-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[V. Repealed.]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 Repealed.]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 |
