Page:United States Statutes at Large Volume 48 Part 1.djvu/730

 704 INCOME TAX. SEC. 112. RECOGNITION OF GAIN OR LOSS. COMPUTATION OF NET INCOME - Could. (a) GENERAL RULE .-Upon the sale or exchange of property the Entire amount recog- entire amount of the gain or loss, determined under section 111, shall ni Exc Exce pti ons. be recognized, except as hereinafter provided in this section. No gain or loss on ex- changing for similar uses. Stock for stock of same co rporat ion. Stock for stock on reorganization. Proper ty for stock of party to reorganiza- tion. Transfers for stock of corporation under same control . Limitation. Gain from exchanges not solely in kind. Recognition of. Reorganization dis- tribution construed as a taxable dividend. Accumulations after February 1913. Tax on gain from prope rty ex change. Gain of corporation. 73d CONGRESS. SESS. II. CFI. 2'77. MAY 10, 193 4. (b) EXC HAN GES SOL ELY IN KIND .- (1) PROPERTY HELD FOR PRODUCTIVE USE OR INVESTMENT. -N O gain or loss sh all be r ecognize d if pro perty he ld for p roductiv e use in trade or business or for investment (not including stock in trade or other property held primarily for sale, nor stocks, bonds, notes, choses in action, certificates of trust or beneficial interest, or other securities or evidences of indebtedness or interest) is exchanged solely for property of a like kind to be held either for productive use in trade or business or for investment. (2) STOCK FOR STOCK OF SAME CORPORATION .-NO gain or loss shall be recogni zed if c ommon st ock in a corpora tion is exchange d solely for common stock in the same corporation, or if preferred stock in a corporation is exchanged solely for preferred stock in the salve corporation. (3) STOCK FOR STOCK ON REORGANIZATION .-No gain or loss shall be recogni zed if s tock or securiti es in a corporat ion a pa rty to a reorganization are, in pursuance of the plan of reorganization, ex changed solely f or stock or secu rities i n such c orporati on or in an other co rporatio n a part y to the reorgan ization. (4) SAME-GAIN OF CORPORATION .-No gain or loss shall be recognized if a corporation a party to a reorganization exchanges property, in pursuance of the plan of reorganization, solely for stock or securities in another corporation a party to the reorgani- zat ion. (5) TRANSFER TO CORPORATI ON CONTROLLED BY TRANSFEROR .-NO gain or loss shall be recognized if property is transferred toa corporat ion by o ne or mo re person s solely in exch ange for stock o r securiti es in su ch corpo ration, a nd immed iately a fter the exchang e such person or persons are in control of the corporation ; but in the case of an exchange by two or more persons this paragraph shall apply only if the amount of the stock and securities received by each is substantially in proportion to his interest in the property prior to the exchange. (C) GAI N F ROM EX CHA NGES NOT SOLELY IN KIND .- (1) If a n exchan ge would be withi n the pr ovisions of subs ection (b) (1), (2), (3), or (5) of this section if it were not for the fact that the property received in exchange consists not only of property permitte d by suc h paragr aph to be receive d withou t the re cognitio n of gain, but also of other property or money, then the gain, if any, to the recipient shall be recognized, but in an amount not in excess of the sum of such money and the fair market value of such other prope rty. (2) If a distribution made in pursuance of a plan of reorgani- zation is within the provisions of paragraph (1) of this subsection but has the eff ect of t he distr ibution of a tax able div idend, t hen there shall be taxed asa divide nd to each distr ibute e suc h an amoun t of the gain recognized under paragraph (1) as is not in excess of his ratable share of the undistributed earnings and profits of the corporation accumulated after February 28, 1913 . The remainder, if any, of the ga in recognized under paragraph (1) shall be taxed as a gain from the exchange of property. (d) SAME-GAIN OF CORPORATION .-If an e xchang e woul d be within the provisions of subsection (b) (4) of this section if it were not for the fact tha t the pr operty re ceived i n exchan ge consi sts not