, title II, Sec. 207, 89 Stat. 32; Oct. 4, 1976, Pub.
L. 94-455, title XIX, Secs. 1901(a)(129), 1906(b)(13)(A), 90 Stat.
1785, 1834; May 23, 1977, Pub. L. 95-30, title I, Sec. 102(b)(13),
91 Stat. 138; Nov. 6, 1978, Pub. L. 95-600, title IV, Secs.
404(c)(5), 405(a)-(c)(1), 92 Stat. 2870, 2871; Nov. 8, 1978, Pub.
L. 95-615, title II, Sec. 206, 92 Stat. 3107; Aug. 13, 1981, Pub.
L. 97-34, title I, Secs. 112(b)(4), 122(a), (b), 95 Stat. 195, 197;
July 18, 1984, Pub. L. 98-369, div. A, title X, Sec. 1053(a), 98
Stat. 1045; Oct. 22, 1986, Pub. L. 99-514, title XVIII, Sec.
1878(g), 100 Stat. 2904; Nov. 10, 1988, Pub. L. 100-647, title VI,
Sec. 6002(a), 102 Stat. 3684, related to rollover of gain on sale
of principal residence.
EFFECTIVE DATE OF REPEAL
Repeal applicable to sales and exchanges after May 6, 1997, with
certain exceptions, see section 312(d) of Pub. L. 105-34, set out
as an Effective Date of 1997 Amendment note under section 121 of
this title.
-End-
-CITE-
26 USC Sec. 1035 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART III - COMMON NONTAXABLE EXCHANGES
-HEAD-
Sec. 1035. Certain exchanges of insurance policies
-STATUTE-
(a) General rules
No gain or loss shall be recognized on the exchange of -
(1) a contract of life insurance for another contract of life
insurance or for an endowment or annuity contract; or
(2) a contract of endowment insurance (A) for another contract
of endowment insurance which provides for regular payments
beginning at a date not later than the date payments would have
begun under the contract exchanged, or (B) for an annuity
contract; or
(3) an annuity contract for an annuity contract.
(b) Definitions
For the purpose of this section -
(1) Endowment contract
A contract of endowment insurance is a contract with an
insurance company which depends in part on the life expectancy of
the insured, but which may be payable in full in a single payment
during his life.
(2) Annuity contract
An annuity contract is a contract to which paragraph (1)
applies but which may be payable during the life of the annuitant
only in installments.
(3) Life insurance contract
A contract of life insurance is a contract to which paragraph
(1) applies but which is not ordinarily payable in full during
the life of the insured.
(c) Exchanges involving foreign persons
To the extent provided in regulations, subsection (a) shall not
apply to any exchange having the effect of transferring property to
any person other than a United States person.
(d) Cross references
(1) For rules relating to recognition of gain or loss where
an exchange is not solely in kind, see subsections (b) and (c)
of section 1031.
(2) For rules relating to the basis of property acquired in
an exchange described in subsection (a), see subsection (d) of
section 1031.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 309; Pub. L. 98-369, div. A,
title II, Secs. 211(b)(15), 224(a), July 18, 1984, 98 Stat. 756,
776; Pub. L. 99-514, title XVIII, Sec. 1828, Oct. 22, 1986, 100
Stat. 2851; Pub. L. 105-34, title XI, Sec. 1131(b)(1), Aug. 5,
1997, 111 Stat. 979.)
-COD-
CODIFICATION
Another section 1131(b) of Pub. L. 105-34 enacted section 684 of
this title.
-MISC1-
AMENDMENTS
1997 - Subsecs. (c), (d). Pub. L. 105-34 added subsec. (c) and
redesignated former subsec. (c) as (d).
1986 - Subsec. (b)(1). Pub. L. 99-514 struck out "subject to tax
under subchapter L" after "with an insurance company".
1984 - Subsec. (b)(1). Pub. L. 98-369, Sec. 224(a), which
directed the substitution of "an insurance company subject to tax
under subchapter L" for "a life insurance company as defined in
section 801", was executed by making such substitution for "a life
insurance company as defined in section 816" to reflect the
probable intent of Congress and the earlier amendment by Pub. L.
98-369, Sec. 211(b)(15), which substituted "as defined in section
816" for "as defined in section 801".
Pub. L. 98-369, Sec. 211(b)(15), substituted "section 816" for
"section 801".
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 effective, except as otherwise
provided, as if included in the provisions of the Tax Reform Act of
1984, Pub. L. 98-369, div. A, to which such amendment relates, see
section 1881 of Pub. L. 99-514, set out as a note under section 48
of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 211(b)(5) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, see section 215 of
Pub. L. 98-369, set out as an Effective Date note under section 801
of this title.
Section 224(b) of Pub. L. 98-369 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to all
exchanges whether before, on, or after the date of the enactment of
this Act [July 18, 1984]."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 1031 of this title.
-End-
-CITE-
26 USC Sec. 1036 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART III - COMMON NONTAXABLE EXCHANGES
-HEAD-
Sec. 1036. Stock for stock of same corporation
-STATUTE-
(a) General rule
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.
(b) Nonqualified preferred stock not treated as stock
For purposes of this section, nonqualified preferred stock (as
defined in section 351(g)(2)) shall be treated as property other
than stock.
(c) Cross references
(1) For rules relating to recognition of gain or loss where
an exchange is not solely in kind, see subsections (b) and (c)
of section 1031.
(2) For rules relating to the basis of property acquired in
an exchange described in subsection (a), see subsection (d) of
section 1031.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 309; Pub. L. 105-34, title X,
Sec. 1014(e)(3), Aug. 5, 1997, 111 Stat. 921.)
-MISC1-
AMENDMENTS
1997 - Subsecs. (b), (c). Pub. L. 105-34 added subsec. (b) and
redesignated former subsec. (b) as (c).
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by Pub. L. 105-34 applicable, with certain exceptions,
to transactions after June 8, 1997, see section 1014(f) of Pub. L.
105-34, set out as a note under section 351 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 83, 424, 1031 of this
title.
-End-
-CITE-
26 USC Sec. 1037 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART III - COMMON NONTAXABLE EXCHANGES
-HEAD-
Sec. 1037. Certain exchanges of United States obligations
-STATUTE-
(a) General rule
When so provided by regulations promulgated by the Secretary in
connection with the issue of obligations of the United States, no
gain or loss shall be recognized on the surrender to the United
States of obligations of the United States issued under chapter 31
of title 31 in exchange solely for other obligations issued under
such chapter.
(b) Application of original issue discount rules
(1) Exchanges involving obligations issued at a discount
In any case in which gain has been realized but not recognized
because of the provisions of subsection (a) (or so much of
section 1031(b) as relates to subsection (a) of this section), to
the extent such gain is later recognized by reason of a
disposition or redemption of an obligation received in an
exchange subject to such provisions, the first sentence of
section 1271(c)(2) shall apply to such gain as though the
obligation disposed of or redeemed were the obligation
surrendered to the Government in the exchange rather than the
obligation actually disposed of or redeemed. For purposes of this
paragraph and subpart A of part V of subchapter P, if the
obligation surrendered in the exchange is a nontransferable
obligation described in subsection (a) or (c) of section 454 -
(A) the aggregate amount considered, with respect to the
obligation surrendered, as ordinary income shall not exceed the
difference between the issue price and the stated redemption
price which applies at the time of the exchange, and
(B) the issue price of the obligation received in the
exchange shall be considered to be the stated redemption price
of the obligation surrendered in the exchange, increased by the
amount of other consideration (if any) paid to the United
States as a part of the exchange.
(2) Exchanges of transferable obligations issued at not less than
par
In any case in which subsection (a) (or so much of section
1031(b) or (c) as relates to subsection (a) of this section) has
applied to the exchange of a transferable obligation which was
issued at not less than par for another transferable obligation,
the issue price of the obligation received from the Government in
the exchange shall be considered for purposes of applying subpart
A of part V of subchapter P to be the same as the issue price of
the obligation surrendered to the Government in the exchange,
increased by the amount of other consideration (if any) paid to
the United States as a part of the exchange.
(c) Cross references
(1) For rules relating to the recognition of gain or loss in
a case where subsection (a) would apply except for the fact
that the exchange was not made solely for other obligations of
the United States, see subsections (b) and (c) of section 1031.
(2) For rules relating to the basis of obligations of the
United States acquired in an exchange for other obligations
described in subsection (a), see subsection (d) of section
1031.
-SOURCE-
(Added Pub. L. 86-346, title II, Sec. 201(a), Sept. 22, 1959, 73
Stat. 622; amended Pub. L. 94-455, title XIX, Sec. 1901(a)(130),
(b)(3)(I), Oct. 4, 1976, 90 Stat. 1786, 1793; Pub. L. 97-452, Sec.
2(c)(3), Jan. 12, 1983, 96 Stat. 2478; Pub. L. 98-369, div. A,
title I, Sec. 42(a)(11), July 18, 1984, 98 Stat. 557.)
-MISC1-
AMENDMENTS
1984 - Subsec. (b). Pub. L. 98-369, Sec. 42(a)(11)(C),
substituted "original issue discount rules" for "section 1232" in
heading.
Subsec. (b)(1). Pub. L. 98-369, Sec. 42(a)(11)(A), (B),
substituted "section 1271(c)(2)" for "section 1232(a)(2)(B)", and
"subpart A of part V of subchapter P" for "section 1232".
Subsec. (b)(2). Pub. L. 98-369, Sec. 42(a)(11)(B), substituted
"subpart A of part V of subchapter P" for "section 1232".
1983 - Subsec. (a). Pub. L. 97-452 substituted "chapter 31 of
title 31" and "chapter" for "the Second Liberty Bond Act" and
"Act", respectively.
1976 - Subsec. (b)(1). Pub. L. 94-455 substituted in introductory
provisions "section 1232(a)(2)(B)" for "section 1232(a)(2)(A)" and
in subpar. (A) "ordinary income" for "gain from the sale or
exchange of property which is not a capital asset".
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to taxable years ending
after July 18, 1984, see section 44 of Pub. L. 98-369, set out as
an Effective Date note under section 1271 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by Pub. L. 94-455 effective for taxable years beginning
after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out
as a note under section 2 of this title.
EFFECTIVE DATE
Section 203 of Pub. L. 86-346 provided that: "The amendments made
by this title [enacting this section and amending section 1031 of
this title and section 742a of former Title 31, Money and Finance]
shall be effective for taxable years ending after the date of
enactment of this Act [Sept. 22, 1959]."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 454, 1031 of this title.
-End-
-CITE-
26 USC Sec. 1038 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART III - COMMON NONTAXABLE EXCHANGES
-HEAD-
Sec. 1038. Certain reacquisitions of real property
-STATUTE-
(a) General rule
If -
(1) a sale of real property gives rise to indebtedness to the
seller which is secured by the real property sold, and
(2) the seller of such property reacquires such property in
partial or full satisfaction of such indebtedness,
then, except as provided in subsections (b) and (d), no gain or
loss shall result to the seller from such reacquisition, and no
debt shall become worthless or partially worthless as a result of
such reacquisition.
(b) Amount of gain resulting
(1) In general
In the case of a reacquisition of real property to which
subsection (a) applies, gain shall result from such reacquisition
to the extent that -
(A) the amount of money and the fair market value of other
property (other than obligations of the purchaser) received,
prior to such reacquisition, with respect to the sale of such
property, exceeds
(B) the amount of the gain on the sale of such property
returned as income for periods prior to such reacquisition.
(2) Limitation
The amount of gain determined under paragraph (1) resulting
from a reacquisition during any taxable year beginning after the
date of the enactment of this section shall not exceed the amount
by which the price at which the real property was sold exceeded
its adjusted basis, reduced by the sum of -
(A) the amount of the gain on the sale of such property
returned as income for periods prior to the reacquisition of
such property, and
(B) the amount of money and the fair market value of other
property (other than obligations of the purchaser received with
respect to the sale of such property) paid or transferred by
the seller in connection with the reacquisition of such
property.
For purposes of this paragraph, the price at which real property
is sold is the gross sales price reduced by the selling
commissions, legal fees, and other expenses incident to the sale
of such property which are properly taken into account in
determining gain or loss on such sale.
(3) Gain recognized
Except as provided in this section, the gain determined under
this subsection resulting from a reacquisition to which
subsection (a) applies shall be recognized, notwithstanding any
other provision of this subtitle.
(c) Basis of reacquired real property
If subsection (a) applies to the reacquisition of any real
property, the basis of such property upon such reacquisition shall
be the adjusted basis of the indebtedness to the seller secured by
such property (determined as of the date of reacquisition),
increased by the sum of -
(1) the amount of the gain determined under subsection (b)
resulting from such reacquisition, and
(2) the amount described in subsection (b)(2)(B).
If any indebtedness to the seller secured by such property is not
discharged upon the reacquisition of such property, the basis of
such indebtedness shall be zero.
(d) Indebtedness treated as worthless prior to reacquisition
If, prior to a reacquisition of real property to which subsection
(a) applies, the seller has treated indebtedness secured by such
property as having become worthless or partially worthless -
(1) such seller shall be considered as receiving, upon the
reacquisition of such property, an amount equal to the amount of
such indebtedness treated by him as having become worthless, and
(2) the adjusted basis of such indebtedness shall be increased
(as of the date of reacquisition) by an amount equal to the
amount so considered as received by such seller.
(e) Principal residences
If -
(1) subsection (a) applies to a reacquisition of real property
with respect to the sale of which gain was not recognized under
section 121 (relating to gain on sale of principal residence);
and
(2) within 1 year after the date of the reacquisition of such
property by the seller, such property is resold by him,
then, under regulations prescribed by the Secretary, subsections
(b), (c), and (d) of this section shall not apply to the
reacquisition of such property and, for purposes of applying
section 121, the resale of such property shall be treated as a part
of the transaction constituting the original sale of such property.
[(f) Repealed. Pub. L. 104-188, title I, Sec. 1616(b)(12), Aug. 20,
1996, 110 Stat. 1857]
(g) Acquisition by estate, etc., of seller
Under regulations prescribed by the Secretary, if an installment
obligation is indebtedness to the seller which is described in
subsection (a), and if such obligation is, in the hands of the
taxpayer, an obligation with respect to which section 691(a)(4)(B)
applies, then -
(1) for purposes of subsection (a), acquisition of real
property by the taxpayer shall be treated as reacquisition by the
seller, and
(2) the basis of the real property acquired by the taxpayer
shall be increased by an amount equal to the deduction under
section 691(c) which would (but for this subsection) have been
allowable to the taxpayer with respect to the gain on the
exchange of the obligation for the real property.
-SOURCE-
(Added Pub. L. 88-570, Sec. 2(a), Sept. 2, 1964, 78 Stat. 854;
amended Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A), Oct. 4,
1976, 90 Stat. 1834; Pub. L. 95-600, title IV, Secs. 404(c)(6),
405(c)(3), Nov. 6, 1978, 92 Stat. 2870, 2871; Pub. L. 96-471, Sec.
4, Oct. 19, 1980, 94 Stat. 2255; Pub. L. 104-188, title I, Sec.
1616(b)(12), Aug. 20, 1996, 110 Stat. 1857; Pub. L. 105-34, title
III, Sec. 312(d)(8), Aug. 5, 1997, 111 Stat. 840.)
-MISC1-
AMENDMENTS
1997 - Subsec. (e). Pub. L. 105-34 amended heading and text of
subsec. (e) generally. Prior to amendment, text read as follows:
"If -
"(1) subsection (a) applies to a reacquisition of real property
with respect to the sale of which -
"(A) an election under section 121 (relating to one-time
exclusion of gain from sale of principal residence by
individual who has attained age 55) is in effect, or
"(B) gain was not recognized under section 1034 (relating to
rollover of gain on sale of principal residence); and
"(2) within one year after the date of the reacquisition of
such property by the seller, such property is resold by him,
then, under regulations prescribed by the Secretary, subsections
(b), (c), and (d) of this section shall not apply to the
reacquisition of such property and, for purposes of applying
sections 121 and 1034, the resale of such property shall be treated
as a part of the transaction constituting the original sale of such
property."
1996 - Subsec. (f). Pub. L. 104-188 struck out subsec. (f) which
read as follows:
"(f) Reacquisitions by Domestic Building and Loan Associations. -
This section shall not apply to a reacquisition of real property by
an organization described in section 593(a) (relating to domestic
building and loan associations, etc.)."
1980 - Subsec. (g). Pub. L. 96-471 added subsec. (g).
1978 - Subsec. (e)(1)(A). Pub. L. 95-600, Sec. 404(c)(6),
substituted "relating to one-time exclusion of gain from sale of
principal residence by individual who has attained age 55" for
"relating to gain from sale or exchange of residence of an
individual who has attained age 65".
Subsec. (e)(1)(B). Pub. L. 95-600, Sec. 405(c)(3), which directed
the amendment of section 1083(e)(1)(B) of this title by
substituting "(relating to rollover of gain on sale of principal
residence)" for "(relating to sale or exchange of residence)", was
executed to this section to reflect the probable intent of Congress
because section 1083 does not contain a subsec. (e)(1)(B).
1976 - Subsec. (e). Pub. L. 94-455 struck out "or his delegate"
after "Secretary".
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by Pub. L. 105-34 applicable to sales and exchanges
after May 6, 1997, with certain exceptions, see section 312(d) of
Pub. L. 105-34, set out as a note under section 121 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by Pub. L. 104-188 applicable to taxable years
beginning after Dec. 31, 1995, see section 1616(c) of Pub. L.
104-188, set out as a note under section 593 of this title.
EFFECTIVE DATE OF 1980 AMENDMENT
Section 6(c) of Pub. L. 96-471 provided: "The amendment made by
section 4 [amending this section] shall apply to acquisitions of
real property by the taxpayer after the date of the enactment of
this Act [Oct. 19, 1980]."
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by section 404(c)(6) of Pub. L. 95-600 applicable to
sales or exchanges after July 26, 1978, in taxable years ending
after such date, see section 404(d)(1) of Pub. L. 95-600, set out
as a note under section 121 of this title.
Section 405(d) of Pub. L. 95-600 provided that: "The amendments
made by this section [amending this section and sections 1034,
1250, 6212, and 6504 of this title] shall apply to sales and
exchanges of residences after July 26, 1978, in taxable years
ending after such date."
EFFECTIVE DATE; ELECTION TO APPLY TO TAXABLE YEARS BEGINNING AFTER
DEC. 31, 1957
Section 2(c) of Pub. L. 88-570 provided that:
"(1) The amendments made by this section [enacting this section]
shall apply to taxable years beginning after the date of the
enactment of this Act [Sept. 2, 1964].
"(2) If the taxpayer makes an election under this paragraph, the
amendments made by this section [enacting this section] shall also
apply to taxable years beginning after December 31, 1957, except
that such amendments shall not apply with respect to any
reacquisition of real property in a taxable year for which the
assessment of a deficiency, or the credit or refund of an
overpayment, is prevented on the date of the enactment of this Act
[Sept. 2, 1964] by the operation of any law or rule of law. An
election under this paragraph shall be made within one year after
the date of the enactment of this Act and shall be made in such
form and manner as the Secretary of the Treasury or his delegate
shall prescribe by regulations.
"(3) If an election is made by the taxpayer under paragraph (2),
and if the assessment of a deficiency, or the credit or refund of
an overpayment, for any taxable year to which such election applies
is not prevented on the date of the enactment of this Act [Sept. 2,
1964] by the operation of any law or rule of law -
"(A) the period within which a deficiency for such taxable year
may be assessed (to the extent such deficiency is attributable to
the application of the amendments made by this section) shall not
expire prior to one year after the date of such election; and
"(B) the period within which a claim for credit or refund of an
overpayment for such taxable year may be filed (to the extent
such overpayment is attributable to the application of such
amendments) shall not expire prior to one year after the date of
such election.
No interest shall be payable with respect to any deficiency
attributable to the application of such amendments, and no interest
shall be allowed with respect to any credit or refund of any
overpayment attributable to the application of such amendments, for
any period prior to the date of the enactment of this Act. An
election by a taxpayer under paragraph (2) shall be deemed a
consent to the application of this paragraph."
-End-
-CITE-
26 USC Sec. 1039 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART III - COMMON NONTAXABLE EXCHANGES
-HEAD-
[Sec. 1039. Repealed. Pub. L. 101-508, title XI, Sec. 11801(a)(33),
Nov. 5, 1990, 104 Stat. 1388-521]
-MISC1-
Section, added Pub. L. 91-172, title IX, Sec. 910(a), Dec. 30,
1969, 83 Stat. 718; amended Pub. L. 94-455, title XIX, Sec.
1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834, related to the
recognition of gain on certain sales of low-income housing
projects.
SAVINGS PROVISION
For provisions that nothing in repeal by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
-End-
-CITE-
26 USC Sec. 1040 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART III - COMMON NONTAXABLE EXCHANGES
-HEAD-
Sec. 1040. Transfer of certain farm, etc., real property
-STATUTE-
(a) General rule
If the executor of the estate of any decedent transfers to a
qualified heir (within the meaning of section 2032A(e)(1)) any
property with respect to which an election was made under section
2032A, then gain on such transfer shall be recognized to the estate
only to the extent that, on the date of such transfer, the fair
market value of such property exceeds the value of such property
for purposes of chapter 11 (determined without regard to section
2032A).
(b) Similar rule for certain trusts
To the extent provided in regulations prescribed by the
Secretary, a rule similar to the rule provided in subsection (a)
shall apply where the trustee of a trust (any portion of which is
included in the gross estate of the decedent) transfers property
with respect to which an election was made under section 2032A.
(c) Basis of property acquired in transfer described in subsection
(a) or (b)
The basis of property acquired in a transfer with respect to
which gain realized is not recognized by reason of subsection (a)
or (b) shall be the basis of such property immediately before the
transfer increased by the amount of the gain recognized to the
estate or trust on the transfer.
-SOURCE-
(Added Pub. L. 94-455, title XX, Sec. 2005(b), Oct. 4, 1976, 90
Stat. 1877; amended Pub. L. 95-600, title VII, Sec. 702(d)(3), Nov.
6, 1978, 92 Stat. 2929; Pub. L. 96-222, title I, Sec. 105(a)(5)(A),
Apr. 1, 1980, 94 Stat. 219; Pub. L. 96-223, title IV, Sec.
401(c)(2)(A), Apr. 2, 1980, 94 Stat. 300; Pub. L. 97-34, title IV,
Sec. 421(j)(2)(B), Aug. 13, 1981, 95 Stat. 312; Pub. L. 97-448,
title I, Sec. 104(b)(3)(A), (B), Jan. 12, 1983, 96 Stat. 2381; Pub.
L. 107-16, title V, Sec. 542(d)(1), June 7, 2001, 115 Stat. 84.)
-STATAMEND-
AMENDMENT OF SECTION
Pub. L. 107-16, title V, Sec. 542(d)(1), (f)(1), title IX, Sec.
901, June 7, 2001, 115 Stat. 84, 86, 150, provided that, applicable
to estates of decedents dying after Dec. 31, 2009, this section is
temporarily amended to read as follows:
Sec. 1040. Use of appreciated carryover basis property to satisfy
pecuniary bequest
(a) In general
If the executor of the estate of any decedent satisfies the right
of any person to receive a pecuniary bequest with appreciated
property, then gain on such exchange shall be recognized to the
estate only to the extent that, on the date of such exchange, the
fair market value of such property exceeds such value on the date
of death.
(b) Similar rule for certain trusts
To the extent provided in regulations prescribed by the
Secretary, a rule similar to the rule provided in subsection (a)
shall apply where -
(1) by reason of the death of the decedent, a person has a
right to receive from a trust a specific dollar amount which is
the equivalent of a pecuniary bequest, and
(2) the trustee of a trust satisfies such right with property.
(c) Basis of property acquired in exchange described in subsection
(a) or (b)
The basis of property acquired in an exchange with respect to
which gain realized is not recognized by reason of subsection (a)
or (b) shall be the basis of such property immediately before the
exchange increased by the amount of the gain recognized to the
estate or trust on the exchange.
See Effective and Termination Dates of 2001 Amendment note below.
-MISC1-
AMENDMENTS
1983 - Subsec. (a). Pub. L. 97-448, Sec. 104(b)(3)(A),
substituted "on the date of such transfer" for "on the date of such
exchange".
Subsec. (c). Pub. L. 97-448, Sec. 104(b)(3)(B), substituted
references to "transfer", "a transfer", and "the transfer" for
references to "exchange", "an exchange", and "the exchange",
respectively, wherever appearing in heading and text.
1981 - Pub. L. 97-34 substituted "Transfer of certain farm, etc.,
real property" for "Use of farm, etc., real property to satisfy
pecuniary bequest" in section catchline.
Subsec. (a). Pub. L. 97-34 revised subsec. (a) generally,
substituting "transfers to a qualified heir (within the meaning of
section 2032A(e)(1)) any property" for "satisfies the right of a
qualified heir (within the meaning of section 2032A(e)(1)) to
receive a pecuniary bequest with property" and "such transfer" for
"such exchange" before "shall be recognized".
Subsec. (b). Pub. L. 97-34 substituted "shall apply where the
trustee of a trust (any portion of which is included in the gross
estate of the decedent) transfers property with respect to which an
election was made under section 2032A" for "shall apply where -
"(1) by reason of the death of the decedent, a qualified heir
has a right to receive from a trust a specific dollar amount
which is the equivalent of a pecuniary bequest, and
"(2) the trustee of the trust satisfies such right with
property with respect to which an election was made under section
2032A".
1980 - Pub. L. 96-223 substituted "Use of farm, etc., property to
satisfy pecuniary bequest" for "Use of certain appreciated
carryover basis property to satisfy pecuniary request" in section
catchline, generally revised subsecs. (a) and (b) to reflect the
repeal elsewhere in the Code of carryover basis provisions, and
struck out subsec. (d) which had provided that, for purposes of
this section, references to carryover basis property should be
treated as including a reference to property the valuation of which
is determined under section 2032A. Pub. L. 96-222 added subsec.
(d).
1978 - Subsec. (a). Pub. L. 95-600 substituted "chapter 11
(determined without regard to section 2032A)" for "chapter 11".
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by Pub. L. 107-16 applicable to estates of decedents
dying after Dec. 31, 2009, see section 542(f)(1) of Pub. L. 107-16,
set out as a note under section 121 of this title.
Amendment by Pub. L. 107-16 inapplicable to estates of decedents
dying, gifts made, or generation skipping transfers, after Dec. 31,
2010, and the Internal Revenue Code of 1986 to be applied and
administered to such estates, gifts, and transfers as if such
amendment had never been enacted, see section 901 of Pub. L.
107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 97-448 effective, except as otherwise
provided, as if it had been included in the provision of the
Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by Pub. L. 97-34 applicable with respect to the estates
of decedents dying after Dec. 31, 1976, upon compliance with
certain conditions relating to timely election requirement,
reinstatement of elections, and statute of limitations, see section
421(k)(5) of Pub. L. 97-34, set out as a note under section 2032A
of this title.
EFFECTIVE DATE OF 1980 AMENDMENTS
Amendment by Pub. L. 96-223 applicable in respect of decedents
dying after Dec. 31, 1976, see section 401(e) of Pub. L. 96-223,
set out as a note under section 1023 of this title.
Section 105(a)(5)(B) of Pub. L. 96-222, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"Notwithstanding section 515 of the Revenue Act of 1978 [section
515 of Pub. L. 95-600 which deferred carryover basis rules until
Dec. 31, 1979], section 1040 of the Internal Revenue Code of 1986
[formerly I.R.C. 1954] (as amended by subparagraph (A) [amending
this section]) shall apply with respect to the estates of decedents
dying after December 31, 1976."
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by Pub. L. 95-600 applicable to estates of decedents
dying after Dec. 31, 1976, see section 702(d)(6) of Pub. L. 95-600,
set out as a note under section 2032A of this title.
EFFECTIVE DATE
Section applicable in respect of decedents dying after Dec. 31,
1976, see section 2005(f)(1) of Pub. L. 94-455, set out as a note
under section 1015 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 1223 of this title.
-End-
-CITE-
26 USC Sec. 1041 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART III - COMMON NONTAXABLE EXCHANGES
-HEAD-
Sec. 1041. Transfers of property between spouses or incident to
divorce
-STATUTE-
(a) General rule
No gain or loss shall be recognized on a transfer of property
from an individual to (or in trust for the benefit of) -
(1) a spouse, or
(2) a former spouse, but only if the transfer is incident to
the divorce.
(b) Transfer treated as gift; transferee has transferor's basis
In the case of any transfer of property described in subsection
(a) -
(1) for purposes of this subtitle, the property shall be
treated as acquired by the transferee by gift, and
(2) the basis of the transferee in the property shall be the
adjusted basis of the transferor.
(c) Incident to divorce
For purposes of subsection (a)(2), a transfer of property is
incident to the divorce if such transfer -
(1) occurs within 1 year after the date on which the marriage
ceases, or
(2) is related to the cessation of the marriage.
(d) Special rule where spouse is nonresident alien
Subsection (a) shall not apply if the spouse (or former spouse)
of the individual making the transfer is a nonresident alien.
(e) Transfers in trust where liability exceeds basis
Subsection (a) shall not apply to the transfer of property in
trust to the extent that -
(1) the sum of the amount of the liabilities assumed, plus the
amount of the liabilities to which the property is subject,
exceeds
(2) the total of the adjusted basis of the property
transferred.
Proper adjustment shall be made under subsection (b) in the basis
of the transferee in such property to take into account gain
recognized by reason of the preceding sentence.
-SOURCE-
(Added Pub. L. 98-369, div. A, title IV, Sec. 421(a), July 18,
1984, 98 Stat. 793; amended Pub. L. 99-514, title XVIII, Sec.
1842(b), Oct. 22, 1986, 100 Stat. 2853; Pub. L. 100-647, title I,
Sec. 1018(l)(3), Nov. 10, 1988, 102 Stat. 3584.)
-MISC1-
AMENDMENTS
1988 - Subsec. (d). Pub. L. 100-647 substituted "Subsection (a)"
for "Paragraph (1) of subsection (a)" and "the spouse (or former
spouse)" for "the spouse".
1986 - Subsec. (e). Pub. L. 99-514 added subsec. (e).
EFFECTIVE DATE OF 1988 AMENDMENT
Section 1018(l)(3) of Pub. L. 100-647 provided that the amendment
made by that section is effective with respect to transfers after
June 21, 1988.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 effective, except as otherwise
provided, as if included in the provisions of the Tax Reform Act of
1984, Pub. L. 98-369, div. A, to which such amendment relates, see
section 1881 of Pub. L. 99-514, set out as a note under section 48
of this title.
EFFECTIVE DATE
Section 421(d) of Pub. L. 98-369 provided that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendments made by this section [enacting this
section and amending sections 47, 72, 101, 453, 453B, 1001, 1015,
and 1239 of this title] shall apply to transfers after the date of
the enactment of this Act [July 18, 1984] in taxable years ending
after such date.
"(2) Election to have amendments apply to transfers after 1983. -
If both spouses or former spouses make an election under this
paragraph, the amendments made by this section shall apply to all
transfers made by such spouses (or former spouses) after December
31, 1983.
"(3) Exception for transfers pursuant to existing decrees. -
Except in the case of an election under paragraph (2), the
amendments made by this section shall not apply to transfers under
any instrument in effect on or before the date of the enactment of
this Act unless both spouses (or former spouses) elect to have such
amendments apply to transfers under such instrument.
"(4) Election. - Any election under paragraph (2) or (3) shall be
made in such manner, at such time, and subject to such conditions,
as the Secretary of the Treasury or his delegate may by regulations
prescribe."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 50, 72, 121, 143, 267,
382, 424, 453B, 1001, 1015 of this title.
-End-
-CITE-
26 USC Sec. 1042 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART III - COMMON NONTAXABLE EXCHANGES
-HEAD-
Sec. 1042. Sales of stock to employee stock ownership plans or
certain cooperatives
-STATUTE-
(a) Nonrecognition of gain
If -
(1) the taxpayer or executor elects in such form as the
Secretary may prescribe the application of this section with
respect to any sale of qualified securities,
(2) the taxpayer purchases qualified replacement property
within the replacement period, and
(3) the requirements of subsection (b) are met with respect to
such sale,
then the gain (if any) on such sale which would be recognized as
long-term capital gain shall be recognized only to the extent that
the amount realized on such sale exceeds the cost to the taxpayer
of such qualified replacement property.
(b) Requirements to qualify for nonrecognition
A sale of qualified securities meets the requirements of this
subsection if -
(1) Sale to employee organizations
The qualified securities are sold to -
(A) an employee stock ownership plan (as defined in section
4975(e)(7)), or
(B) an eligible worker-owned cooperative.
(2) Plan must hold 30 percent of stock after sale
The plan or cooperative referred to in paragraph (1) owns
(after application of section 318(a)(4)), immediately after the
sale, at least 30 percent of -
(A) each class of outstanding stock of the corporation (other
than stock described in section 1504(a)(4)) which issued the
qualified securities, or
(B) the total value of all outstanding stock of the
corporation (other than stock described in section 1504(a)(4)).
(3) Written statement required
(A) In general
The taxpayer files with the Secretary the written statement
described in subparagraph (B).
(B) Statement
A statement is described in this subparagraph if it is a
verified written statement of -
(i) the employer whose employees are covered by the plan
described in paragraph (1), or
(ii) any authorized officer of the cooperative described in
paragraph (l),
consenting to the application of sections 4978 and 4979A with
respect to such employer or cooperative.
(4) 3-year holding period
The taxpayer's holding period with respect to the qualified
securities is at least 3 years (determined as of the time of the
sale).
(c) Definitions; special rules
For purposes of this section -
(1) Qualified securities
The term "qualified securities" means employer securities (as
defined in section 409(l)) which -
(A) are issued by a domestic C corporation that has no stock
outstanding that is readily tradable on an established
securities market, and
(B) were not received by the taxpayer in -
(i) a distribution from a plan described in section 401(a),
or
(ii) a transfer pursuant to an option or other right to
acquire stock to which section 83, 422, or 423 applied (or to
which section 422 or 424 (as in effect on the day before the
date of the enactment of the Revenue Reconciliation Act of
1990) applied).
(2) Eligible worker-owned cooperative
The term "eligible worker-owned cooperative" means any
organization -
(A) to which part I of subchapter T applies,
(B) a majority of the membership of which is composed of
employees of such organization,
(C) a majority of the voting stock of which is owned by
members,
(D) a majority of the board of directors of which is elected
by the members on the basis of 1 person 1 vote, and
(E) a majority of the allocated earnings and losses of which
are allocated to members on the basis of -
(i) patronage,
(ii) capital contributions, or
(iii) some combination of clauses (i) and (ii).
(3) Replacement period
The term "replacement period" means the period which begins 3
months before the date on which the sale of qualified securities
occurs and which ends 12 months after the date of such sale.
(4) Qualified replacement property
(A) In general
The term "qualified replacement property" means any security
issued by a domestic operating corporation which -
(i) did not, for the taxable year preceding the taxable
year in which such security was purchased, have passive
investment income (as defined in section 1362(d)(3)(C)) in
excess of 25 percent of the gross receipts of such
corporation for such preceding taxable year, and
(ii) is not the corporation which issued the qualified
securities which such security is replacing or a member of
the same controlled group of corporations (within the meaning
of section 1563(a)(1)) as such corporation.
For purposes of clause (i), income which is described in
section 954(c)(3) (as in effect immediately before the Tax
Reform Act of 1986) shall not be treated as passive investment
income.
(B) Operating corporation
For purposes of this paragraph -
(i) In general
The term "operating corporation" means a corporation more
than 50 percent of the assets of which were, at the time the
security was purchased or before the close of the replacement
period, used in the active conduct of the trade or business.
(ii) Financial institutions and insurance companies
The term "operating corporation" shall include -
(I) any financial institution described in section 581,
and
(II) an insurance company subject to tax under subchapter
L.
(C) Controlling and controlled corporations treated as 1
corporation
(i) In general
For purposes of applying this paragraph, if -
(I) the corporation issuing the security owns stock
representing control of 1 or more other corporations,
(II) 1 or more other corporations own stock representing
control of the corporation issuing the security, or
(III) both,
then all such corporations shall be treated as 1 corporation.
(ii) Control
For purposes of clause (i), the term "control" has the
meaning given such term by section 304(c). In determining
control, there shall be disregarded any qualified replacement
property of the taxpayer with respect to the section 1042
sale being tested.
(D) Security defined
For purposes of this paragraph, the term "security" has the
meaning given such term by section 165(g)(2), except that such
term shall not include any security issued by a government or
political subdivision thereof.
(5) Securities sold by underwriter
No sale of securities by an underwriter to an employee stock
ownership plan or eligible worker-owned cooperative in the
ordinary course of his trade or business as an underwriter,
whether or not guaranteed, shall be treated as a sale for
purposes of subsection (a).
(6) Time for filing election
An election under subsection (a) shall be filed not later than
the last day prescribed by law (including extensions thereof) for
filing the return of tax imposed by this chapter for the taxable
year in which the sale occurs.
(7) Section not to apply to gain of C corporation
Subsection (a) shall not apply to any gain on the sale of any
qualified securities which is includible in the gross income of
any C corporation.
(d) Basis of qualified replacement property
The basis of the taxpayer in qualified replacement property
purchased by the taxpayer during the replacement period shall be
reduced by the amount of gain not recognized by reason of such
purchase and the application of subsection (a). If more than one
item of qualified replacement property is purchased, the basis of
each of such items shall be reduced by an amount determined by
multiplying the total gain not recognized by reason of such
purchase and the application of subsection (a) by a fraction -
(1) the numerator of which is the cost of such item of
property, and
(2) the denominator of which is the total cost of all such
items of property.
Any reduction in basis under this subsection shall not be taken
into account for purposes of section 1278(a)(2)(A)(ii) (relating to
definition of market discount).
(e) Recapture of gain on disposition of qualified replacement
property
(1) In general
If a taxpayer disposes of any qualified replacement property,
then, notwithstanding any other provision of this title, gain (if
any) shall be recognized to the extent of the gain which was not
recognized under subsection (a) by reason of the acquisition by
such taxpayer of such qualified replacement property.
(2) Special rule for corporations controlled by the taxpayer
If -
(A) a corporation issuing qualified replacement property
disposes of a substantial portion of its assets other than in
the ordinary course of its trade or business, and
(B) any taxpayer owning stock representing control (within
the meaning of section 304(c)) of such corporation at the time
of such disposition holds any qualified replacement property of
such corporation at such time,
then the taxpayer shall be treated as having disposed of such
qualified replacement property at such time.
(3) Recapture not to apply in certain cases
Paragraph (1) shall not apply to any transfer of qualified
replacement property -
(A) in any reorganization (within the meaning of section 368)
unless the person making the election under subsection (a)(1)
owns stock representing control in the acquiring or acquired
corporation and such property is substituted basis property in
the hands of the transferee,
(B) by reason of the death of the person making such
election,
(C) by gift, or
(D) in any transaction to which section 1042(a) applies.
(f) Statute of limitations
If any gain is realized by the taxpayer on the sale or exchange
of any qualified securities and there is in effect an election
under subsection (a) with respect to such gain, then -
(1) the statutory period for the assessment of any deficiency
with respect to such gain shall not expire before the expiration
of 3 years from the date the Secretary is notified by the
taxpayer (in such manner as the Secretary may by regulations
prescribe) of -
(A) the taxpayer's cost of purchasing qualified replacement
property which the taxpayer claims results in nonrecognition of
any part of such gain,
(B) the taxpayer's intention not to purchase qualified
replacement property within the replacement period, or
(C) a failure to make such purchase within the replacement
period, and
(2) such deficiency may be assessed before the expiration of
such 3-year period notwithstanding the provisions of any other
law or rule of law which would otherwise prevent such assessment.
(g) Application of section to sales of stock in agricultural
refiners and processors to eligible farm cooperatives
(1) In general
This section shall apply to the sale of stock of a qualified
refiner or processor to an eligible farmers' cooperative.
(2) Qualified refiner or processor
For purposes of this subsection, the term "qualified refiner or
processor" means a domestic corporation -
(A) substantially all of the activities of which consist of
the active conduct of the trade or business of refining or
processing agricultural or horticultural products, and
(B) which, during the 1-year period ending on the date of the
sale, purchases more than one-half of such products to be
refined or processed from -
(i) farmers who make up the eligible farmers' cooperative
which is purchasing stock in the corporation in a transaction
to which this subsection is to apply, or
(ii) such cooperative.
(3) Eligible farmers' cooperative
For purposes of this section, the term "eligible farmers'
cooperative" means an organization to which part I of subchapter
T applies and which is engaged in the marketing of agricultural
or horticultural products.
(4) Special rules
In applying this section to a sale to which paragraph (1)
applies -
(A) the eligible farmers' cooperative shall be treated in the
same manner as a cooperative described in subsection (b)(1)(B),
(B) subsection (b)(2) shall be applied by substituting "100
percent" for "30 percent" each place it appears,
(C) the determination as to whether any stock in the domestic
corporation is a qualified security shall be made without
regard to whether the stock is an employer security or to
subsection (c)(1)(A), and
(D) paragraphs (2)(D) and (7) of subsection (c) shall not
apply.
-SOURCE-
(Added Pub. L. 98-369, div. A, title V, Sec. 541(a), July 18, 1984,
98 Stat. 887; amended Pub. L. 99-514, title XVIII, Secs.
1854(a)(1), (2)(A), (3)(B), (4), (5)(A), (6)(A), (7), (8)(A),
(9)(B), (10), (11), (f)(3)(B), 1899A(26), Oct. 22, 1986, 100 Stat.
2872-2878, 2882, 2959; Pub. L. 100-647, title I, Sec.
1018(t)(4)(D)-(F), Nov. 10, 1988, 102 Stat. 3588; Pub. L. 101-239,
title VII, Sec. 7303(a), Dec. 19, 1989, 103 Stat. 2352; Pub. L.
101-508, title XI, Sec. 11801(c)(9)(H), Nov. 5, 1990, 104 Stat.
1388-526; Pub. L. 104-188, title I, Secs. 1311(b)(3), 1316(d)(3),
1616(b)(13), 1704(t)(50), Aug. 20, 1996, 110 Stat. 1784, 1786,
1857, 1890; Pub. L. 105-34, title IX, Sec. 968(a), Aug. 5, 1997,
111 Stat. 895.)
-REFTEXT-
REFERENCES IN TEXT
The date of the enactment of the Revenue Reconciliation Act of
1990, referred to in subsec. (c)(1)(B)(ii), is the date of
enactment of Pub. L. 101-508, which was approved Nov. 5, 1990.
The Tax Reform Act of 1986, referred to in subsec. (c)(4)(A), is
Pub. L. 99-514, which was approved Oct. 22, 1986.
-MISC1-
AMENDMENTS
1997 - Subsec. (g). Pub. L. 105-34 added subsec. (g).
1996 - Subsec. (c)(1)(A). Pub. L. 104-188, Sec. 1316(d)(3),
substituted "domestic C corporation" for "domestic corporation".
Subsec. (c)(1)(B)(ii). Pub. L. 104-188, Sec. 1704(t)(50),
provided that section 11801(c)(9)(H) of Pub. L. 101-508 shall be
applied as if "section 1042(c)(1)(B)" appeared instead of "section
1042(c)(2)(B)". See 1990 Amendment note below.
Subsec. (c)(4)(A)(i). Pub. L. 104-188, Sec. 1311(b)(3),
substituted "section 1362(d)(3)(C)" for "section 1362(d)(3)(D)".
Subsec. (c)(4)(B)(ii)(I). Pub. L. 104-188, Sec. 1616(b)(13),
struck out "or 593" after "section 581".
1990 - Subsec. (c)(1)(B)(ii). Pub. L. 101-508, which directed the
amendment of subsec. (c)(2)(B)(ii) by substituting "section 83,
422, or 423 applied (or to which section 422 or 424 (as in effect
on the day before the date of the enactment of the Revenue
Reconciliation Act of 1990) applied)" for "section 83, 422, 422A,
423, or 424 applies", was executed to subsec. (c)(1)(B)(ii). See
1996 Amendment note above.
1989 - Subsec. (b)(4). Pub. L. 101-239 added par. (4).
1988 - Subsec. (b)(3), (4). Pub. L. 100-647, Sec. 1018(t)(4)(F),
made technical correction to Pub. L. 99-514, Sec. 1854(a)(3)(B),
see 1986 Amendment notes below.
Subsec. (c)(4)(A). Pub. L. 100-647, Sec. 1018(t)(4)(D), inserted
"(as in effect immediately before the Tax Reform Act of 1986)"
after "section 954(c)(3)" in last sentence.
Subsec. (c)(4)(B)(i). Pub. L. 100-647, Sec. 1018(t)(4)(E),
substituted "replacement period" for "placement period".
1986 - Pub. L. 99-514, Sec. 1854(a)(11), which directed that
"employee" be inserted before "stock" in section catchline was
executed by making the insertion before "stock" the second time
that term appears as the probable intent of Congress.
Subsec. (a). Pub. L. 99-514, Sec. 1854(a)(1), substituted "the
taxpayer or executor elects in such form as the Secretary may
prescribe" for "the taxpayer elects" in par. (1) and inserted
"which would be recognized as long-term capital gain" in concluding
provisions.
Subsec. (b)(2). Pub. L. 99-514, Sec. 1854(a)(2)(A), substituted
"Plan must hold" for "Employees must own" in heading and amended
text generally. Prior to amendment, par. (2) read as follows: "The
plan or cooperative referred to in paragraph (1) owns, immediately
after the sale, at least 30 percent of the total value of the
employer securities (within the meaning of section 409(l))
outstanding as of such time."
Subsec. (b)(3). Pub. L. 99-514, Sec. 1854(a)(3)(B), as amended by
Pub. L. 100-647, Sec. 1018(t)(4)(F), redesignated par. (4) as (3)
and struck out former par. (3) which related to plans maintained
for benefit of employees.
Subsec. (b)(3)(B). Pub. L. 99-514, Sec. 1854(f)(3)(B), amended
subpar. (B) similar to amendment by section 1854(a)(9)(B) of Pub.
L. 99-514, inserting reference to section 4979A.
Pub. L. 99-514, Sec. 1854(a)(9)(B), substituted "sections 4978
and 4979A" for "section 4978(a)".
Subsec. (b)(4). Pub. L. 99-514, Sec. 1854(a)(3)(B), as amended by
Pub. L. 100-647, Sec. 1018(t)(4)(F), redesignated par. (4) as (3).
Subsec. (c). Pub. L. 99-514, Sec. 1899A(26), substituted "this
section - " for "this section. - " in introductory provision.
Subsec. (c)(1). Pub. L. 99-514, Sec. 1854(a)(4), substituted
"stock outstanding that is" for "securities outstanding that are"
in subpar. (A), redesignated subpar. (C) as (B), and struck out
former subpar. (B) which read as follows: "at the time of the sale
described in subsection (a)(1), have been held by the taxpayer for
more than 1 year, and".
Subsec. (c)(4). Pub. L. 99-514, Sec. 1854(a)(5)(A), amended par.
(4) generally. Prior to amendment, par. (4) read as follows: "The
term 'qualified replacement property' means any securities (as
defined in section 165(g)(2)) issued by a domestic corporation
which does not, for the taxable year in which such stock is issued,
have passive investment income (as defined in section
1362(d)(3)(D)) that exceeds 25 percent of the gross receipts of
such corporation for such taxable year."
Subsec. (c)(5). Pub. L. 99-514, Sec. 1854(a)(10), substituted
"sold" for "acquired" in heading, and in text substituted "sale of
securities" for "acquisition of securities" and inserted "to an
employee stock ownership plan or eligible worker-owned
cooperative".
Subsec. (c)(7). Pub. L. 99-514, Sec. 1854(a)(6)(A), added par.
(7).
Subsec. (d). Pub. L. 99-514, Sec. 1854(a)(7), inserted last
sentence.
Subsecs. (e), (f). Pub. L. 99-514, Sec. 1854(a)(8)(A), added
subsec. (e) and redesignated former subsec. (e) as (f).
EFFECTIVE DATE OF 1997 AMENDMENT
Section 968(b) of Pub. L. 105-34 provided that: "The amendment
made by this section [amending this section] shall apply to sales
after December 31, 1997."
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 1316(d)(3) of Pub. L. 104-188 applicable to
taxable years beginning after Dec. 31, 1997, see section 1316(f) of
Pub. L. 104-188, set out as a note under section 170 of this title.
Amendment by section 1311(b)(3) of Pub. L. 104-188 applicable to
taxable years beginning after Dec. 31, 1996, see section 1317(a) of
Pub. L. 104-188, set out as a note under section 641 of this title.
Amendment by section 1616(b)(13) of Pub. L. 104-188 applicable to
taxable years beginning after Dec. 31, 1995, see section 1616(c) of
Pub. L. 104-188, set out as a note under section 593 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Section 7303(b) of Pub. L. 101-239 provided that: "The amendment
made by this section [amending this section] shall apply to sales
after July 10, 1989."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1854(a)(1), (2)(A), (4), (5)(A), (7), (10),
(11) of Pub. L. 99-514 effective, except as otherwise provided, as
if included in the provisions of the Tax Reform Act of 1984, Pub.
L. 98-369, div. A, to which such amendment relates, see section
1881 of Pub. L. 99-514, set out as a note under section 48 of this
title.
Amendment by section 1854(a)(3)(B) of Pub. L. 99-514 applicable
to sales of securities after Oct. 22, 1986, except that a taxpayer
or executor may elect to have section 1042(b)(3) of the Internal
Revenue Code of 1954 (as in effect before the amendment by section
1854(a)(3)(B) of Pub. L. 99-514) apply to sales before Oct. 22,
1986, as if section 1042(b)(3) included the last sentence of
section 409(n)(1) of this title (as added by section 1854(a)(3)(A)
of Pub. L. 99-514), see section 1854(a)(3)(C) of Pub. L. 99-514, as
amended, set out as a note under section 409 of this title.
Section 1854(a)(6)(B)-(D) of Pub. L. 99-514 provided that:
"(B) The amendment made by subparagraph (A) [amending this
section] shall apply to sales after March 28, 1985, except that
such amendment shall not apply to sales made before July 1, 1985,
if made pursuant to a binding contract in effect on March 28, 1985,
and at all times thereafter.
"(C) The amendment made by subparagraph (A) shall not apply to
any sale occurring on December 20, 1985, with respect to which -
"(i) a commitment letter was issued by a bank on October 31,
1984, and
"(ii) a final purchase agreement was entered into on November
5, 1985.
"(D) In the case of a sale on September 27, 1985, with respect to
which a preliminary commitment letter was issued by a bank on April
10, 1985, and with respect to which a commitment letter was issued
by a bank on June 28, 1985, the amendment made by subparagraph (A)
shall apply but such sale shall be treated as having occurred on
September 27, 1986."
Section 1854(a)(8)(B) of Pub. L. 99-514 provided that: "The
amendment made by subparagraph (A) [amending this section] shall
apply to dispositions after the date of the enactment of this Act
[Oct. 22, 1986], in taxable years ending after such date."
Amendment by section 1854(a)(9)(B) of Pub. L. 99-514 applicable
to sales of securities after Oct. 22, 1986, see section
1854(a)(9)(D) of Pub. L. 99-514, set out as an Effective Date note
under section 4979A of this title.
Amendment by section 1854(f)(3)(B) of Pub. L. 99-514 effective
Oct. 22, 1986, see section 1854(f)(4)(A) of Pub. L. 99-514, set out
as a note under section 409 of this title.
EFFECTIVE DATE
Section 541(c) of Pub. L. 98-369 provided that: "The amendments
made by this section [enacting this section and amending sections
1016 and 1223 of this title] shall apply to sales of securities in
taxable years beginning after the date of enactment of this Act
[July 18, 1984]."
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
LINE ITEM VETO
Section 968 of Pub. L. 105-34, amending this section and enacting
provisions set out as a note above, was subject to line item veto
by the President, Cancellation No. 97-2, signed Aug. 11, 1997, 62
F.R. 43267, Aug. 12, 1997. For decision holding line item veto
unconstitutional, see Clinton v. City of New York, 524 U.S. 417,
118 S.Ct. 2091, 141 L.Ed.2d 393 (1998).
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
OWNERSHIP OF STOCK OPTIONS AS OWNERSHIP OF STOCK; EMPLOYEE
OWNERSHIP OF STOCK AFTER SALE
Section 1854(a)(2)(B) of Pub. L. 99-514 provided that:
"(i) The requirement that section 1042(b) of the Internal Revenue
Code of 1954 [now 1986] shall be applied with regard to section
318(a)(4) of such Code shall apply to sales after May 6, 1986.
"(ii) In the case of sales after July 18, 1984, and before the
date of the enactment of this Act [Oct. 22, 1986], paragraph (2) of
section 1042(b) of such Code shall apply as if it read as follows:
" '(2) Employees must own 30 percent of stock after sale. - The
plan or cooperative referred to in paragraph (1) owns,
immediately after the sale, at least 30 percent of the employer
securities or 30 percent of the value of employer securities
(within the meaning of section 409(1)) outstanding at the time of
sale.' "
REPLACEMENT PERIOD FOR CERTAIN SECURITIES
Section 1854(a)(5)(B) of Pub. L. 99-514 provided that: "If -
"(i) before January 1, 1987, the taxpayer acquired any security
(as defined in section 165(g)(2) of the Internal Revenue Code of
1954 [now 1986]) issued by a domestic corporation or by any State
or political subdivision thereof,
"(ii) the taxpayer treated such security as qualified
replacement property for purposes of section 1042 of such Code,
and
"(iii) such property does not meet the requirements of section
1042(c)(4) of such Code (as amended by subparagraph (A)),
then, with respect to so much of any gain which the taxpayer
treated as not recognized under section 1042(a) by reason of the
acquisition of such property, the replacement period for purposes
of such section shall not expire before January 1, 1987."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 409, 1016, 1223, 4978,
4979A of this title.
-End-
-CITE-
26 USC Sec. 1043 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART III - COMMON NONTAXABLE EXCHANGES
-HEAD-
Sec. 1043. Sale of property to comply with conflict-of-interest
requirements
-STATUTE-
(a) Nonrecognition of gain
If an eligible person sells any property pursuant to a
certificate of divestiture, at the election of the taxpayer, gain
from such sale shall be recognized only to the extent that the
amount realized on such sale exceeds the cost (to the extent not
previously taken into account under this subsection) of any
permitted property purchased by the taxpayer during the 60-day
period beginning on the date of such sale.
(b) Definitions
For purposes of this section -
(1) Eligible person
The term "eligible person" means -
(A) an officer or employee of the executive branch of the
Federal Government, but does not mean a special Government
employee as defined in section 202 of title 18, United States
Code, and
(B) any spouse or minor or dependent child whose ownership of
any property is attributable under any statute, regulation,
rule, or executive order referred to in paragraph (2) to a
person referred to in subparagraph (A).
(2) Certificate of divestiture
The term "certificate of divestiture" means any written
determination -
(A) that states that divestiture of specific property is
reasonably necessary to comply with any Federal conflict of
interest statute, regulation, rule, or executive order
(including section 208 of title 18, United States Code), or
requested by a congressional committee as a condition of
confirmation,
(B) that has been issued by the President or the Director of
the Office of Government Ethics, and
(C) that identifies the specific property to be divested.
(3) Permitted property
The term "permitted property" means any obligation of the
United States or any diversified investment fund approved by
regulations issued by the Office of Government Ethics.
(4) Purchase
The taxpayer shall be considered to have purchased any
permitted property if, but for subsection (c), the unadjusted
basis of such property would be its cost within the meaning of
section 1012.
(5) Special rule for trusts
For purposes of this section, the trustee of a trust shall be
treated as an eligible person with respect to property which is
held in the trust if -
(A) any person referred to in paragraph (1)(A) has a
beneficial interest in the principal or income of the trust, or
(B) any person referred to in paragraph (1)(B) has a
beneficial interest in the principal or income of the trust and
such interest is attributable under any statute, regulation,
rule, or executive order referred to in paragraph (2) to a
person referred to in paragraph (1)(A).
(c) Basis adjustments
If gain from the sale of any property is not recognized by reason
of subsection (a), such gain shall be applied to reduce (in the
order acquired) the basis for determining gain or loss of any
permitted property which is purchased by the taxpayer during the
60-day period described in subsection (a).
-SOURCE-
(Added Pub. L. 101-194, title V, Sec. 502(a), Nov. 30, 1989, 103
Stat. 1754; amended Pub. L. 101-280, Sec. 6(a)(1), May 4, 1990, 104
Stat. 160; Pub. L. 101-508, title XI, Sec. 11703(a)(1), Nov. 5,
1990, 104 Stat. 1388-516.)
-MISC1-
AMENDMENTS
1990 - Subsec. (a). Pub. L. 101-508 substituted "to the extent
not previously taken into account under this subsection" for
"reduced by any basis adjustment under subsection (c) attributable
to a prior sale".
Subsec. (b)(5). Pub. L. 101-280 added par. (5).
EFFECTIVE DATE OF 1990 AMENDMENTS
Section 11703(a)(2) of Pub. L. 101-508 provided that: "The
amendment made by paragraph (1) [amending this section] shall apply
to sales after November 30, 1989."
Section 6(a)(3) of Pub. L. 101-280 provided that: "The amendment
made by paragraph (1) [amending this section] and the provisions of
paragraph (2) [set out below] shall apply to sales after November
30, 1989."
EFFECTIVE DATE
Section applicable to sales after Nov. 30, 1989, see section
502(c) of Pub. L. 101-194, set out as an Effective Date of 1989
Amendment note under section 1016 of this title.
PROPERTY SOLD BEFORE JUNE 19, 1990
Section 6(a)(2) of Pub. L. 101-280 provided that:
"(A) For purposes of section 1043 of such Code -
"(i) any property sold before June 19, 1990, shall be treated
as sold pursuant to a certificate of divestiture (as defined in
subsection (b)(2) thereof) if such a certificate is issued with
respect to such sale before such date, and
"(ii) in any such case, the 60-day period referred to in
subsection (a) thereof shall not expire before the end of the
60-day period beginning on the date on which the certificate of
divestiture was issued.
"(B) Notwithstanding subparagraph (A), section 1043 of such Code
shall not apply to any sale before April 19, 1990, unless -
"(i) the sale was made in order to comply with an ethics
agreement or pursuant to specific direction from the appropriate
agency or confirming committee, and
"(ii) the justification for the sale meets the criteria set
forth in subsection (b)(2)(A) thereof as implemented by the
interim regulations implementing such section 1043, published on
April 18, 1990."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1016, 1223 of this title;
title 5 section 3704.
-End-
-CITE-
26 USC Sec. 1044 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART III - COMMON NONTAXABLE EXCHANGES
-HEAD-
Sec. 1044. Rollover of publicly traded securities gain into
specialized small business investment companies
-STATUTE-
(a) Nonrecognition of gain
In the case of the sale of any publicly traded securities with
respect to which the taxpayer elects the application of this
section, gain from such sale shall be recognized only to the extent
that the amount realized on such sale exceeds -
(1) the cost of any common stock or partnership interest in a
specialized small business investment company purchased by the
taxpayer during the 60-day period beginning on the date of such
sale, reduced by
(2) any portion of such cost previously taken into account
under this section.
This section shall not apply to any gain which is treated as
ordinary income for purposes of this subtitle.
(b) Limitations
(1) Limitation on individuals
In the case of an individual, the amount of gain which may be
excluded under subsection (a) for any taxable year shall not
exceed the lesser of -
(A) $50,000, or
(B) $500,000, reduced by the amount of gain excluded under
subsection (a) for all preceding taxable years.
(2) Limitation on C corporations
In the case of a C corporation, the amount of gain which may be
excluded under subsection (a) for any taxable year shall not
exceed the lesser of -
(A) $250,000, or
(B) $1,000,000, reduced by the amount of gain excluded under
subsection (a) for all preceding taxable years.
(3) Special rules for married individuals
For purposes of this subsection -
(A) Separate returns
In the case of a separate return by a married individual,
paragraph (1) shall be applied by substituting "$25,000" for
"$50,000" and "$250,000" for "$500,000".
(B) Allocation of gain
In the case of any joint return, the amount of gain excluded
under subsection (a) for any taxable year shall be allocated
equally between the spouses for purposes of applying this
subsection to subsequent taxable years.
(C) Marital status
For purposes of this subsection, marital status shall be
determined under section 7703.
(4) Special rules for C corporation
For purposes of this subsection -
(A) all corporations which are members of the same controlled
group of corporations (within the meaning of section 52(a))
shall be treated as 1 taxpayer, and
(B) any gain excluded under subsection (a) by a predecessor
of any C corporation shall be treated as having been excluded
by such C corporation.
(c) Definitions and special rules
For purposes of this section -
(1) Publicly traded securities
The term "publicly traded securities" means securities which
are traded on an established securities market.
(2) Purchase
The taxpayer shall be considered to have purchased any property
if, but for subsection (d), the unadjusted basis of such property
would be its cost within the meaning of section 1012.
(3) Specialized small business investment company
The term "specialized small business investment company" means
any partnership or corporation which is licensed by the Small
Business Administration under section 301(d) of the Small
Business Investment Act of 1958 (as in effect on May 13, 1993).
(4) Certain entities not eligible
This section shall not apply to any estate, trust, partnership,
or S corporation.
(d) Basis adjustments
If gain from any sale is not recognized by reason of subsection
(a), such gain shall be applied to reduce (in the order acquired)
the basis for determining gain or loss of any common stock or
partnership interest in any specialized small business investment
company which is purchased by the taxpayer during the 60-day period
described in subsection (a). This subsection shall not apply for
purposes of section 1202.
-SOURCE-
(Added Pub. L. 103-66, title XIII, Sec. 13114(a), Aug. 10, 1993,
107 Stat. 430; amended Pub. L. 104-188, title I, Sec. 1703(a), Aug.
20, 1996, 110 Stat. 1875.)
-REFTEXT-
REFERENCES IN TEXT
Section 301(d) of the Small Business Investment Act of 1958,
referred to in subsec. (c)(3), was classified to section 681(d) of
Title 15, Commerce and Trade, prior to repeal by Pub. L. 104-208,
div. D, title II, Sec. 208(b)(3)(A), Sept. 30, 1996, 110 Stat.
3009-742.
-MISC1-
AMENDMENTS
1996 - Subsec. (c)(2). Pub. L. 104-188 reenacted heading without
change and amended text generally. Prior to amendment, text read as
follows: "The term 'purchase' has the meaning given such term by
section 1043(b)(4)."
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by Pub. L. 104-188 effective as if included in the
provision of the Revenue Reconciliation Act of 1993, Pub. L.
103-66, Secs. 13001-13444, to which such amendment relates, see
section 1703(o) of Pub. L. 104-188, set out as a note under section
39 of this title.
EFFECTIVE DATE
Section applicable to sales on or after Aug. 10, 1993, in taxable
years ending on or after such date, see section 13114(d) of Pub. L.
103-66, set out as an Effective Date of 1993 Amendment note under
section 1016 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 45D, 1016 of this title.
-End-
-CITE-
26 USC Sec. 1045 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART III - COMMON NONTAXABLE EXCHANGES
-HEAD-
Sec. 1045. Rollover of gain from qualified small business stock to
another qualified small business stock
-STATUTE-
(a) Nonrecognition of gain
In the case of any sale of qualified small business stock held by
a taxpayer other than a corporation for more than 6 months and with
respect to which such taxpayer elects the application of this
section, gain from such sale shall be recognized only to the extent
that the amount realized on such sale exceeds -
(1) the cost of any qualified small business stock purchased by
the taxpayer during the 60-day period beginning on the date of
such sale, reduced by
(2) any portion of such cost previously taken into account
under this section.
This section shall not apply to any gain which is treated as
ordinary income for purposes of this title.
(b) Definitions and special rules
For purposes of this section -
(1) Qualified small business stock
The term "qualified small business stock" has the meaning given
such term by section 1202(c).
(2) Purchase
A taxpayer shall be treated as having purchased any property
if, but for paragraph (3), the unadjusted basis of such property
in the hands of the taxpayer would be its cost (within the
meaning of section 1012).
(3) Basis adjustments
If gain from any sale is not recognized by reason of subsection
(a), such gain shall be applied to reduce (in the order acquired)
the basis for determining gain or loss of any qualified small
business stock which is purchased by the taxpayer during the
60-day period described in subsection (a).
(4) Holding period
For purposes of determining whether the nonrecognition of gain
under subsection (a) applies to stock which is sold -
(A) the taxpayer's holding period for such stock and the
stock referred to in subsection (a)(1) shall be determined
without regard to section 1223, and
(B) only the first 6 months of the taxpayer's holding period
for the stock referred to in subsection (a)(1) shall be taken
into account for purposes of applying section 1202(c)(2).
(5) Certain rules to apply
Rules similar to the rules of subsections (f), (g), (h), (i),
(j), and (k) of section 1202 shall apply.
-SOURCE-
(Added Pub. L. 105-34, title III, Sec. 313(a), Aug. 5, 1997, 111
Stat. 841; amended Pub. L. 105-206, title VI, Sec. 6005(f), July
22, 1998, 112 Stat. 806.)
-MISC1-
AMENDMENTS
1998 - Subsec. (a). Pub. L. 105-206, Sec. 6005(f)(1), in
introductory provisions, substituted "a taxpayer other than a
corporation" for "an individual" and "such taxpayer" for "such
individual".
Subsec. (b)(5). Pub. L. 105-206, Sec. 6005(f)(2), added par. (5).
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by Pub. L. 105-206 effective, except as otherwise
provided, as if included in the provisions of the Taxpayer Relief
Act of 1997, Pub. L. 105-34, to which such amendment relates, see
section 6024 of Pub. L. 105-206, set out as a note under section 1
of this title.
EFFECTIVE DATE
Section applicable to sales after Aug. 5, 1997, see section
313(c) of Pub. L. 105-34, set out as an Effective Date of 1997
Amendment note under section 1016 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1016, 1223 of this title.
-End-
-CITE-
26 USC PART IV - SPECIAL RULES 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART IV - SPECIAL RULES
-HEAD-
PART IV - SPECIAL RULES
-MISC1-
Sec.
1051. Property acquired during affiliation.
1052. Basis established by the Revenue Act of 1932 or 1934
or by the Internal Revenue Code of 1939.
1053. Property acquired before March 1, 1913.
1054. Certain stock of Federal National Mortgage
Association.
1055. Redeemable ground rents.
1056. Basis limitation for player contracts transferred in
connection with the the sale of a franchise.
[1057. Repealed.]
1058. Transfers of securities under certain agreements.
1059. Corporate shareholder's basis in stock reduced by
nontaxed portion of extraordinary dividends.
1059A. Limitation on taxpayer's basis or inventory cost in
property imported from related persons.
1060. Special allocation rules for certain asset
acquisitions.
1061. Cross references.
AMENDMENTS
1997 - Pub. L. 105-34, title XI, Sec. 1131(c)(5), Aug. 5, 1997,
111 Stat. 980, struck out item 1057 "Election to treat transfer to
foreign trust, etc., as taxable exchange".
1986 - Pub. L. 99-514, title VI, Sec. 641(b), title XII, Sec.
1248(b), Oct. 22, 1986, 100 Stat. 2283, 2584, added items 1059A and
1060 and renumbered former item 1060 as 1061.
1984 - Pub. L. 98-369, div. A, title I, Sec. 53(d), July 18,
1984, 98 Stat. 568, added item 1059 and renumbered former item 1059
as 1060.
1978 - Pub. L. 95-345, Sec. 2(d)(2), Aug. 15, 1978, 92 Stat. 483,
added item 1058 and renumbered former item 1058 as 1059.
1976 - Pub. L. 94-455, title II, Sec. 212(a)(2), title X,
1015(c), Oct. 4, 1976, 90 Stat. 1546, 1618, added items 1056 and
1057 and renumbered former item 1056 as 1058.
1963 - Pub. L. 88-9, Sec. 1(d), Apr. 10, 1963, 77 Stat. 8, added
item 1055 and renumbered former item 1055 as 1056.
1960 - Pub. L. 86-779, Sec. 8(c), Sept. 14, 1960, 74 Stat. 1003,
renumbered former item 1054 as 1055 and added new item 1054.
-End-
-CITE-
26 USC Sec. 1051 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART IV - SPECIAL RULES
-HEAD-
Sec. 1051. Property acquired during affiliation
-STATUTE-
In the case of property acquired by a corporation, during a
period of affiliation, from a corporation with which it was
affiliated, the basis of such property, after such period of
affiliation, shall be determined, in accordance with regulations
prescribed by the Secretary, without regard to inter-company
transactions in respect of which gain or loss was not recognized.
For purposes of this section, the term "period of affiliation"
means the period during which such corporations were affiliated
(determined in accordance with the law applicable thereto) but does
not include any taxable year beginning on or after January 1, 1922,
unless a consolidated return was made, nor any taxable year after
the taxable year 1928.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 310; Pub. L. 94-455, title XIX,
Secs. 1901(a)(131), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1786,
1834.)
-MISC1-
AMENDMENTS
1976 - Pub. L. 94-455, Sec. 1901(a)(131), struck out last two
sentences relating to the basis and adjustment of the basis of
corporate property where a consolidated return was filed.
Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out "or his delegate"
after "Secretary".
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(131) of Pub. L. 94-455 effective for
taxable years beginning after Dec. 31, 1976, see section 1901(d) of
Pub. L. 94-455, set out as a note under section 2 of this title.
-End-
-CITE-
26 USC Sec. 1052 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART IV - SPECIAL RULES
-HEAD-
Sec. 1052. Basis established by the Revenue Act of 1932 or 1934 or
by the Internal Revenue Code of 1939
-STATUTE-
(a) Revenue Act of 1932
If the property was acquired, after February 28, 1913, in any
taxable year beginning before January 1, 1934, and the basis
thereof, for purposes of the Revenue Act of 1932 was prescribed by
section 113(a)(6), (7), or (9) of such Act (47 Stat. 199), then for
purposes of this subtitle the basis shall be the same as the basis
therein prescribed in the Revenue Act of 1932.
(b) Revenue Act of 1934
If the property was acquired, after February 28, 1913, in any
taxable year beginning before January 1, 1936, and the basis
thereof, for purposes of the Revenue Act of 1934, was prescribed by
section 113(a)(6), (7), or (8) of such Act (48 Stat. 706), then for
purposes of this subtitle the basis shall be the same as the basis
therein prescribed in the Revenue Act of 1934.
(c) Internal Revenue Code of 1939
If the property was acquired, after February 28, 1913, in a
transaction to which the Internal Revenue Code of 1939 applied, and
the basis thereof, for purposes of the Internal Revenue Code of
1939, was prescribed by section 113(a)(6), (7), (8), (13), (15),
(18), (19), or (23) of such code, then for purposes of this
subtitle the basis shall be the same as the basis therein
prescribed in the Internal Revenue Code of 1939.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 310.)
-REFTEXT-
REFERENCES IN TEXT
Revenue Act of 1932, referred to in section catchline and subsec.
(a), is act June 6, 1932, ch. 209, 47 Stat. 169. For complete
classification of the Act to the Code, see Tables.
Revenue Act of 1934, referred to in section catchline and subsec.
(b), is act May 10, 1934, ch. 277, 48 Stat. 680. For complete
classification of this Act to the Code, see Tables.
The Internal Revenue Code of 1939, referred to in section
catchline and subsec. (c), is act Feb. 10, 1939, ch. 2, 53 Stat. 1,
as amended. Prior to the enactment of the Internal Revenue Code of
1986 [formerly I.R.C. 1954], the 1939 Code was classified to former
Title 26, Internal Revenue Code. For Table comparisons of the 1939
Code to the 1986 Code, see table I preceding section 1 of this
title.
Section 113 of the Internal Revenue Code of 1939, referred to in
subsec. (c), was classified to section 113 of former Title 26,
Internal Revenue Code. Section 113 was repealed by section
7851(a)(1)(A) of this title. For table of comparisons of the 1939
Code to the 1986 Code, see Table I preceding section 1 of this
title. See, also, section 7851(e) of this title for provision that
references in the 1986 Code to a provision of the 1939 Code, not
then applicable, shall be deemed a reference to the corresponding
provision of the 1986 Code, which is then applicable.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 307, 1223 of this title.
-End-
-CITE-
26 USC Sec. 1053 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART IV - SPECIAL RULES
-HEAD-
Sec. 1053. Property acquired before March 1, 1913
-STATUTE-
In the case of property acquired before March 1, 1913, if the
basis otherwise determined under this subtitle, adjusted (for the
period before March 1, 1913) as provided in section 1016, is less
than the fair market value of the property as of March 1, 1913,
then the basis for determining gain shall be such fair market
value. In determining the fair market value of stock in a
corporation as of March 1, 1913, due regard shall be given to the
fair market value of the assets of the corporation as of that date.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 311; Pub. L. 85-866, title I,
Sec. 47, Sept. 2, 1958, 72 Stat. 1642.)
-MISC1-
AMENDMENTS
1958 - Pub. L. 85-866 substituted "subtitle" for "part".
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by Pub. L. 85-866 applicable to taxable years beginning
after Dec. 31, 1953, and ending after Aug. 16, 1954, see section
1(c)(1) of Pub. L. 85-866, set out as a note under section 165 of
this title.
-End-
-CITE-
26 USC Sec. 1054 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART IV - SPECIAL RULES
-HEAD-
Sec. 1054. Certain stock of Federal National Mortgage Association
-STATUTE-
In the case of a share of stock issued pursuant to section 303(c)
of the Federal National Mortgage Association Charter Act (12
U.S.C., sec. 1718), the basis of such share in the hands of the
initial holder shall be an amount equal to the capital
contributions evidenced by such share reduced by the amount (if
any) required by section 162(d) to be treated (with respect to such
share) as ordinary and necessary expenses paid or incurred in
carrying on a trade or business.
-SOURCE-
(Added Pub. L. 86-779, Sec. 8(b), Sept. 14, 1960, 74 Stat. 1003.)
-MISC1-
PRIOR PROVISIONS
A prior section 1054 was renumbered section 1061 of this title.
EFFECTIVE DATE
Section applicable with respect to taxable years beginning after
Dec. 31, 1959, see section 8(d) of Pub. L. 86-779, set out as an
Effective Date of 1960 Amendment note under section 162 of this
title.
-End-
-CITE-
26 USC Sec. 1055 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART IV - SPECIAL RULES
-HEAD-
Sec. 1055. Redeemable ground rents
-STATUTE-
(a) Character
For purposes of this subtitle -
(1) a redeemable ground rent shall be treated as being in the
nature of a mortgage, and
(2) real property held subject to liabilities under a
redeemable ground rent shall be treated as held subject to
liabilities under a mortgage.
(b) Application of subsection (a)
(1) In general
Subsection (a) shall take effect on the day after the date of
the enactment of this section and shall apply with respect to
taxable years ending after such date of enactment.
(2) Basis of holder
In determining the basis of real property held subject to
liabilities under a redeemable ground rent, subsection (a) shall
apply whether such real property was acquired before or after the
enactment of this section.
(3) Basis of reserved redeemable ground rent
In the case of a redeemable ground rent reserved or created on
or before the date of the enactment of this section in connection
with a transfer of the right to hold real property subject to
liabilities under such ground rent, the basis of such ground rent
after such date in the hands of the person who reserved or
created the ground rent shall be the amount taken into account in
respect of such ground rent for Federal income tax purposes as
consideration for the disposition of such real property. If no
such amount was taken into account, such basis shall be
determined as if this section had not been enacted.
(c) Redeemable ground rent defined
For purposes of this subtitle, the term "redeemable ground rent"
means only a ground rent with respect to which -
(1) there is a lease of land which is assignable by the lessee
without the consent of the lessor and which (together with
periods for which the lease may be renewed at the option of the
lessee) is for a term in excess of 15 years,
(2) the leaseholder has a present or future right to terminate,
and to acquire the entire interest of the lessor in the land, by
payment of a determined or determinable amount, which right
exists by virtue of State or local law and not because of any
private agreement or privately created condition, and
(3) the lessor's interest in the land is primarily a security
interest to protect the rental payments to which the lessor is
entitled under the lease.
(d) Cross reference
For treatment of rentals under redeemable ground rents as
interest, see section 163(c).
-SOURCE-
(Added Pub. L. 88-9, Sec. 1(b), Apr. 10, 1963, 77 Stat. 7.)
-REFTEXT-
REFERENCES IN TEXT
Date of the enactment of this section, referred to in subsec.
(b)(1), (3), means Apr. 10, 1963, the date of approval of Pub. L.
88-9.
-MISC1-
PRIOR PROVISIONS
A prior section 1055 was renumbered section 1061 of this title.
EFFECTIVE DATE
Section 2 of Pub. L. 88-9 provided that: "The amendments made by
subsection (a) of the first section of this Act [amending section
163 of this title] shall take effect as of January 1, 1962, and
shall apply with respect to taxable years ending on or after such
date. The amendments made by subsection (b) of the first section of
this Act [enacting this section] shall take effect on the day after
the date of the enactment of this Act [Apr. 10, 1963] and shall
apply with respect to taxable years ending after such date of
enactment."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 163, 7701 of this title.
-End-
-CITE-
26 USC Sec. 1056 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART IV - SPECIAL RULES
-HEAD-
Sec. 1056. Basis limitation for player contracts transferred in
connection with the sale of a franchise
-STATUTE-
(a) General rule
If a franchise to conduct any sports enterprise is sold or
exchanged, and if, in connection with such sale or exchange, there
is a transfer of a contract for the services of an athlete, the
basis of such contract in the hands of the transferee shall not
exceed the sum of -
(1) the adjusted basis of such contract in the hands of the
transferor immediately before the transfer, plus
(2) the gain (if any) recognized by the transferor on the
transfer of such contract.
(b) Exceptions
Subsection (a) shall not apply -
(1) to an exchange described in section 1031 (relating to
exchange of property held for productive use or investment), and
(2) to property in the hands of a person acquiring the property
from a decedent or to whom the property passed from a decedent
(within the meaning of section 1014(a)).
(c) Transferor required to furnish certain information
Under regulations prescribed by the Secretary, the transfer
shall, at the times and in the manner provided in such regulations,
furnish to the Secretary and to the transferee the following
information:
(1) the amount which the transferor believes to be the adjusted
basis referred to in paragraph (1) of subsection (a),
(2) the amount which the transferor believes to be the gain
referred to in paragraph (2) of subsection (a), and
(3) any subsequent modification of either such amount.
To the extent provided in such regulations, the amounts furnished
pursuant to the preceding sentence shall be binding on the
transferor and on the transferee.
(d) Presumption as to amount allocable to player contracts
In the case of any sale or exchange described in subsection (a),
it shall be presumed that not more than 50 percent of the
consideration is allocable to contracts for the services of
athletes unless it is established to the satisfaction of the
Secretary that a specified amount in excess of 50 percent is
properly allocable to such contracts. Nothing in the preceding
sentence shall give rise to a presumption that an allocation of
less than 50 percent of the consideration to contracts for the
services of athletes is a proper allocation.
-SOURCE-
(Added Pub. L. 94-455, title II, Sec. 212(a)(1), Oct. 4, 1976, 90
Stat. 1545; amended Pub. L. 99-514, title VI, Sec. 631(e)(13), Oct.
22, 1986, 100 Stat. 2275.)
-MISC1-
PRIOR PROVISIONS
A prior section 1056 was renumbered section 1061 of this title.
AMENDMENTS
1986 - Subsec. (a). Pub. L. 99-514 struck out "For purposes of
this section, gain realized by the transferor on the transfer of
such contract, but not recognized by reason of section 337(a),
shall be treated as recognized to the extent recognized by the
transferor's shareholders."
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 applicable to any distribution in
complete liquidation, and any sale or exchange, made by a
corporation after July 31, 1986, unless such corporation is
completely liquidated before Jan. 1, 1987, any transaction
described in section 338 of this title for which the acquisition
date occurs after Dec. 31, 1986, and any distribution, not in
complete liquidation, made after Dec. 31, 1986, with exceptions and
special and transitional rules, see section 633 of Pub. L. 99-514,
set out as an Effective Date note under section 336 of this title.
EFFECTIVE DATE
Section 212(a)(3) of Pub. L. 94-455 provided that: "The
amendments made by this subsection [enacting this section and
renumbering former section 1056 as 1057] apply to sales or
exchanges of franchises after December 31, 1975, in taxable years
ending after such date."
-End-
-CITE-
26 USC Sec. 1057 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART IV - SPECIAL RULES
-HEAD-
[Sec. 1057. Repealed. Pub. L. 105-34, title XI, Sec. 1131(c)(2),
Aug. 5, 1997, 111 Stat. 980]
-MISC1-
Section, added Pub. L. 94-455, title X, Sec. 1015(c), Oct. 4,
1976, 90 Stat. 1618, related to election to treat transfer to
foreign trust, etc., as taxable exchange.
A prior section 1057 was renumbered section 1061 of this title.
-End-
-CITE-
26 USC Sec. 1058 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART IV - SPECIAL RULES
-HEAD-
Sec. 1058. Transfers of securities under certain agreements
-STATUTE-
(a) General rule
In the case of a taxpayer who transfers securities (as defined in
section 1236(c)) pursuant to an agreement which meets the
requirements of subsection (b), no gain or loss shall be recognized
on the exchange of such securities by the taxpayer for an
obligation under such agreement, or on the exchange of rights under
such agreement by that taxpayer for securities identical to the
securities transferred by that taxpayer.
(b) Agreement requirements
In order to meet the requirements of this subsection, an
agreement shall -
(1) provide for the return to the transferor of securities
identical to the securities transferred;
(2) require that payments shall be made to the transferor of
amounts equivalent to all interest, dividends, and other
distributions which the owner of the securities is entitled to
receive during the period beginning with the transfer of the
securities by the transferor and ending with the transfer of
identical securities back to the transferor;
(3) not reduce the risk of loss or opportunity for gain of the
transferor of the securities in the securities transferred; and
(4) meet such other requirements as the Secretary may by
regulation prescribe.
(c) Basis
Property acquired by a taxpayer described in subsection (a), in a
transaction described in that subsection, shall have the same basis
as the property transferred by that taxpayer.
-SOURCE-
(Added Pub. L. 95-345, Sec. 2(d)(1), Aug. 15, 1978, 92 Stat. 482.)
-MISC1-
PRIOR PROVISIONS
A prior section 1058 was renumbered section 1061 of this title.
EFFECTIVE DATE
Section applicable with respect to amounts received after Dec.
31, 1976, as payments with respect to securities loans (as defined
in section 512(a)(5) of this title), and transfers of securities,
under agreements described in this section, occurring after such
date, see section 2(e) of Pub. L. 95-345, set out as an Effective
Date of 1978 Amendment note under section 509 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 512, 954 of this title.
-End-
-CITE-
26 USC Sec. 1059 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART IV - SPECIAL RULES
-HEAD-
Sec. 1059. Corporate shareholder's basis in stock reduced by
nontaxed portion of extraordinary dividends
-STATUTE-
(a) General rule
If any corporation receives any extraordinary dividend with
respect to any share of stock and such corporation has not held
such stock for more than 2 years before the dividend announcement
date -
(1) Reduction in basis
The basis of such corporation in such stock shall be reduced
(but not below zero) by the nontaxed portion of such dividends.
(2) Amounts in excess of basis
If the nontaxed portion of such dividends exceeds such basis,
such excess shall be treated as gain from the sale or exchange of
such stock for the taxable year in which the extraordinary
dividend is received.
(b) Nontaxed portion
For purposes of this section -
(1) In general
The nontaxed portion of any dividend is the excess (if any) of
-
(A) the amount of such dividend, over
(B) the taxable portion of such dividend.
(2) Taxable portion
The taxable portion of any dividend is -
(A) the portion of such dividend includible in gross income,
reduced by
(B) the amount of any deduction allowable with respect to
such dividend under section 243, 244, or 245.
(c) Extraordinary dividend defined
For purposes of this section -
(1) In general
The term "extraordinary dividend" means any dividend with
respect to a share of stock if the amount of such dividend equals
or exceeds the threshold percentage of the taxpayer's adjusted
basis in such share of stock.
(2) Threshold percentage
The term "threshold percentage" means -
(A) 5 percent in the case of stock which is preferred as to
dividends, and
(B) 10 percent in the case of any other stock.
(3) Aggregation of dividends
(A) Aggregation within 85-day period
All dividends -
(i) which are received by the taxpayer (or a person
described in subparagraph (C)) with respect to any share of
stock, and
(ii) which have ex-dividend dates within the same period of
85 consecutive days,
shall be treated as 1 dividend.
(B) Aggregation within 1 year where dividends exceed 20 percent
of adjusted basis
All dividends -
(i) which are received by the taxpayer (or a person
described in subparagraph (C)) with respect to any share of
stock, and
(ii) which have ex-dividend dates during the same period of
365 consecutive days,
shall be treated as extraordinary dividends if the aggregate of
such dividends exceeds 20 percent of the taxpayer's adjusted
basis in such stock (determined without regard to this
section).
(C) Substituted basis transactions
In the case of any stock, a person is described in this
subparagraph if -
(i) the basis of such stock in the hands of such person is
determined in whole or in part by reference to the basis of
such stock in the hands of the taxpayer, or
(ii) the basis of such stock in the hands of the taxpayer
is determined in whole or in part by reference to the basis
of such stock in the hands of such person.
(4) Fair market value determination
If the taxpayer establishes to the satisfaction of the
Secretary the fair market value of any share of stock as of the
day before the ex-dividend date, the taxpayer may elect to apply
paragraphs (1) and (3) by substituting such value for the
taxpayer's adjusted basis.
(d) Special rules
For purposes of this section -
(1) Time for reduction
Any reduction in basis under subsection (a)(1) shall be treated
as occurring at the beginning of the ex-dividend date of the
extraordinary dividend to which the reduction relates.
(2) Distributions in kind
To the extent any dividend consists of property other than
cash, the amount of such dividend shall be treated as the fair
market value of such property (as of the date of the
distribution) reduced as provided in section 301(b)(2).
(3) Determination of holding period
For purposes of determining the holding period of stock under
subsection (a), rules similar to the rules of paragraphs (3) and
(4) of section 246(c) shall apply; except that "2 years" shall be
substituted for the number of days specified in subparagraph (B)
(!1) of section 246(c)(3).
(4) Ex-dividend date
The term "ex-dividend date" means the date on which the share
of stock becomes ex-dividend.
(5) Dividend announcement date
The term "dividend announcement date" means, with respect to
any dividend, the date on which the corporation declares,
announces, or agrees to the amount or payment of such dividend,
whichever is the earliest.
(6) Exception where stock held during entire existence of
corporation
(A) In general
Subsection (a) shall not apply to any extraordinary dividend
with respect to any share of stock of a corporation if -
(i) such stock was held by the taxpayer during the entire
period such corporation was in existence, and
(ii) except as provided in regulations, no earnings and
profits of such corporation were attributable to transfers of
property from (or earnings and profits of) a corporation
which is not a qualified corporation.
(B) Qualified corporation
For purposes of subparagraph (A), the term "qualified
corporation" means any corporation (including a predecessor
corporation) -
(i) with respect to which the taxpayer holds directly or
indirectly during the entire period of such corporation's
existence at least the same ownership interest as the
taxpayer holds in the corporation distributing the
extraordinary dividend, and
(ii) which has no earnings and profits -
(I) which were earned by, or
(II) which are attributable to gain on property which
accrued during a period the corporation holding the
property was,
a corporation not described in clause (i).
(C) Application of paragraph
This paragraph shall not apply to any extraordinary dividend
to the extent such application is inconsistent with the
purposes of this section.
(e) Special rules for certain distributions
(1) Treatment of partial liquidations and certain redemptions
Except as otherwise provided in regulations -
(A) Redemptions
In the case of any redemption of stock -
(i) which is part of a partial liquidation (within the
meaning of section 302(e)) of the redeeming corporation,
(ii) which is not pro rata as to all shareholders, or
(iii) which would not have been treated (in whole or in
part) as a dividend if -
(I) any options had not been taken into account under
section 318(a)(4), or
(II) section 304(a) had not applied,
any amount treated as a dividend with respect to such
redemption shall be treated as an extraordinary dividend to
which paragraphs (1) and (2) of subsection (a) apply without
regard to the period the taxpayer held such stock. In the case
of a redemption described in clause (iii), only the basis in
the stock redeemed shall be taken into account under subsection
(a).
(B) Reorganizations, etc.
An exchange described in section 356 which is treated as a
dividend shall be treated as a redemption of stock for purposes
of applying subparagraph (A).
(2) Qualifying dividends
(A) In general
Except as provided in regulations, the term "extraordinary
dividend" does not include any qualifying dividend (within the
meaning of section 243).
(B) Exception
Subparagraph (A) shall not apply to any portion of a dividend
which is attributable to earnings and profits which -
(i) were earned by a corporation during a period it was not
a member of the affiliated group, or
(ii) are attributable to gain on property which accrued
during a period the corporation holding the property was not
a member of the affiliated group.
(3) Qualified preferred dividends
(A) In general
In the case of 1 or more qualified preferred dividends with
respect to any share of stock -
(i) this section shall not apply to such dividends if the
taxpayer holds such stock for more than 5 years, and
(ii) if the taxpayer disposes of such stock before it has
been held for more than 5 years, the aggregate reduction
under subsection (a)(1) with respect to such dividends shall
not be greater than the excess (if any) of -
(I) the qualified preferred dividends paid with respect
to such stock during the period the taxpayer held such
stock, over
(II) the qualified preferred dividends which would have
been paid during such period on the basis of the stated
rate of return.
(B) Rate of return
For purposes of this paragraph -
(i) Actual rate of return
The actual rate of return shall be the rate of return for
the period for which the taxpayer held the stock, determined
-
(I) by only taking into account dividends during such
period, and
(II) by using the lesser of the adjusted basis of the
taxpayer in such stock or the liquidation preference of
such stock.
(ii) Stated rate of return
The stated rate of return shall be the annual rate of the
qualified preferred dividend payable with respect to any
share of stock (expressed as a percentage of the amount
described in clause (i)(II)).
(C) Definitions and special rules
For purposes of this paragraph -
(i) Qualified preferred dividend
The term "qualified preferred dividend" means any fixed
dividend payable with respect to any share of stock which -
(I) provides for fixed preferred dividends payable not
less frequently than annually, and
(II) is not in arrears as to dividends at the time the
taxpayer acquires the stock.
Such term shall not include any dividend payable with respect
to any share of stock if the actual rate of return on such
stock exceeds 15 percent.
(ii) Holding period
In determining the holding period for purposes of
subparagraph (A)(ii), subsection (d)(3) shall be applied by
substituting "5 years" for "2 years".
(f) Treatment of dividends on certain preferred stock
(1) In general
Any dividend with respect to disqualified preferred stock shall
be treated as an extraordinary dividend to which paragraphs (1)
and (2) of subsection (a) apply without regard to the period the
taxpayer held the stock.
(2) Disqualified preferred stock
For purposes of this subsection, the term "disqualified
preferred stock" means any stock which is preferred as to
dividends if -
(A) when issued, such stock has a dividend rate which
declines (or can reasonably be expected to decline) in the
future,
(B) the issue price of such stock exceeds its liquidation
rights or its stated redemption price, or
(C) such stock is otherwise structured -
(i) to avoid the other provisions of this section, and
(ii) to enable corporate shareholders to reduce tax through
a combination of dividend received deductions and loss on the
disposition of the stock.
(g) Regulations
The Secretary shall prescribe such regulations as may be
appropriate to carry out the purposes of this section, including
regulations -
(1) providing for the application of this section in the case
of stock dividends, stock splits, reorganizations, and other
similar transactions, in the case of stock held by pass-thru
entities, and in the case of consolidated groups, and
(2) providing that the rules of subsection (f) shall apply in
the case of stock which is not preferred as to dividends in cases
where stock is structured to avoid the purposes of this section.
-SOURCE-
(Added Pub. L. 98-369, div. A, title I, Sec. 53(a), July 18, 1984,
98 Stat. 565; amended Pub. L. 99-514, title VI, Sec. 614(a)-(e),
Oct. 22, 1986, 100 Stat. 2251-2253; Pub. L. 100-647, title I, Sec.
1006(c), Nov. 10, 1988, 102 Stat. 3393; Pub. L. 101-239, title VII,
Sec. 7206(a), Dec. 19, 1989, 103 Stat. 2336; Pub. L. 105-34, title
X, Secs. 1011(a)-(c), 1013(b), title XVI, Sec. 1604(d)(1), Aug. 5,
1997, 111 Stat. 912, 913, 918, 1098; Pub. L. 105-206, title VI,
Sec. 6010(b), July 22, 1998, 112 Stat. 813.)
-REFTEXT-
REFERENCES IN TEXT
Section 246(c)(3) of this title, referred to in subsec. (d)(3),
was amended by Pub. L. 105-34, title X, Sec. 1015(b)(2), Aug. 5,
1997, 111 Stat. 922, by striking out subpar. (B) and redesignating
subpar. (C) as (B).
-MISC1-
PRIOR PROVISIONS
A prior section 1059 was renumbered section 1061 of this title.
AMENDMENTS
1998 - Subsec. (g)(1). Pub. L. 105-206 substituted ", in the case
of stock held by pass-thru entities, and in the case of
consolidated groups" for "and in the case of stock held by
pass-thru entities".
1997 - Subsec. (a)(2). Pub. L. 105-34, Sec. 1011(a), amended
heading and text of par. (2) generally. Prior to amendment, text
read as follows: "In addition to any gain recognized under this
chapter, there shall be treated as gain from the sale or exchange
of any stock for the taxable year in which the sale or disposition
of such stock occurs an amount equal to the aggregate nontaxed
portions of any extraordinary dividends with respect to such stock
which did not reduce the basis of such stock by reason of the
limitation on reducing basis below zero."
Subsec. (d)(1). Pub. L. 105-34, Sec. 1011(c), amended heading and
text of par. (1) generally. Prior to amendment, text read as
follows:
"(A) In general. - Except as provided in subparagraph (B), any
reduction in basis under subsection (a)(1) shall occur immediately
before any sale or disposition of the stock.
"(B) Special rule for computing extraordinary dividend. - In
determining a taxpayer's adjusted basis for purposes of subsection
(c)(1), any reduction in basis under subsection (a)(1) by reason of
a prior distribution which was an extraordinary dividend shall be
treated as occurring at the beginning of the ex-dividend date for
such distribution."
Subsec. (d)(3). Pub. L. 105-34, Sec. 1604(d)(1), substituted
"subsection (a)" for "subsection (a)(2)".
Subsec. (e)(1). Pub. L. 105-34, Sec. 1011(b), amended heading and
text of par. (1) generally. Prior to amendment, text read as
follows: "Except as otherwise provided in regulations, in the case
of any redemption of stock which is -
"(A) part of a partial liquidation (within the meaning of
section 302(e)) of the redeeming corporation, or
"(B) not pro rata as to all shareholders,
any amount treated as a dividend under section 301 with respect to
such redemption shall be treated as an extraordinary dividend to
which paragraphs (1) and (2) of subsection (a) apply without regard
to the period the taxpayer held such stock."
Subsec. (e)(1)(A)(iii). Pub. L. 105-34, Sec. 1013(b), amended cl.
(iii) generally. Prior to amendment, cl. (iii) read as follows:
"which would not have been treated (in whole or in part) as a
dividend if any options had not been taken into account under
section 318(a)(4)."
1989 - Subsecs. (f), (g). Pub. L. 101-239 added subsecs. (f) and
(g) and struck out former subsec. (f) which read as follows:
"Regulations. - The Secretary shall prescribe such regulations as
may be appropriate to carry out the purposes of this section,
including regulations providing for the application of this section
in the case of stock dividends, stock splits, reorganizations, and
other similar transactions and in the case of stock held by
pass-thru entities."
1988 - Subsec. (d)(5). Pub. L. 100-647, Sec. 1006(c)(2), inserted
"amount or" after "agrees to the".
Pub. L. 100-647, Sec. 1006(c)(1), redesignated par. (6) as (5)
and struck out former par. (5) which related to extension to
certain property distributions.
Subsec. (d)(6). Pub. L. 100-647, Sec. 1006(c)(3), amended par.
(6) generally. Prior to amendment, par. (6) read as follows:
"Subsection (a) shall not apply to any extraordinary dividend with
respect to any share of stock of a corporation if -
"(A) such stock was held by the taxpayer during the entire
period such corporation (and any precedessor [sic] corporation)
was in existence,
"(B) except as provided in regulations, the only earnings and
profits of such corporation were earnings and profits accumulated
by such corporation (or any predecessor corporation) during such
period, and
"(C) the application of this paragraph to such dividend is not
inconsistent with the purposes of this section."
Pub. L. 100-647, Sec. 1006(c)(1), redesignated par. (7) as (6).
Former par. (6) redesignated (5).
Subsec. (d)(7). Pub. L. 100-647, Sec. 1006(c)(1), redesignated
par. (7) as (6).
Subsec. (e)(1). Pub. L. 100-647, Sec. 1006(c)(4), substituted "to
which paragraphs (1) and (2) of subsection (a) apply without regard
to the period the taxpayer held such stock" for "for purposes of
this section (without regard to the holding period of the stock)".
Subsec. (e)(2). Pub. L. 100-647, Sec. 1006(c)(5), amended par.
(2) generally. Prior to amendment, par. (2) read as follows:
"Except as provided in regulations, the term 'extraordinary
dividend' shall not include any qualifying dividend (within the
meaning of section 243(b)(1))."
Subsec. (e)(3)(A). Pub. L. 100-647, Sec. 1006(c)(6), amended
subpar. (A) generally. Prior to amendment, subpar. (A) read as
follows: "A qualified preferred dividend shall be treated as an
extraordinary dividend -
"(i) only if the actual rate of return of the taxpayer on the
stock with respect to which such dividend was paid exceeds 15
percent, or
"(ii) if clause (i) does not apply, and the taxpayer disposes
of such stock before the taxpayer has held such stock for more
than 5 years, only to the extent the actual rate of return
exceeds the stated rate of return."
Subsec. (e)(3)(B). Pub. L. 100-647, Sec. 1006(c)(8)(A), which
directed the amendment of subpar. (B) "by striking out
'subparagraph (A)' and the material preceding clause (i) and
inserting in lieu thereof 'this paragraph' ", was executed by
striking out "subparagraph (A)" in the material preceding clause
(i) and inserting in lieu thereof "this paragraph", to reflect the
probable intent of Congress.
Subsec. (e)(3)(B)(ii). Pub. L. 100-647, Sec. 1006(c)(8)(B),
substituted "clause (i)(II)" for "subparagraph (B)(i)(II)".
Subsec. (e)(3)(C)(i). Pub. L. 100-647, Sec. 1006(c)(7), inserted
"fixed" before "dividend payable" in introductory provisions and
inserted at end "Such term shall not include any dividend payable
with respect to any share of stock if the actual rate of return on
such stock exceeds 15 percent."
Subsec. (f). Pub. L. 100-647, Sec. 1006(c)(9), inserted "and in
the case of stock held by pass-thru entities" after "other similar
transactions".
1986 - Subsec. (a). Pub. L. 99-514, Sec. 614(a)(1), amended
subsec. (a) generally. Prior to amendment, subsec. (a) read as
follows: "If any corporation -
"(1) receives an extraordinary dividend with respect to any
share of stock, and
"(2) sells or otherwise disposes of such stock before such
stock has been held for more than 1 year,
the basis of such corporation in such stock shall be reduced by the
nontaxed portion of such dividend. If the nontaxed portion of such
dividend exceeds such basis, such excess shall be treated as gain
from the sale or exchange of such stock."
Subsec. (c)(1). Pub. L. 99-514, Sec. 614(c)(2), struck out
"(determined without regard to this section)" after "such share of
stock".
Subsec. (c)(4). Pub. L. 99-514, Sec. 614(b), added par. (4).
Subsec. (d)(1). Pub. L. 99-514, Sec. 614(c)(1), amended par. (1)
generally. Prior to amendment, par. (1) read as follows: "Any
reduction in basis under subsection (a) by reason of any
distribution which is an extraordinary dividend shall occur at the
beginning of the ex-dividend date for such distribution."
Subsec. (d)(3). Pub. L. 99-514, Sec. 614(a)(3), substituted "2
years" for "1 year".
Subsec. (d)(6). Pub. L. 99-514, Sec. 614(a)(2), added par. (6).
Subsec. (d)(7). Pub. L. 99-514, Sec. 614(d), added par. (7).
Subsecs. (e), (f). Pub. L. 99-514, Sec. 614(e), added subsec. (e)
and redesignated former subsec. (e) as (f).
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by Pub. L. 105-206 effective, except as otherwise
provided, as if included in the provisions of the Taxpayer Relief
Act of 1997, Pub. L. 105-34, to which such amendment relates, see
section 6024 of Pub. L. 105-206, set out as a note under section 1
of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 1011(d) of Pub. L. 105-34 provided that:
"(1) In general. - The amendments made by this section [amending
this section] shall apply to distributions after May 3, 1995.
"(2) Transition rule. - The amendments made by this section shall
not apply to any distribution made pursuant to the terms of -
"(A) a written binding contract in effect on May 3, 1995, and
at all times thereafter before such distribution, or
"(B) a tender offer outstanding on May 3, 1995.
"(3) Certain dividends not pursuant to certain redemptions. - In
determining whether the amendment made by subsection (a) applies to
any extraordinary dividend other than a dividend treated as an
extraordinary dividend under section 1059(e)(1) of the Internal
Revenue Code of 1986 (as amended by this Act), paragraphs (1) and
(2) shall be applied by substituting 'September 13, 1995' for 'May
3, 1995'."
Amendment by section 1013(b) of Pub. L. 105-34 applicable to
distributions and acquisitions after June 8, 1997, with certain
exceptions, see section 1013(d) of Pub. L. 105-34, set out as a
note under section 304 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Section 7206(b) of Pub. L. 101-239 provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendment made by subsection (a) [amending this section] shall
apply to stock issued after July 10, 1989, in taxable years ending
after such date.
"(2) Binding contract. - The amendment made by subsection (a)
shall not apply to any stock issued pursuant to a written binding
contract in effect on July 10, 1989, and at all times thereafter
before the stock is issued."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Section 614(f) of Pub. L. 99-514 provided that:
"(1) In general. - Except as provided in this subsection, the
amendments made by this section [amending this section] shall apply
to dividends declared after July 18, 1986, in taxable years ending
after such date.
"(2) Aggregation. - For purposes of section 1059(c)(3) of the
Internal Revenue Code of 1986, dividends declared after July 18,
1986, shall not be aggregated with dividends declared on or before
July 18, 1986.
"(3) Redemptions. - Section 1059(e)(1) of the Internal Revenue
Code of 1986 (as added by subsection (e)) shall apply to dividends
declared after the date of the enactment of this Act [Oct. 22,
1986], in taxable years ending after such date."
EFFECTIVE DATE
Section 53(e) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, title XVIII, Sec. 1804(b)(2), Oct. 22, 1986, 100 Stat.
2095, 2798, provided that:
"(1) In general. - Except as provided in this subsection, the
amendments made by this section [enacting this section and amending
sections 246, 1016, and 7701 of this title] shall apply to
distributions after March 1, 1984, in taxable years ending after
such date.
"(2) Subsection (b). - The amendments made by subsection (b)
[amending section 246 of this title] shall apply to stock acquired
after the date of the enactment of this Act [July 18, 1984] in
taxable years ending after such date.
"(3) Related person provisions. -
"(A) In general. - Except as otherwise provided in subparagraph
(B), the amendment made by subsection (c) [amending section 7701
of this title] shall take effect on July 18, 1984.
"(B) Special rule for purposes of section 265(2). - The
amendment made by subsection (c) insofar as it relates to section
265(2) of the Internal Revenue Code of 1986 [formerly I.R.C.
1954] shall apply to -
"(i) term loans made after July 18, 1984, and
"(ii) demand loans outstanding after July 18, 1984 (other
than any loan outstanding on July 18, 1984, and repaid before
September 18, 1984).
"(C) Treatment of renegotiations, etc. - For purposes of this
paragraph, any loan renegotiated, extended, or revised after July
18, 1984, shall be treated as a loan made after such date.
"(D) Definition of term and demand loans. - For purposes of
this paragraph, the terms 'demand loan' and 'term loan' have the
respective meanings given such terms by paragraphs (5) and (6) of
section 7872(f) of the Internal Revenue Code of 1986 [formerly
I.R.C. 1954], except that the second sentence of such paragraph
(5) shall not apply."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1, 246, 263, 1016 of this
title; title 29 section 1343.
-FOOTNOTE-
(!1) See References in Text note below.
-End-
-CITE-
26 USC Sec. 1059A 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART IV - SPECIAL RULES
-HEAD-
Sec. 1059A. Limitation on taxpayer's basis or inventory cost in
property imported from related persons
-STATUTE-
(a) In general
If any property is imported into the United States in a
transaction (directly or indirectly) between related persons
(within the meaning of section 482), the amount of any costs -
(1) which are taken into account in computing the basis or
inventory cost of such property by the purchaser, and
(2) which are also taken into account in computing the customs
value of such property,
shall not, for purposes of computing such basis or inventory cost
for purposes of this chapter, be greater than the amount of such
costs taken into account in computing such customs value.
(b) Customs value; import
For purposes of this section -
(1) Customs value
The term "customs value" means the value taken into account for
purposes of determining the amount of any customs duties or any
other duties which may be imposed on the importation of any
property.
(2) Import
Except as provided in regulations, the term "import" means the
entering, or withdrawal from warehouse, for consumption.
-SOURCE-
(Added Pub. L. 99-514, title XII, Sec. 1248(a), Oct. 22, 1986, 100
Stat. 2584.)
-MISC1-
EFFECTIVE DATE
Section 1248(c) of Pub. L. 99-514 provided that: "The amendments
made by this section [enacting this section] shall apply to
transactions entered into after March 18, 1986."
-End-
-CITE-
26 USC Sec. 1060 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART IV - SPECIAL RULES
-HEAD-
Sec. 1060. Special allocation rules for certain asset acquisitions
-STATUTE-
(a) General rule
In the case of any applicable asset acquisition, for purposes of
determining both -
(1) the transferee's basis in such assets, and
(2) the gain or loss of the transferor with respect to such
acquisition,
the consideration received for such assets shall be allocated among
such assets acquired in such acquisition in the same manner as
amounts are allocated to assets under section 338(b)(5). If in
connection with an applicable asset acquisition, the transferee and
transferor agree in writing as to the allocation of any
consideration, or as to the fair market value of any of the assets,
such agreement shall be binding on both the transferee and
transferor unless the Secretary determines that such allocation (or
fair market value) is not appropriate.
(b) Information required to be furnished to Secretary
Under regulations, the transferor and transferee in an applicable
asset acquisition shall, at such times and in such manner as may be
provided in such regulations, furnish to the Secretary the
following information:
(1) The amount of the consideration received for the assets
which is allocated to section 197 intangibles.
(2) Any modification of the amount described in paragraph (1).
(3) Any other information with respect to other assets
transferred in such acquisition as the Secretary deems necessary
to carry out the provisions of this section.
(c) Applicable asset acquisition
For purposes of this section, the term "applicable asset
acquisition" means any transfer (whether directly or indirectly) -
(1) of assets which constitute a trade or business, and
(2) with respect to which the transferee's basis in such assets
is determined wholly by reference to the consideration paid for
such assets.
A transfer shall not be treated as failing to be an applicable
asset acquisition merely because section 1031 applies to a portion
of the assets transferred.
(d) Treatment of certain partnership transactions
In the case of a distribution of partnership property or a
transfer of an interest in a partnership -
(1) the rules of subsection (a) shall apply but only for
purposes of determining the value of section 197 intangibles for
purposes of applying section 755, and
(2) if section 755 applies, such distribution or transfer (as
the case may be) shall be treated as an applicable asset
acquisition for purposes of subsection (b).
(e) Information required in case of certain transfers of interests
in entities
(1) In general
If -
(A) a person who is a 10-percent owner with respect to any
entity transfers an interest in such entity, and
(B) in connection with such transfer, such owner (or a
related person) enters into an employment contract, covenant
not to compete, royalty or lease agreement, or other agreement
with the transferee,
such owner and the transferee shall, at such time and in such
manner as the Secretary may prescribe, furnish such information
as the Secretary may require.
(2) 10-percent owner
For purposes of this subsection -
(A) In general
The term "10-percent owner" means, with respect to any
entity, any person who holds 10 percent or more (by value) of
the interests in such entity immediately before the transfer.
(B) Constructive ownership
Section 318 shall apply in determining ownership of stock in
a corporation. Similar principles shall apply in determining
the ownership of interests in any other entity.
(3) Related person
For purposes of this subsection, the term "related person"
means any person who is related (within the meaning of section
267(b) or 707(b)(1)) to the 10-percent owner.
(f) Cross reference
For provisions relating to penalties for failure to file a
return required by this section, see section 6721.
-SOURCE-
(Added Pub. L. 99-514, title VI, Sec. 641(a), Oct. 22, 1986, 100
Stat. 2282; amended Pub. L. 100-647, title I, Sec. 1006(h)(1), (2),
(3)(B), Nov. 10, 1988, 102 Stat. 3410; Pub. L. 101-508, title XI,
Sec. 11323(a), (b)(1), Nov. 5, 1990, 104 Stat. 1388-464; Pub. L.
103-66, title XIII, Sec. 13261(e), Aug. 10, 1993, 107 Stat. 539.)
-MISC1-
PRIOR PROVISIONS
A prior section 1060 was renumbered section 1061 of this title.
AMENDMENTS
1993 - Subsec. (b)(1). Pub. L. 103-66, Sec. 13261(e)(1),
substituted "section 197 intangibles" for "goodwill or going
concern value".
Subsec. (d)(1). Pub. L. 103-66, Sec. 13261(e)(2), substituted
"section 197 intangibles" for "goodwill or going concern value (or
similar items)".
1990 - Subsec. (a). Pub. L. 101-508, Sec. 11323(a), inserted at
end "If in connection with an applicable asset acquisition, the
transferee and transferor agree in writing as to the allocation of
any consideration, or as to the fair market value of any of the
assets, such agreement shall be binding on both the transferee and
transferor unless the Secretary determines that such allocation (or
fair market value) is not appropriate."
Subsecs. (e), (f). Pub. L. 101-508, Sec. 11323(b)(1), added
subsec. (e) and redesignated former subsec. (e) as (f).
1988 - Subsec. (b)(3). Pub. L. 100-647, Sec. 1006(h)(1),
substituted "deems" for "may find".
Subsec. (d). Pub. L. 100-647, Sec. 1006(h)(2), added subsec. (d).
Subsec. (e). Pub. L. 100-647, Sec. 1006(h)(3)(B), added subsec.
(e).
EFFECTIVE DATE OF 1993 AMENDMENT
Amendment by Pub. L. 103-66 applicable, except as otherwise
provided, with respect to property acquired after Aug. 10, 1993,
see section 13261(g) of Pub. L. 103-66, set out as an Effective
Date note under section 197 of this title.
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by Pub. L. 101-508 applicable to acquisitions after
Oct. 9, 1990, but not applicable to any acquisition pursuant to a
written binding contract in effect on Oct. 9, 1990, and at all
times thereafter before such acquisition, see section 11323(d) of
Pub. L. 101-508, set out as a note under section 338 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Section 641(c) of Pub. L. 99-514 provided that: "The amendments
made by this section [enacting this section and renumbering former
section 1060 as 1061] shall apply to any acquisition of assets
after May 6, 1986, unless such acquisition is pursuant to a binding
contract which was in effect on May 6, 1986, and at all times
thereafter."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 6724 of this title.
-End-
-CITE-
26 USC Sec. 1061 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART IV - SPECIAL RULES
-HEAD-
Sec. 1061. Cross references
-STATUTE-
(1) For nonrecognition of gain in connection with the
transfer of obsolete vessels to the Maritime Administration
under section 510 of the Merchant Marine Act, 1936, see
subsection (e) of that section, as amended August 4, 1939 (46
U.S.C. App. 1160).
(2) For recognition of gain or loss in connection with the
construction of new vessels, see section 511 of such Act, as
amended (46 U.S.C. App. 1161).
(3) For nonrecognition of gain in connection with vessels
exchanged with the Maritime Administration under section 8 of
the Merchant Ship Sales Act of 1946, see subsection (a) (!1) of
that section (50 U.S.C. App. 1741).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 311, Sec. 1054; renumbered Sec.
1055, Pub. L. 86-779, Sec. 8(b), Sept. 14, 1960, 74 Stat. 1003;
renumbered Sec. 1056, Pub. L. 88-9, Sec. 1(b), Apr. 10, 1963, 77
Stat. 7; renumbered Sec. 1057, Pub. L. 94-455, title II, Sec.
212(a)(1), Oct. 4, 1976, 90 Stat. 1545; renumbered Sec. 1058, Pub.
L. 94-455, title X, Sec. 1015(c), Oct. 4, 1976, 90 Stat. 1618;
renumbered Sec. 1059, Pub. L. 95-345, Sec. 2(d)(1), Aug. 15, 1978,
92 Stat. 482; renumbered Sec. 1060, Pub. L. 98-369, div. A, title
I, Sec. 53(a), July 18, 1984, 98 Stat. 565; renumbered Sec. 1061
and amended, Pub. L. 99-514, title VI, Sec. 641(a), title XVIII,
Sec. 1899A(27), Oct. 22, 1986, 100 Stat. 2282, 2960.)
-REFTEXT-
REFERENCES IN TEXT
Subsection (a) of section 8 of the Merchant Ship Sales Act of
1946, referred to in par. (3), which was classified to section
1741(a) of Title 50, Appendix, War and National Defense, was
repealed by Pub. L. 101-225, title III, Sec. 307(12), Dec. 12,
1989, 103 Stat. 1925.
-MISC1-
AMENDMENTS
1986 - Pub. L. 99-514, Sec. 641(a), renumbered section 1060 of
this title as this section.
Pars. (1), (2). Pub. L. 99-514, Sec. 1899A(27), which directed
the amendment of pars. (1) and (2) of section 1060 by substituting
"46 U.S.C. App." for "46 U.S.C." was executed to section 1061 to
reflect the probable intent of Congress in view of the renumbering
of section 1060 as 1061 by section 641(a) of Pub. L. 99-514.
-FOOTNOTE-
(!1) See References in Text note below.
-End-
-CITE-
26 USC [PART V - REPEALED] 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
[PART V - REPEALED]
-HEAD-
[PART V - REPEALED]
-End-
-CITE-
26 USC Sec. 1071 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
[PART V - REPEALED]
-HEAD-
[Sec. 1071. Repealed. Pub. L. 104-7, Sec. 2(a), Apr. 11, 1995, 109
Stat. 93]
-MISC1-
Section, acts Aug. 16, 1954, ch. 736, 68A Stat. 311; Sept. 2,
1958, Pub. L. 85-866, title I, Sec. 48(a), 72 Stat. 1642; Oct. 4,
1976, Pub. L. 94-455, title XIX, Secs. 1901(b)(31)(E),
1906(b)(13)(A), 90 Stat. 1800, 1834, provided for nonrecognition on
FCC certified sales and exchanges.
EFFECTIVE DATE OF REPEAL
Section 2(d) of Pub. L. 104-7 provided that:
"(1) In general. - The amendments made by this section [repealing
this section and amending sections 1245 and 1250 of this title]
shall apply to -
"(A) sales and exchanges on or after January 17, 1995, and
"(B) sales and exchanges before such date if the FCC tax
certificate with respect to such sale or exchange is issued on or
after such date.
"(2) Binding contracts. -
"(A) In general. - The amendments made by this section shall
not apply to any sale or exchange pursuant to a written contract
which was binding on January 16, 1995, and at all times
thereafter before the sale or exchange, if the FCC tax
certificate with respect to such sale or exchange was applied
for, or issued, on or before such date.
"(B) Sales contingent on issuance of certificate. -
"(i) In general. - A contract shall be treated as not binding
for purposes of subparagraph (A) if the sale or exchange
pursuant to such contract, or the material terms of such
contract, were contingent, at any time on January 16, 1995, on
the issuance of an FCC tax certificate. The preceding sentence
shall not apply if the FCC tax certificate for such sale or
exchange is issued on or before January 16, 1995.
"(ii) Material terms. - For purposes of clause (i), the
material terms of a contract shall not be treated as contingent
on the issuance of an FCC tax certificate solely because such
terms provide that the sales price would, if such certificate
were not issued, be increased by an amount not greater than 10
percent of the sales price otherwise provided in the contract.
"(3) FCC tax certificate. - For purposes of this subsection, the
term 'FCC tax certificate' means any certificate of the Federal
Communications Commission for the effectuation of section 1071 of
the Internal Revenue Code of 1986 (as in effect on the day before
the date of the enactment of this Act [Apr. 11, 1995])."
-End-
-CITE-
26 USC PART VI - EXCHANGES IN OBEDIENCE TO S.E.C. ORDERS 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART VI - EXCHANGES IN OBEDIENCE TO S.E.C. ORDERS
-HEAD-
PART VI - EXCHANGES IN OBEDIENCE TO S.E.C. ORDERS
-MISC1-
Sec.
1081. Nonrecognition of gain or loss on exchanges or
distributions in obedience to orders of S.E.C.
1082. Basis for determining gain or loss.
1083. Definitions.
-End-
-CITE-
26 USC Sec. 1081 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART VI - EXCHANGES IN OBEDIENCE TO S.E.C. ORDERS
-HEAD-
Sec. 1081. Nonrecognition of gain or loss on exchanges or
distributions in obedience to orders of S.E.C.
-STATUTE-
(a) Exchanges of stock or securities only
No gain or loss shall be recognized to the transferor if stock or
securities in a corporation which is a registered holding company
or a majority-owned subsidiary company are transferred to such
corporation or to an associate company thereof which is a
registered holding company or a majority-owned subsidiary company
solely in exchange for stock or securities (other than stock or
securities which are nonexempt property), and the exchange is made
by the transferee corporation in obedience to an order of the
Securities and Exchange Commission.
(b) Exchanges and sales of property by corporations
(1) General rule
No gain shall be recognized to a transferor corporation which
is a registered holding company or an associate company of a
registered holding company, if such corporation, in obedience to
an order of the Securities and Exchange Commission, transfers
property in exchange for property, and such order recites that
such exchange by the transferor corporation is necessary or
appropriate to the integration or simplification of the holding
company system of which the transferor corporation is a member.
Any gain, to the extent that it cannot be applied in reduction of
basis under section 1082(a)(2), shall be recognized.
(2) Nonexempt property
If any such property so received is nonexempt property, gain
shall be recognized unless such nonexempt property or an amount
equal to the fair market value of such property at the time of
the transfer is, within 24 months of the transfer, under
regulations prescribed by the Secretary, and in accordance with
an order of the Securities and Exchange Commission, expended for
property other than nonexempt property or is invested as a
contribution to the capital, or as paid-in surplus, of another
corporation, and such order recites that such expenditure or
investment by the transferor corporation is necessary or
appropriate to the integration or simplification of the holding
company system of which the transferor corporation is a member.
If the fair market value of such nonexempt property at the time
of the transfer exceeds the amount expended and the amount
invested, as required in the preceding sentence, the gain, if
any, to the extent of such excess, shall be recognized.
(3) Cancellation or redemption of stock or securities
For purposes of this subsection, a distribution in cancellation
or redemption (except a distribution having the effect of a
dividend) of the whole or a part of the transferor's own stock
(not acquired on the transfer) and a payment in complete or
partial retirement or cancellation of securities representing
indebtedness of the transferor or a complete or partial
retirement or cancellation of such securities which is a part of
the consideration for the transfer shall be considered an
expenditure for property other than nonexempt property, and if,
on the transfer, a liability of the transferor is assumed, or
property of the transferor is transferred subject to a liability,
the amount of such liability shall be considered to be an
expenditure by the transferor for property other than nonexempt
property.
(4) Consents
This subsection shall not apply unless the transferor
corporation consents, at such time and in such manner as the
Secretary may by regulations prescribe to the regulations
prescribed under section 1082(a)(2) in effect at the time of
filing its return for the taxable year in which the transfer
occurs.
(c) Distribution of stock or securities only
If there is distributed, in obedience to an order of the
Securities and Exchange Commission, to a shareholder in a
corporation which is a registered holding company or a
majority-owned subsidiary company, stock or securities (other than
stock or securities which are nonexempt property), without the
surrender by such shareholder of stock or securities in such
corporation, no gain to the distributee from the receipt of the
stock or securities so distributed shall be recognized.
(d) Transfers within system group
(1) General rule
No gain or loss shall be recognized to a corporation which is a
member of a system group -
(A) if such corporation transfers property to another
corporation which is a member of the same system group in
exchange for other property, and the exchange by each
corporation is made in obedience to an order of the Securities
and Exchange Commission, or
(B) if there is distributed to such corporation as a
shareholder in a corporation which is a member of the same
system group, property, without the surrender by such
shareholder of stock or securities in the corporation making
the distribution, and the distribution is made and received in
obedience to an order of the Securities and Exchange
Commission.
If an exchange by or a distribution to a corporation with respect
to which no gain or loss is recognized under any of the
provisions of this paragraph may also be considered to be within
the provisions of subsection (a), (b), or (c), then the
provisions of this paragraph only shall apply.
(2) Sales of stock or securities
If the property received on an exchange which is within any of
the provisions of paragraph (1) consists in whole or in part of
stock or securities issued by the corporation from which such
property was received, and if in obedience to an order of the
Securities and Exchange Commission such stock or securities
(other than stock which is not preferred as to both dividends and
assets) are sold and the proceeds derived therefrom are applied
in whole or in part in the retirement or cancellation of stock or
of securities of the recipient corporation outstanding at the
time of such exchange, no gain or loss shall be recognized to the
recipient corporation on the sale of the stock or securities with
respect to which such order was made; except that if any part of
the proceeds derived from the sale of such stock or securities is
not so applied, or if the amount of such proceeds is in excess of
the fair market value of such stock or securities at the time of
such exchange, the gain, if any, shall be recognized, but in an
amount not in excess of the proceeds which are not so applied, or
in an amount not more than the amount by which the proceeds
derived from such sale exceed such fair market value, whichever
is the greater.
(e) Exchanges not solely in kind
(1) General rule
If an exchange (not within any of the provisions of subsection
(d)) would be within the provisions of subsection (a) if it were
not for the fact that property received in exchange consists not
only of property permitted by such subsection to be received
without the recognition of gain or loss, but also of other
property or money, then the gain, if any, to the recipient shall
be recognized, but in an amount not in excess of the sum of such
money and the fair market value of such other property, and the
loss, if any, to the recipient shall not be recognized.
(2) Distribution treated as dividend
If an exchange is within the provisions of paragraph (1) and if
it includes a distribution which has the effect of the
distribution of a taxable dividend, then there shall be taxed as
a dividend to each distributee such an amount of the gain
recognized under such paragraph as is not in excess of his
ratable share of the undistributed earnings and profits of the
corporation accumulated after February 28, 1913. The remainder,
if any, of the gain recognized under paragraph (1) shall be taxed
as a gain from the exchange of property.
(f) Conditions for application of section
The provisions of this section shall not apply to an exchange,
expenditure, investment, distribution, or sale unless -
(1) the order of the Securities and Exchange Commission in
obedience to which such exchange, expenditure, investment,
distribution, or sale was made recites that such exchange,
expenditure, investment, distribution, or sale is necessary or
appropriate to effectuate the provisions of section 11(b) of the
Public Utility Holding Company Act of 1935 (15 U.S.C. 79k(b)),
(2) such order specifies and itemizes the stock and securities
and other property which are ordered to be acquired, transferred,
received, or sold on such exchange, acquisition, expenditure,
distribution, or sale, and, in the case of an investment, the
investment to be made, and
(3) such exchange, acquisition, expenditure, investment,
distribution, or sale was made in obedience to such order, and
was completed within the time prescribed therefor.
(g) Nonapplication of other provisions
If an exchange or distribution made in obedience to an order of
the Securities and Exchange Commission is within any of the
provisions of this part and may also be considered to be within any
of the other provisions of this subchapter or subchapter C (sec.
301 and following, relating to corporate distributions and
adjustments), then the provisions of this part only shall apply.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 312; Pub. L. 94-455, title XIX,
Secs. 1901(a)(132), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1786,
1834.)
-MISC1-
AMENDMENTS
1976 - Subsec. (b)(2), (4). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out "or his delegate" after "Secretary".
Subsec. (c). Pub. L. 94-455, Sec. 1901(a)(132)(A), among other
changes, struck out the special rule relating to the
non-recognition of gain where a shareholder is given distribution
rights to acquire common stock in a second corporation without the
surrender of stock in the first corporation.
Subsec. (f). Pub. L. 94-455, Sec. 1901(a)(132)(B), substituted
"The provisions" for "Except in the case of a distribution
described in subsection (c)(2), the provisions" and struck out "49
Stat. 820;" before "15 U.S.C. 79k(b)".
Subsec. (g). Pub. L. 94-455, Sec. 1901(a)(132)(C), substituted
"If an" for "If a distribution described in subsection (c)(2), or
an", and struck out the comma after "Commission".
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(132) of Pub. L. 94-455 effective for
taxable years beginning after Dec. 31, 1976, see section 1901(d) of
Pub. L. 94-455, set out as a note under section 2 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1082, 1223, 1245, 1250 of
this title.
-End-
-CITE-
26 USC Sec. 1082 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART VI - EXCHANGES IN OBEDIENCE TO S.E.C. ORDERS
-HEAD-
Sec. 1082. Basis for determining gain or loss
-STATUTE-
(a) Exchanges generally
(1) Exchanges subject to the provisions of section 1081(a) or (e)
If the property was acquired on an exchange subject to the
provisions of section 1081(a) or (e), or the corresponding
provisions of prior internal revenue laws, the basis shall be the
same as in the case of the property exchanged, decreased in the
amount of any money received by the taxpayer, and increased in
the amount of gain or decreased in the amount of loss to the
taxpayer that was recognized on such exchange under the law
applicable to the year in which the exchange was made. If the
property so acquired consisted in part of the type of property
permitted by section 1081(a) to be received without the
recognition of gain or loss, and in part of nonexempt property,
the basis provided in this subsection shall be allocated between
the properties (other than money) received, and for the purpose
of the allocation there shall be assigned to such nonexempt
property (other than money) an amount equivalent to its fair
market value at the date of the exchange. This subsection shall
not apply to property acquired by a corporation by the issuance
of its stock or securities as the consideration in whole or in
part for the transfer of the property to it.
(2) Exchanges subject to the provisions of section 1081(b)
The gain not recognized on a transfer by reason of section
1081(b) or the corresponding provisions of prior internal revenue
laws shall be applied to reduce the basis for determining gain or
loss on sale or exchange of the following categories of property
in the hands of the transferor immediately after the transfer,
and property acquired within 24 months after such transfer by an
expenditure or investment to which section 1081(b) relates on
account of the acquisition of which gain is not recognized under
such subsection, in the following order:
(A) property of a character subject to the allowance for
depreciation under section 167;
(B) property (not described in subparagraph (A)) with respect
to which a deduction for amortization is allowable under
section 169;
(C) property with respect to which a deduction for depletion
is allowable under section 611 but not allowable under section
613;
(D) stock and securities of corporations not members of the
system group of which the transferor is a member (other than
stock or securities of a corporation of which the transferor is
a subsidiary);
(E) securities (other than stock) of corporations which are
members of the system group of which the transferor is a member
(other than securities of the transferor or of a corporation of
which the transferor is a subsidiary);
(F) stock of corporations which are members of the system
group of which the transferor is a member (other than stock of
the transferor or of a corporation of which the transferor is a
subsidiary);
(G) all other remaining property of the transferor (other
than stock or securities of the transferor or of a corporation
of which the transferor is a subsidiary).
The manner and amount of the reduction to be applied to
particular property within any of the categories described in
subparagraphs (A) to (G), inclusive, shall be determined under
regulations prescribed by the Secretary.
(3) Basis in case of pre-1942 acquisition
Notwithstanding the provisions of paragraph (1) or (2), if the
property was acquired in a taxable year beginning before January
1, 1942, in any manner described in section 372 of the Internal
Revenue Code of 1939 before its amendment by the Revenue Act of
1942, the basis shall be that prescribed in such section (before
its amendment by such Act) with respect to such property.
(b) Transfers to corporations
If, in connection with a transfer subject to the provisions of
section 1081(a), (b), or (e) or the corresponding provisions of
prior internal revenue laws, the property was acquired by a
corporation, either as paid-in surplus or as a contribution to
capital, or in consideration for stock or securities issued by the
corporation receiving the property (including cases where part of
the consideration for the transfer of such property to the
corporation consisted of property or money in addition to such
stock or securities), then the basis shall be the same as it would
be in the hands of the transferor, increased in the amount of gain
or decreased in the amount of loss recognized to the transferor on
such transfer under the law applicable to the year in which the
transfer was made.
(c) Distributions of stock or securities
If the stock or securities were received in a distribution
subject to the provisions of section 1081(c) or the corresponding
provisions of prior internal revenue laws, then the basis in the
case of the stock in respect of which the distribution was made
shall be apportioned, under regulations prescribed by the
Secretary, between such stock and the stock or securities
distributed.
(d) Transfers within system group
If the property was acquired by a corporation which is a member
of a system group on a transfer or distribution described in
section 1081(d)(1), then the basis shall be the same as it would be
in the hands of the transferor; except that if such property is
stock or securities issued by the corporation from which such stock
or securities were received and they were issued -
(1) as the sole consideration for the property transferred to
such corporation, then the basis of such stock or securities
shall be either -
(A) the same as in the case of the property transferred
therefor, or
(B) the fair market value of such stock or securities at the
time of their receipt, whichever is the lower; or
(2) as part consideration for the property transferred to such
corporation, then the basis of such stock or securities shall be
either -
(A) an amount which bears the same ratio to the basis of the
property transferred as the fair market value of such stock or
securities at the time of their receipt bears to the total fair
market value of the entire consideration received, or
(B) the fair market value of such stock or securities at the
time of their receipt, whichever is the lower.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 315; Pub. L. 91-172, title VII,
Sec. 704(b)(3), Dec. 30, 1969, 83 Stat. 669; Pub. L. 92-178, title
III, Sec. 303(c)(5), Dec. 10, 1971, 85 Stat. 522; Pub. L. 94-455,
title XIX, Secs. 1901(b)(11)(C), 1906(b)(13)(A), 1951(c)(2)(B),
title XXI, Sec. 2124(a)(3)(C), Oct. 4, 1976, 90 Stat. 1795, 1834,
1840, 1917; Pub. L. 97-34, title II, Sec. 212(d)(2)(E), Aug. 13,
1981, 95 Stat. 239; Pub. L. 99-514, title II, Sec. 242(b)(1), Oct.
22, 1986, 100 Stat. 2181; Pub. L. 101-508, title XI, Sec.
11801(c)(6)(D), Nov. 5, 1990, 104 Stat. 1388-524.)
-REFTEXT-
REFERENCES IN TEXT
Section 372 of the Internal Revenue Code of 1939 before its
amendment by the Revenue Act of 1942, referred to in subsec.
(a)(3), was classified to section 372 of former Title 26, Internal
Revenue Code. Section 372 was repealed by section 7851(a)(1)(A) of
this title. For table of comparisons of the 1939 Code to the 1986
Code, see Table I preceding section 1 of this title. See, also,
section 7851(e) of this title for provision that references in the
1986 Code to a provision of the 1939 Code, not then applicable,
shall be deemed a reference to the corresponding provision of the
1986 Code, which is then applicable.
The Revenue Act of 1942, referred to in subsec. (a)(3), is act
Oct. 21, 1942, ch. 619, 56 Stat. 836. For complete classification
of this Act to the Code, see Tables.
-MISC1-
AMENDMENTS
1990 - Subsec. (a)(2)(B). Pub. L. 101-508, which directed the
substitution of "169" for "169, 184, or 188", was executed by
substituting "169" for "169, 184 or 188" to reflect the probable
intent of Congress. See 1986 Amendment note below.
1986 - Subsec. (a)(2)(B). Pub. L. 99-514 struck out ", 185,"
after "184".
1981 - Subsec. (a)(2)(B). Pub. L. 97-34 substituted "or 188" for
"188, or 191".
1976 - Subsec. (a)(2). Pub. L. 94-455, Secs. 1901 (b)(11)(C),
1906(b)(13)(A), 1951(c)(2)(B), 2124(a)(3)(C), struck out in subpar.
(B) "168" before "169", "187" after "185", and substituted "188, or
191" for "or 188" and in provisions following subpar. (G) struck
out "or his delegate" after "Secretary".
Subsec. (c). Pub. L. Sec. 1906(b)(13)(A), struck out "or his
delegate" after "Secretary".
1971 - Subsec. (a)(2)(B). Pub. L. 92-178 inserted reference to
section 188.
1969 - Subsec. (a)(2)(B). Pub. L. 91-172 inserted reference to
sections 184, 185, and 187.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 applicable to that portion of the
basis of any property which is attributable to expenditures paid or
incurred after Dec. 31, 1986, except as otherwise provided, see
section 242(c) of Pub. L. 99-514, set out as an Effective Date of
Repeal note under former section 185 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by Pub. L. 97-34 applicable to expenditures incurred
after Dec. 31, 1981, in taxable years ending after such date, see
section 212(e) of Pub. L. 97-34, set out as a note under section 46
of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(b)(11)(C) of Pub. L. 94-455 effective
for taxable years beginning after Dec. 31, 1976, see section
1901(d) of Pub. L. 94-455, set out as a note under section 2 of
this title.
Amendment by section 1951(c)(2)(B) of Pub. L. 94-455 applicable
with respect to taxable years beginning after Dec. 31, 1976, see
section 1951(d) of Pub. L. 94-455, set out as a note under section
72 of this title.
Amendment by section 2124(a)(3)(C) of Pub. L. 94-455 applicable
with respect to additions to capital accounts made after June 14,
1976 and before June 15, 1981, see section 2124(a)(4) of Pub. L.
94-455, set out as an Effective Date note under section 642 of this
title.
EFFECTIVE DATE OF 1971 AMENDMENT
Amendment by Pub. L. 92-178 applicable to taxable years ending
after Dec. 31, 1971, see section 303(d) of Pub. L. 92-178, set out
as a note under section 642 of this title.
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by Pub. L. 91-172 applicable to taxable years ending
after Dec. 31, 1968, see section 704(c) of Pub. L. 91-172, set out
as a note under section 169 of this title.
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 1081 of this title.
-End-
-CITE-
26 USC Sec. 1083 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART VI - EXCHANGES IN OBEDIENCE TO S.E.C. ORDERS
-HEAD-
Sec. 1083. Definitions
-STATUTE-
(a) Order of Securities and Exchange Commission
For purposes of this part, the term "order of the Securities and
Exchange Commission" means an order issued after May 28, 1938, by
the Securities and Exchange Commission which requires, authorizes,
permits, or approves transactions described in such order to
effectuate section 11(b) of the Public Utility Holding Company Act
of 1935 (15 U.S.C. 79k(b)), which has become or becomes final in
accordance with law.
(b) Registered holding company; holding company system; associate
company
For purposes of this part, the terms "registered holding
company", "holding company system", and "associate company" shall
have the meanings assigned to them by section 2 of the Public
Utility Holding Company Act of 1935 (15 U.S.C. 79b(a)).
(c) Majority-owned subsidiary company
For purposes of this part, the term "majority-owned subsidiary
company" of a registered holding company means a corporation, stock
of which, representing in the aggregate more than 50 percent of the
total combined voting power of all classes of stock of such
corporation entitled to vote (not including stock which is entitled
to vote only on default or nonpayment of dividends or other special
circumstances) is owned wholly by such registered holding company,
or partly by such registered holding company and partly by one or
more majority-owned subsidiary companies thereof, or by one or more
majority-owned subsidiary companies of such registered holding
company.
(d) System group
For purposes of this part, the term "system group" means one or
more chains of corporations connected through stock ownership with
a common parent corporation if -
(1) at least 90 percent of each class of the stock (other than
(A) stock which is preferred as to both dividends and assets, and
(B) stock which is limited and preferred as to dividends but
which is not preferred as to assets but only if the total value
of such stock is less than 1 percent of the aggregate value of
all classes of stock which are not preferred as to both dividends
and assets) of each of the corporations (except the common parent
corporation) is owned directly by one or more of the other
corporations; and
(2) the common parent corporation owns directly at least 90
percent of each class of the stock (other than stock, which is
preferred as to both dividends and assets) of at least one of the
other corporations; and
(3) each of the corporations is either a registered holding
company or a majority-owned subsidiary company.
(e) Nonexempt property
For purposes of this part, the term "nonexempt property" means -
(1) any consideration in the form of evidences of indebtedness
owed by the transferor or a cancellation or assumption of debts
or other liabilities of the transferor (including a continuance
of encumbrances subject to which the property was transferred);
(2) short-term obligations (including notes, drafts, bills of
exchange, and bankers' acceptances) having a maturity at the time
of issuance of not exceeding 24 months, exclusive of days of
grace;
(3) securities issued or guaranteed as to principal or interest
by a government or subdivision thereof (including those issued by
a corporation which is an instrumentality of a government or
subdivision thereof);
(4) stock or securities which were acquired from a registered
holding company or an associate company of a registered holding
company which acquired such stock or securities after February
28, 1938, unless such stock or securities (other than obligations
described as nonexempt property in paragraph (1), (2), or (3))
were acquired in obedience to an order of the Securities and
Exchange Commission or were acquired with the authorization or
approval of the Securities and Exchange Commission under any
section of the Public Utility Holding Company Act of 1935 (15
U.S.C. 79k(b));
(5) money, and the right to receive money not evidenced by a
security other than an obligation described as nonexempt property
in paragraph (2) or (3).
(f) Stock or securities
For purposes of this part, the term "stock or securities" means
shares of stock in any corporation, certificates of stock or
interest in any corporation, notes, bonds, debentures, and
evidences of indebtedness (including any evidence of an interest in
or right to subscribe to or purchase any of the foregoing).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 317; Pub. L. 94-455, title XIX,
Sec. 1901(a)(133), Oct. 4, 1976, 90 Stat. 1786.)
-MISC1-
AMENDMENTS
1976 - Subsec. (a). Pub. L. 94-455 struck out "49 Stat. 820;"
before "15 U.S.C. 79k(b)".
Subsec. (b). Pub. L. 94-455 struck out "49 Stat. 804;" before "15
U.S.C. 79b(a)".
Subsec. (e)(4). Pub. L. 94-455 struck out "49 Stat. 820;" before
"15 U.S.C. 79k(b)".
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by Pub. L. 94-455 effective for taxable years beginning
after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out
as a note under section 2 of this title.
-End-
-CITE-
26 USC PART VII - WASH SALES; STRADDLES 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART VII - WASH SALES; STRADDLES
-HEAD-
PART VII - WASH SALES; STRADDLES
-MISC1-
Sec.
1091. Loss from wash sales of stock or securities.
1092. Straddles.
AMENDMENTS
1981 - Pub. L. 97-34, title V, Sec. 501(d)(1), (2), Aug. 13,
1981, 95 Stat. 326, 327, substituted as part heading "WASH SALES;
STRADDLES" for "WASH SALES OF STOCK OR SECURITIES" and added item
1092.
-End-
-CITE-
26 USC Sec. 1091 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART VII - WASH SALES; STRADDLES
-HEAD-
Sec. 1091. Loss from wash sales of stock or securities
-STATUTE-
(a) Disallowance of loss deduction
In the case of any loss claimed to have been sustained from any
sale or other disposition of shares of stock or securities where it
appears that, within a period beginning 30 days before the date of
such sale or disposition and ending 30 days after such date, the
taxpayer has acquired (by purchase or by an exchange on which the
entire amount of gain or loss was recognized by law), or has
entered into a contract or option so to acquire, substantially
identical stock or securities, then no deduction shall be allowed
under section 165 unless the taxpayer is a dealer in stock or
securities and the loss is sustained in a transaction made in the
ordinary course of such business. For purposes of this section, the
term "stock or securities" shall, except as provided in
regulations, include contracts or options to acquire or sell stock
or securities.
(b) Stock acquired less than stock sold
If the amount of stock or securities acquired (or covered by the
contract or option to acquire) is less than the amount of stock or
securities sold or otherwise disposed of, then the particular
shares of stock or securities the loss from the sale or other
disposition of which is not deductible shall be determined under
regulations prescribed by the Secretary.
(c) Stock acquired not less than stock sold
If the amount of stock or securities acquired (or covered by the
contract or option to acquire) is not less than the amount of stock
or securities sold or otherwise disposed of, then the particular
shares of stock or securities the acquisition of which (or the
contract or option to acquire which) resulted in the
nondeductibility of the loss shall be determined under regulations
prescribed by the Secretary.
(d) Unadjusted basis in case of wash sale of stock
If the property consists of stock or securities the acquisition
of which (or the contract or option to acquire which) resulted in
the nondeductibility (under this section or corresponding
provisions of prior internal revenue laws) of the loss from the
sale or other disposition of substantially identical stock or
securities, then the basis shall be the basis of the stock or
securities so sold or disposed of, increased or decreased, as the
case may be, by the difference, if any, between the price at which
the property was acquired and the price at which such substantially
identical stock or securities were sold or otherwise disposed of.
(e) Certain short sales of stock or securities and securities
futures contracts to sell
Rules similar to the rules of subsection (a) shall apply to any
loss realized on the closing of a short sale of (or the sale,
exchange, or termination of a securities futures contract to sell)
stock or securities if, within a period beginning 30 days before
the date of such closing and ending 30 days after such date -
(1) substantially identical stock or securities were sold, or
(2) another short sale of (or securities futures contracts to
sell) substantially identical stock or securities was entered
into.
For purposes of this subsection, the term "securities futures
contract" has the meaning provided by section 1234B(c).
(f) Cash settlement
This section shall not fail to apply to a contract or option to
acquire or sell stock or securities solely by reason of the fact
that the contract or option settles in (or could be settled in)
cash or property other than such stock or securities.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 319; Pub. L. 94-455, title XIX,
Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 98-369,
div. A, title I, Sec. 106(a), (b), July 18, 1984, 98 Stat. 629;
Pub. L. 100-647, title V, Sec. 5075(a), Nov. 10, 1988, 102 Stat.
3682; Pub. L. 106-554, Sec. 1(a)(7) [title IV, Sec. 401(d)], Dec.
21, 2000, 114 Stat. 2763, 2763A-649; Pub. L. 107-147, title IV,
Sec. 412(d)(2), Mar. 9, 2002, 116 Stat. 53.)
-MISC1-
AMENDMENTS
2002 - Subsec. (e). Pub. L. 107-147 substituted "securities and
securities futures contracts to sell" for "securities" in heading,
inserted "(or the sale, exchange, or termination of a securities
futures contract to sell)" after "closing of a short sale of" in
introductory provisions and "(or securities futures contracts to
sell)" after "short sale of" in par. (2), and inserted concluding
provisions.
2000 - Subsec. (f). Pub. L. 106-554 added subsec. (f).
1988 - Subsec. (a). Pub. L. 100-647 inserted sentence at end
defining "stock or securities".
1984 - Subsec. (a). Pub. L. 98-369, Sec. 106(b), substituted "no
deduction shall be allowed under section 165 unless the taxpayer is
a dealer in stock or securities and the loss is sustained in a
transaction made in the ordinary course of such business" for "no
deduction for the loss shall be allowed under section 165(c)(2);
nor shall such deduction be allowed a corporation under section
165(a) unless it is a dealer in stocks or securities, and the loss
is sustained in a transaction made in the ordinary course of
business".
Subsec. (e). Pub. L. 98-369, Sec. 106(a), added subsec. (e).
1976 - Pub. L. 94-455 struck out "or his delegate" after
"Secretary" wherever appearing.
EFFECTIVE DATE OF 2002 AMENDMENT
Amendment by Pub. L. 107-147 effective as if included in the
provisions of the Community Renewal Tax Relief Act of 2000 [H.R.
5662, as enacted by Pub. L. 106-554], to which such amendment
relates, see section 412(e) of Pub. L. 107-147, set out as a note
under section 151 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Section 5075(b) of Pub. L. 100-647 provided that: "The amendment
made by subsection (a) [amending this section] shall apply with
respect to any sale after the date of enactment of this Act [Nov.
10, 1988], in taxable years ending after such date."
EFFECTIVE DATE OF 1984 AMENDMENT
Section 106(c) of Pub. L. 98-369 provided that:
"(1) Subsection (a). - The amendment made by subsection (a)
[amending this section] shall apply to short sales of stock or
securities after the date of the enactment of this Act [July 18,
1984] in taxable years ending after such date.
"(2) Subsection (b). - The amendment made by subsection (b)
[amending this section] shall apply to sales after December 31,
1984, in taxable years ending after such date."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 267, 312, 475, 860F,
1092, 1223, 1256 of this title.
-End-
-CITE-
26 USC Sec. 1092 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART VII - WASH SALES; STRADDLES
-HEAD-
Sec. 1092. Straddles
-STATUTE-
(a) Recognition of loss in case of straddles, etc.
(1) Limitation on recognition of loss
(A) In general
Any loss with respect to 1 or more positions shall be taken
into account for any taxable year only to the extent that the
amount of such loss exceeds the unrecognized gain (if any) with
respect to 1 or more positions which were offsetting positions
with respect to 1 or more positions from which the loss arose.
(B) Carryover of loss
Any loss which may not be taken into account under
subparagraph (A) for any taxable year shall, subject to the
limitations under subparagraph (A), be treated as sustained in
the succeeding taxable year.
(2) Special rule for identified straddles
(A) In general
In the case of any straddle which is an identified straddle
as of the close of any taxable year -
(i) paragraph (1) shall not apply for such taxable year,
and
(ii) any loss with respect to such straddle shall be
treated as sustained not earlier than the day on which all of
the positions making up the straddle are disposed of.
(B) Identified straddle
The term "identified straddle" means any straddle -
(i) which is clearly identified on the taxpayer's records
as an identified straddle before the earlier of -
(I) the close of the day on which the straddle is
acquired, or
(II) such time as the Secretary may prescribe by
regulations.
(ii) all of the original positions of which (as identified
by the taxpayer) are acquired on the same day and with
respect to which -
(I) all of such positions are disposed of on the same day
during the taxable year, or
(II) none of such positions has been disposed of as of
the close of the taxable year, and
(iii) which is not part of a larger straddle.
(3) Unrecognized gain
For purposes of this subsection -
(A) In general
The term "unrecognized gain" means -
(i) in the case of any position held by the taxpayer as of
the close of the taxable year, the amount of gain which would
be taken into account with respect to such position if such
position were sold on the last business day of such taxable
year at its fair market value, and
(ii) in the case of any position with respect to which, as
of the close of the taxable year, gain has been realized but
not recognized, the amount of gain so realized.
(B) Reporting of gain
(i) In general
Each taxpayer shall disclose to the Secretary, at such time
and in such manner and form as the Secretary may prescribe by
regulations -
(I) each position (whether or not part of a straddle)
with respect to which, as of the close of the taxable year,
there is unrecognized gain, and
(II) the amount of such unrecognized gain.
(ii) Reports not required in certain cases
Clause (i) shall not apply -
(I) to any position which is part of an identified
straddle,
(II) to any position which, with respect to the taxpayer,
is property described in paragraph (1) or (2) of section
1221(a) or to any position which is part of a hedging
transaction (as defined in section 1256(e)), or
(III) with respect to any taxable year if no loss on a
position (including a regulated futures contract) has been
sustained during such taxable year or if the only loss
sustained on such position is a loss described in subclause
(II).
(b) Regulations
(1) In general
The Secretary shall prescribe such regulations with respect to
gain or loss on positions which are a part of a straddle as may
be appropriate to carry out the purposes of this section and
section 263(g). To the extent consistent with such purposes, such
regulations shall include rules applying the principles of
subsections (a) and (d) of section 1091 and of subsections (b)
and (d) of section 1233.
(2) Regulations relating to mixed straddles
(A) Elective provisions in lieu of section 1233(d) principles
The regulations prescribed under paragraph (1) shall provide
that -
(i) the taxpayer may offset gains and losses from positions
which are part of mixed straddles -
(I) by straddle-by-straddle identification, or
(II) by the establishment (with respect to any class of
activities) of a mixed straddle account for which gains and
losses would be recognized (and offset) on a periodic
basis,
(ii) such offsetting will occur before the application of
section 1256, and section 1256(a)(3) will only apply to net
gain or net loss attributable to section 1256 contracts, and
(iii) the principles of section 1233(d) shall not apply
with respect to any straddle identified under clause (i)(I)
or part of an account established under clause (i)(II).
(B) Limitation on net gain or net loss from mixed straddle
account
In the case of any mixed straddle account referred to in
subparagraph (A)(i)(II) -
(i) Not more than 50 percent of net gain may be treated as
long-term capital gain
In no event shall more than 50 percent of the net gain from
such account for any taxable year be treated as long-term
capital gain.
(ii) Not more than 40 percent of net loss may be treated as
short-term capital loss
In no event shall more than 40 percent of the net loss from
such account for any taxable year be treated as short-term
capital loss.
(C) Authority to treat certain positions as mixed straddles
The regulations prescribed under paragraph (1) may treat as a
mixed straddle positions not described in section 1256(d)(4).
(D) Timing and character authority
The regulations prescribed under paragraph (1) shall include
regulations relating to the timing and character of gains and
losses in case of straddles where at least 1 position is
ordinary and at least 1 position is capital.
(c) Straddle defined
For purposes of this section -
(1) In general
The term "straddle" means offsetting positions with respect to
personal property.
(2) Offsetting positions
(A) In general
A taxpayer holds offsetting positions with respect to
personal property if there is a substantial diminution of the
taxpayer's risk of loss from holding any position with respect
to personal property by reason of his holding 1 or more other
positions with respect to personal property (whether or not of
the same kind).
(B) One side larger than other side
If 1 or more positions offset only a portion of 1 or more
other positions, the Secretary shall by regulations prescribe
the method for determining the portion of such other positions
which is to be taken into account for purposes of this section.
(C) Special rule for identified straddles
In the case of any position which is not part of an
identified straddle (within the meaning of subsection
(a)(2)(B)), such position shall not be treated as offsetting
with respect to any position which is part of an identified
straddle.
(3) Presumption
(A) In general
For purposes of paragraph (2), 2 or more positions shall be
presumed to be offsetting if -
(i) the positions are in the same personal property
(whether established in such property or a contract for such
property),
(ii) the positions are in the same personal property, even
though such property may be in a substantially altered form,
(iii) the positions are in debt instruments of a similar
maturity or other debt instruments described in regulations
prescribed by the Secretary,
(iv) the positions are sold or marketed as offsetting
positions (whether or not such positions are called a
straddle, spread, butterfly, or any similar name),
(v) the aggregate margin requirement for such positions is
lower than the sum of the margin requirements for each such
position (if held separately), or
(vi) there are such other factors (or satisfaction of
subjective or objective tests) as the Secretary may by
regulations prescribe as indicating that such positions are
offsetting.
For purposes of the preceding sentence, 2 or more positions
shall be treated as described in clause (i), (ii), (iii), or
(vi) only if the value of 1 or more of such positions
ordinarily varies inversely with the value of 1 or more other
such positions.
(B) Presumption may be rebutted
Any presumption established pursuant to subparagraph (A) may
be rebutted.
(4) Exception for certain straddles consisting of qualified
covered call options and the optioned stock
(A) In general
If -
(i) all the offsetting positions making up any straddle
consist of 1 or more qualified covered call options and the
stock to be purchased from the taxpayer under such options,
and
(ii) such straddle is not part of a larger straddle,
such straddle shall not be treated as a straddle for purposes
of this section and section 263(g).
(B) Qualified covered call option defined
For purposes of subparagraph (A), the term "qualified covered
call option" means any option granted by the taxpayer to
purchase stock held by the taxpayer (or stock acquired by the
taxpayer in connection with the granting of the option) but
only if -
(i) such option is traded on a national securities exchange
which is registered with the Securities and Exchange
Commission or other market which the Secretary determines has
rules adequate to carry out the purposes of this paragraph,
(ii) such option is granted more than 30 days before the
day on which the option expires,
(iii) such option is not a deep-in-the-money option,
(iv) such option is not granted by an options dealer
(within the meaning of section 1256(g)(8)) in connection with
his activity of dealing in options, and
(v) gain or loss with respect to such option is not
ordinary income or loss.
(C) Deep-in-the-money option
For purposes of subparagraph (B), the term "deep-in-the-money
option" means an option having a strike price lower than the
lowest qualified bench mark.
(D) Lowest qualified bench mark
(i) In general
Except as otherwise provided in this subparagraph, for
purposes of subparagraph (C), the term "lowest qualified
bench mark" means the highest available strike price which is
less than the applicable stock price.
(ii) Special rule where option is for period more than 90
days and strike price exceeds $50
In the case of an option -
(I) which is granted more than 90 days before the date on
which such option expires, and
(II) with respect to which the strike price is more than
$50,
the lowest qualified bench mark is the second highest
available strike price which is less than the applicable
stock price.
(iii) 85 percent rule where applicable stock price $25 or
less
If -
(I) the applicable stock price is $25 or less, and
(II) but for this clause, the lowest qualified bench mark
would be less than 85 percent of the applicable stock
price,
the lowest qualified bench mark shall be treated as equal to
85 percent of the applicable stock price.
(iv) Limitation where applicable stock price $150 or less
If -
(I) the applicable stock price is $150 or less, and
(II) but for this clause, the lowest qualified bench mark
would be less than the applicable stock price reduced by
$10,
the lowest qualified bench mark shall be treated as equal to
the applicable stock price reduced by $10.
(E) Special year-end rule
Subparagraph (A) shall not apply to any straddle for purposes
of section 1092(a) if -
(i) the qualified covered call options referred to in such
subparagraph are closed or the stock is disposed of at a loss
during any taxable year,
(ii) gain on disposition of the stock to be purchased from
the taxpayer under such options or gains on such options are
includible in gross income for a later taxable year, and
(iii) such stock or option was not held by the taxpayer for
30 days or more after the closing of such options or the
disposition of such stock.
For purposes of the preceding sentence, the rules of paragraphs
(3) (other than subparagraph (B) (!1) thereof) and (4) of
section 246(c) shall apply in determining the period for which
the taxpayer holds the stock.
(F) Strike price
For purposes of this paragraph, the term "strike price" means
the price at which the option is exercisable.
(G) Applicable stock price
For purposes of subparagraph (D), the term "applicable stock
price" means, with respect to any stock for which an option has
been granted -
(i) the closing price of such stock on the most recent day
on which such stock was traded before the date on which such
option was granted, or
(ii) the opening price of such stock on the day on which
such option was granted, but only if such price is greater
than 110 percent of the price determined under clause (i).
(H) Regulations
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of this
paragraph. Such regulations may include modifications to the
provisions of this paragraph which are appropriate to take
account of changes in the practices of option exchanges or to
prevent the use of options for tax avoidance purposes.
(d) Definitions and special rules
For purposes of this section -
(1) Personal property
The term "personal property" means any personal property of a
type which is actively traded.
(2) Position
The term "position" means an interest (including a futures or
forward contract or option) in personal property.
(3) Special rules for stock
For purposes of paragraph (1) -
(A) In general
Except as provided in subparagraph (B), the term "personal
property" does not include stock. The preceding sentence shall
not apply to any interest in stock.
(B) Exceptions
The term "personal property" includes -
(i) any stock which is part of a straddle at least 1 of the
offsetting positions of which is -
(I) an option with respect to such stock or substantially
identical stock or securities,
(II) a securities futures contract (as defined in section
1234B) with respect to such stock or substantially
identical stock or securities, or
(III) under regulations, a position with respect to
substantially similar or related property (other than
stock), and
(ii) any stock of a corporation formed or availed of to
take positions in personal property which offset positions
taken by any shareholder.
(C) Special rules
(i) For purposes of subparagraph (B), subsection (c) and
paragraph (4) shall be applied as if stock described in
clause (i) or (ii) of subparagraph (B) were personal
property.
(ii) For purposes of determining whether subsection (e)
applies to any transaction with respect to stock described in
clause (ii) of subparagraph (B), all includible corporations
of an affiliated group (within the meaning of section
1504(a)) shall be treated as 1 taxpayer.
(4) Positions held by related persons, etc.
(A) In general
In determining whether 2 or more positions are offsetting,
the taxpayer shall be treated as holding any position held by a
related person.
(B) Related person
For purposes of subparagraph (A), a person is a related
person to the taxpayer if with respect to any period during
which a position is held by such person, such person -
(i) is the spouse of the taxpayer, or
(ii) files a consolidated return (within the meaning of
section 1501) with the taxpayer for any taxable year which
includes a portion of such period.
(C) Certain flowthrough entities
If part or all of the gain or loss with respect to a position
held by a partnership, trust, or other entity would properly be
taken into account for purposes of this chapter by a taxpayer,
then, except to the extent otherwise provided in regulations,
such position shall be treated as held by the taxpayer.
(5) Special rule for section 1256 contracts
(A) General rule
In the case of a straddle at least 1 (but not all) of the
positions of which are section 1256 contracts, the provisions
of this section shall apply to any section 1256 contract and
any other position making up such straddle.
(B) Special rule for identified straddles
For purposes of subsection (a)(2) (relating to identified
straddles), subparagraph (A) and section 1256(a)(4) shall not
apply to a straddle all of the offsetting positions of which
consist of section 1256 contracts.
(6) Section 1256 contract
The term "section 1256 contract" has the meaning given such
term by section 1256(b).
(7) Special rules for foreign currency
(A) Position to include interest in certain debt
For purposes of paragraph (2), an obligor's interest in a
nonfunctional currency denominated debt obligation is treated
as a position in the nonfunctional currency.
(B) Actively traded requirement
For purposes of paragraph (1), foreign currency for which
there is an active interbank market is presumed to be actively
traded.
(e) Exception for hedging transactions
This section shall not apply in the case of any hedging
transaction (as defined in section 1256(e)).
(f) Treatment of gain or loss and suspension of holding period
where taxpayer grantor of qualified covered call option
If a taxpayer holds any stock and grants a qualified covered call
option to purchase such stock with a strike price less than the
applicable stock price -
(1) Treatment of loss
Any loss with respect to such option shall be treated as
long-term capital loss if, at the time such loss is realized,
gain on the sale or exchange of such stock would be treated as
long-term capital gain.
(2) Suspension of holding period
The holding period of such stock shall not include any period
during which the taxpayer is the grantor of such option.
(g) Cross reference
For provision requiring capitalization of certain interest
and carrying charges where there is a straddle, see section
263(g).
-SOURCE-
(Added Pub. L. 97-34, title V, Sec. 501(a), Aug. 13, 1981, 95 Stat.
323; amended Pub. L. 97-448, title I, Sec. 105(a)(1)(A)-(C),
(2)-(4), Jan. 12, 1983, 96 Stat. 2384, 2385; Pub. L. 98-369, div.
A, title I, Secs. 101(a)-(d), 102(e)(2), 103(a), 107(a), July 18,
1984, 98 Stat. 616-619, 624, 627, 629; Pub. L. 99-514, title III,
Sec. 331(a), title XII, Sec. 1261(b), title XVIII, Secs. 1808(c),
1899A(66), Oct. 22, 1986, 100 Stat. 2220, 2591, 2817, 2962; Pub. L.
100-647, title VI, Sec. 6130(c), Nov. 10, 1988, 102 Stat. 3719;
Pub. L. 105-34, title XII, Sec. 1271(b)(9), Aug. 5, 1997, 111 Stat.
1037; Pub. L. 106-170, title V, Sec. 532(c)(1)(F), Dec. 17, 1999,
113 Stat. 1930; Pub. L. 106-554, Sec. 1(a)(7) [title IV, Sec.
401(e)], Dec. 21, 2000, 114 Stat. 2763, 2763A-649.)
-REFTEXT-
REFERENCES IN TEXT
Section 246(c)(3) of this title, referred to in subsec.
(c)(4)(E), was amended by Pub. L. 105-34, title X, Sec. 1015(b)(2),
Aug. 5, 1997, 111 Stat. 922, by striking out subpar. (B) and
redesignating subpar. (C) as (B).
-MISC1-
AMENDMENTS
2000 - Subsec. (d)(3)(B)(i)(II), (III). Pub. L. 106-554 added
subcl. (II) and redesignated former subcl. (II) as (III).
1999 - Subsec. (a)(3)(B)(ii)(II). Pub. L. 106-170 substituted
"1221(a)" for "1221".
1997 - Subsec. (f)(2). Pub. L. 105-34 substituted "The" for
"Except for purposes of section 851(b)(3), the".
1988 - Subsec. (b)(2)(D). Pub. L. 100-647 added subpar. (D).
1986 - Subsec. (c)(4)(E). Pub. L. 99-514, Sec. 331(a), in cl.
(i), inserted "or the stock is disposed of at a loss", in cl. (ii),
substituted "or gains on such options are" for "is", and in cl.
(iii), inserted "or option" and "or the disposition of such stock".
Subsec. (d)(3)(A). Pub. L. 99-514, Sec. 1808(c), inserted at end
"The preceding sentence shall not apply to any interest in stock."
Subsec. (d)(5), (6). Pub. L. 99-514, Sec. 1899A(66), amended
directory language of section 101(b)(2) of Pub. L. 98-369 to
clarify general amendment by sections 101(d) and 102(e) of Pub. L.
98-369. See 1984 Amendment notes below.
Subsec. (d)(7). Pub. L. 99-514, Sec. 1261(b), added par. (7).
1984 - Subsec. (a)(2)(B)(i). Pub. L. 98-369, Sec. 107(a),
designated existing provisions as subcl. (I) and added subcl. (II).
Subsec. (b). Pub. L. 98-369, Sec. 103(a), amended subsec. (b)
generally, substituting provisions dealing with regulations for
provisions dealing with character of gain or loss and wash sales.
Subsec. (c)(4). Pub. L. 98-369, Sec. 101(a)(2), added par. (4).
Subsec. (d)(1). Pub. L. 98-369, Sec. 101(b)(1), struck out
"(other than stock)" before "of a type".
Subsec. (d)(2). Pub. L. 98-369, Sec. 101(a)(1), redesignated
former subpar. (A) as entire par. (2), and struck out former
subpar. (B) which provided that "position" includes any stock
option which is a part of a straddle and which is an option to buy
or sell stock which is actively traded, but does not include a
stock option which (i) is traded on a domestic exchange or on a
similar foreign exchange designated by the Secretary, and (ii) is
of a type with respect to which the maximum period during which
such option may be exercised is less than the minimum period for
which a capital asset must be held for gain to be treated as
long-term capital gain under section 1222(3).
Subsec. (d)(3), (4). Pub. L. 98-369, Sec. 101(b)(2), as amended
by Pub. L. 99-514, Sec. 1899A(66), added par. (3) and redesignated
former pars. (3) and (4) as (4) and (5), respectively.
Subsec. (d)(5). Pub. L. 98-369, Sec. 101(d), amended par. (4)
generally, substituting provisions relating to special rules for
section 1256 contracts for provisions relating to special rules for
regulated futures contracts.
Pub. L. 98-369, Sec. 101(b)(2), as amended by Pub. L. 99-514,
Sec. 1899A(66), redesignated former par. (4) as (5). Former par.
(5) redesignated (6).
Subsec. (d)(6). Pub. L. 98-369, Sec. 102(e)(2), amended par. (5)
generally, substituting references to section 1256 contracts for
references to regulated futures contracts wherever appearing in
heading and text.
Pub. L. 98-369, Sec. 101(b)(2), as amended by Pub. L. 99-514,
Sec. 1899A(66), redesignated former par. (5) as (6).
Subsecs. (f), (g). Pub. L. 98-369, Sec. 101(c), added subsec. (f)
and redesignated former subsec. (f) as (g).
1983 - Subsec. (a)(1)(A). Pub. L. 97-448, Sec. 105(a)(1)(A), (2),
substituted "unrecognized gain" for "unrealized gain" and "which
were offsetting positions with respect to 1 or more positions from
which the loss arose" for "which - (i) were acquired by the
taxpayer before the disposition giving rise to such loss, (ii) were
offsetting positions with respect to the 1 or more positions from
which the loss arose, and (iii) were not part of an identified
straddle as of the close of the taxable year".
Subsec. (a)(3). Pub. L. 97-448, Sec. 105(a)(1)(B), substituted
"Unrecognized gain" for "Unrealized gain" in heading.
Subsec. (a)(3)(A). Pub. L. 97-448, Sec. 105(a)(1)(B), substituted
"unrecognized gain" for "unrealized gain" as term defined,
designated existing definition as cl. (i), and added cl. (ii).
Subsec. (a)(3)(B)(i)(I). Pub. L. 97-448, Sec. 105(a)(1)(C),
substituted "with respect to which, as of the close of the taxable
year, there is unrecognized gain, and" for "which is held by such
taxpayer as of the close of the taxable year and with respect to
which there is unrealized gain, and".
Subsec. (a)(3)(B)(i)(II). Pub. L. 97-448, Sec. 105(a)(1)(C),
substituted "unrecognized gain" for "unrealized gain".
Subsec. (c)(2)(C). Pub. L. 97-448, Sec. 105(a)(4), substituted
"subsection (a)(2)(B)" for "subsection (a)(3)(B)".
Subsec. (d)(4). Pub. L. 97-448, Sec. 105(a)(3), substituted "a
straddle at least 1 (but not all) of the positions of which are
regulated futures contracts, the provisions of this section shall
apply" for "a straddle - (A) at lease 1 (but not all) of the
positions of which are regulated futures contracts, and (B) with
respect to which the taxpayer has elected not to have the
provisions of section 1256 apply, the provisions of this section
shall apply".
EFFECTIVE DATE OF 1999 AMENDMENT
Amendment by Pub. L. 106-170 applicable to any instrument held,
acquired, or entered into, any transaction entered into, and
supplies held or acquired on or after Dec. 17, 1999, see section
532(d) of Pub. L. 106-170, set out as a note under section 170 of
this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by Pub. L. 105-34 applicable to taxable years beginning
after Aug. 5, 1997, see section 1271(c) of Pub. L. 105-34, set out
as a note under section 817 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 applicable with respect to forward
contracts, future contracts, options, and similar instruments
entered into or acquired after Oct. 21, 1988, see section
6130(d)(1) of Pub. L. 100-647, set out as a note under section 988
of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Section 331(b) of Pub. L. 99-514 provided that: "The amendments
made by this section [amending this section] shall apply to
positions established on or after January 1, 1987."
Amendment by section 1261(b) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, with certain
exceptions and qualifications, see section 1261(e) of Pub. L.
99-514, set out as an Effective Date note under section 985 of this
title.
Amendment by section 1808(c) of Pub. L. 99-514 effective, except
as otherwise provided, as if included in the provisions of the Tax
Reform Act of 1984, Pub. L. 98-369, div. A, to which such amendment
relates, see section 1881 of Pub. L. 99-514, set out as a note
under section 48 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Section 101(e) of Pub. L. 98-369 provided that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendments made by this section [amending this
section] shall apply to positions established after December 31,
1983, in taxable years ending after such date.
"(2) Special rule for offsetting position stock. - In the case of
any stock of a corporation formed or availed of to take positions
in personal property which offset positions taken by any
shareholder, the amendments made by this section shall apply to
positions established on or after May 23, 1983, in taxable years
ending on or after such date.
"(3) Subsection (c). - The amendment made by subsection (c)
[amending this section] shall apply to positions established after
June 30, 1984, in taxable years ending after such date.
"(4) Subsection (d). - The amendment made by subsection (d)
[amending this section] shall apply to positions established after
the date of the enactment of this Act in taxable years ending after
such date."
Amendment by section 102(e)(2) of Pub. L. 98-369 applicable to
positions established after July 18, 1984, in taxable years ending
after that date, except as otherwise provided, see section 102(f),
(g) of Pub. L. 98-369, set out as a note under section 1256 of this
title.
Section 103(b), (c) of Pub. L. 98-369, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(b) Requirement That Regulations Be Issued Within 6 Months After
the Date of Enactment. - The Secretary of the Treasury or his
delegate shall prescribe initial regulations under section 1092(b)
of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]
(including regulations relating to mixed straddles) not later than
the date 6 months after the date of the enactment of this Act [July
18, 1984].
"(c) Effective Date of Regulations With Respect to Mixed
Straddles. - The regulations described in subsection (b) with
respect to the application of section 1233 of the Internal Revenue
Code of 1986 to mixed straddles shall not apply to mixed straddles
all of the positions of which were established before January 1,
1984."
Section 107(e) of Pub. L. 98-369 provided that: "The amendments
made by this section [amending this section and sections 1236 and
1256 of this title] shall apply to positions entered into after the
date of the enactment of this Act [July 18, 1984], in taxable years
ending after such date."
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 97-448 effective, except as otherwise
provided, as if it had been included in the provision of the
Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
EFFECTIVE DATE
Section 508 of title V of Pub. L. 97-34, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(a) In General. - Except as otherwise provided in this section,
the amendments made by this title [enacting this section and
sections 1234A and 1256 of this title, amending sections 263, 341,
1212, 1221, 1231, 1232, 1233, 1236, and 6653 of this title, and
enacting provisions set out as a note under section 1256 of this
title] shall apply to property acquired and positions established
by the taxpayer after June 23, 1981, in taxable years ending after
such date.
"(b) Identification Requirements. -
"(1) Under section 1236 of code. - The amendments made by
section 506 [amending section 1236 of this title] shall apply to
property acquired by the taxpayer after the date of the enactment
of this Act [Aug. 13, 1981] in taxable years ending after such
date.
"(2) Under section 1256(e)(2)(c) of code. - Section
1256(e)(2)(C) of the Internal Revenue Code of 1986 [formerly
I.R.C. 1954] (as added by this title) shall apply to property
acquired and positions established by the taxpayer after December
31, 1981, in taxable years ending after such date.
"(c) Election With Respect to Property Held on June 23, 1981. -
If the taxpayer so elects (at such time and in such manner as the
Secretary of the Treasury or his delegate shall prescribe) with
respect to all regulated futures contracts or positions held by the
taxpayer on June 23, 1981, the amendments made by this title shall
apply to all such contracts and positions, effective for periods
after such date in taxable years ending after such date. For
purposes of the preceding sentence, the term 'regulated futures
contract' has the meaning given to such term by section 1256(b) of
the Internal Revenue Code of 1986, and the term 'position' has the
meaning given to such term by section 1092(d)(2) of such Code."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
TREATMENT OF CERTAIN LOSSES ON STRADDLES ENTERED INTO BEFORE
EFFECTIVE DATE OF ECONOMIC RECOVERY TAX ACT OF 1981
Section 108 of Pub. L. 98-369, as amended by Pub. L. 99-514, Sec.
2, title XVIII, Sec. 1808(d), Oct. 22, 1986, 100 Stat. 2095, 2817,
provided that:
"(a) General Rule. - For purposes of the Internal Revenue Code of
1986 [formerly I.R.C. 1954], in the case of any disposition of 1 or
more positions -
"(1) which were entered into before 1982 and form part of a
straddle, and
"(2) to which the amendments made by title V of the Economic
Recovery Tax Act of 1981 [Pub. L. 97-34, see Effective Date note
above] do not apply,
any loss from such disposition shall be allowed for the taxable
year of the disposition if such loss is incurred in a trade or
business, or if such loss is incurred in a transaction entered into
for profit though not connected with a trade or business.
"(b) Loss Incurred in a Trade or Business. - For purposes of
subsection (a), any loss incurred by a commodities dealer in the
trading of commodities shall be treated as a loss incurred in a
trade or business.
"(c) Net Loss Allowed. - If any loss with respect to a position
described in paragraphs (1) and (2) of subsection (a) is not
allowable as a deduction (after applying subsections (a) and (b)),
such loss shall be allowed in determining the gain or loss from
dispositions of other positions in the straddle to the extent
required to accurately reflect the taxpayer's net gain or loss from
all positions in such straddle.
"(d) Other Rules. - Except as otherwise provided in subsections
(a) and (c) and in sections 1233 and 1234 of such Code, the
determination of whether there is recognized gain or loss with
respect to a position, and the amount and timing of such gain or
loss, and the treatment of such gain or loss as long-term or
short-term shall be made without regard to whether such position
constitutes part of a straddle.
"(e) Straddle. - For purposes of this section, the term
'straddle' has the meaning given to such term by section 1092(c) of
the Internal Revenue Code of 1986 as in effect on the day after the
date of the enactment of the Economic Recovery Tax Act of 1981
[Aug. 13, 1981], and shall include a straddle all the positions of
which are regulated futures contracts.
"(f) Commodities Dealer. - For purposes of this section, the term
'commodities dealer' means any taxpayer who -
"(1) at any time before January 1, 1982, was an individual
described in section 1402(i)(2)(B) of the Internal Revenue Code
of 1986 [formerly I.R.C. 1954] (as added by this subtitle), or
"(2) was a member of the family (within the meaning of section
704(e)(3) of such Code) of an individual described in paragraph
(1) to the extent such member engaged in commodities trading
through an organization the members of which consisted solely of
-
"(A) 1 or more individuals described in paragraph (1), and
"(B) 1 or more members of the families (as so defined) of
such individuals.
"(g) Regulated Futures Contracts. - For purposes of this section,
the term 'regulated futures contracts' has the meaning given to
such term by section 1256(b) of the Internal Revenue Code of 1986
(as in effect before the date of enactment of this Act [July 18,
1984]).
"(h) Syndicates. - For purposes of this section, any loss
incurred by a person (other than a commodities dealer) with respect
to an interest in a syndicate (within the meaning of section
1256(e)(3)(B) of the Internal Revenue Code of 1986 [formerly I.R.C.
1954]) shall not be considered to be a loss incurred in a trade or
business."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 246, 263, 475, 731, 871,
988, 1233, 1234B, 1256, 1258, 1259 of this title.
-FOOTNOTE-
(!1) See References in Text note below.
-End-
-CITE-
26 USC [PART VIII - REPEALED] 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
[PART VIII - REPEALED]
-HEAD-
[PART VIII - REPEALED]
-End-
-CITE-
26 USC Secs. 1101 to 1103 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
[PART VIII - REPEALED]
-HEAD-
[Secs. 1101 to 1103. Repealed. Pub. L. 101-508, title XI, Sec.
11801(a)(34), Nov. 5, 1990, 104 Stat. 1388-521]
-MISC1-
Section 1101, added May 9, 1956, ch. 240, Sec. 10(a), 70 Stat.
139; amended Oct. 2, 1976, Pub. L. 94-452, Sec. 2(a), 90 Stat.
1503; Oct. 4, 1976, Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A),
90 Stat. 1834; Oct. 19, 1982, Pub. L. 97-354, Sec. 5(a)(34), 96
Stat. 1695, related to distributions of property pursuant to Bank
Holding Company Act.
Section 1102, added May 9, 1956, ch. 240, Sec. 10(a), 70 Stat.
143; amended Dec. 27, 1967, Pub. L. 90-225, Sec. 1, 81 Stat. 730;
Oct. 2, 1976, Pub. L. 94-452, Sec. 2(a), 90 Stat. 1508; Oct. 4,
1976, Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A), 90 Stat.
1834, related to basis of property acquired in distributions,
periods of limitation, allocation of earnings and profits, and
itemization of property.
Section 1103, added May 9, 1956, ch. 240, Sec. 10(a), 70 Stat.
144; amended Oct. 2, 1976, Pub. L. 94-452, Sec. 2(a), 90 Stat.
1509; Oct. 4, 1976, Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A),
90 Stat. 1834, related to definitions for this part.
SAVINGS PROVISION
For provisions that nothing in repeal by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
-End-
-CITE-
26 USC [PART IX - REPEALED] 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
[PART IX - REPEALED]
-HEAD-
[PART IX - REPEALED]
-End-
-CITE-
26 USC Sec. 1111 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
[PART IX - REPEALED]
-HEAD-
[Sec. 1111. Repealed. Pub. L. 94-455, title XIX, Sec. 1901(a)(134),
Oct. 4, 1976, 90 Stat. 1786]
-MISC1-
Section, added Pub. L. 87-403, Sec. 1(a), Feb. 2, 1962, 76 Stat.
4, related to distribution of stock pursuant to order enforcing
antitrust laws.
-End-
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