Page:United States Statutes at Large Volume 48 Part 1.djvu/735

 73d CONGRESS. SESS. II. CH. 277 . MAY 10, 1934 . 709 basis for determining gain shall be such fair market value. In INCOME TAX . COMPUTATION deter mining the fa ir market valu e of stock in a corporatio n as OF NET INCOME- of March 1, 1913, due regard shall be given to the fair market CA eis based on fair value of the assets of the corporation as of that date. market value. (b) ADJUSTED BAsis .-The adjusted basis for determining the gain Adjusted b's for determining gain or or loss from the sale or other disposition of property, whenever toss. acquired, shall be the basis determined under subsection (a), adjusted as hereinafter provided. (1) GENERAL RUL E .-Prop er ad j ustment in respect of the Prop- Adjust metet nt to cap's- erty shall in all cases be made- tat account. (A) for expenditures, receipts, losses, or other items, prop- Carrying charges mp o~ erly chargeable to capital account, including taxes and other arty. carrying charges on unimproved and unproductive real prop- erty, but no such adjustment shall be made for taxes or other carryin g charges for which deducti ons have been taken by the taxpayer in determining net income for the taxable year or prior taxable years ; (B) in respect of any perio d since Februa ry 28, 1913, for FD pl e n, etc., since exhaustion, wear and tear, obsolescence, amortization, and deple- tion, to the extent allowed (but not less than the amount allow- able) under this Act or prior income tax laws. Where for any a0 Maximnm allow- taxable year prior to the taxable year 1932 the depletion allow- Bas ed on dis cov ery value or percentage of ante wa s based on di scovery value or a percenta ge of income, 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 percent- age of income ; (C) in respect of any period prior to March 1, 1913, for . prior to exhaustion, wear and tear, obsolescence, amortization, and deple- tio n, to the ext ent sus tained ; D) in the case of stock (to the extent not provided for in Basis red uced by ta x- ( tree distributions . the for egoing subpar agraphs) for t he 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 Vol. 40, p .1070; cot. corporation under the provisions of the Revenue Act of 1918 or 42' p' 245' 1921, out of its earnings or profits which were taxable in accord- ance with the provisions of section 218 of the Revenue Act of 1918 or 1921). (2) SUBsTITUTEn BASis .-The te r m " subst ituted basis " as used Subst ituted b asis. i n this subsection means a basis determined under any provision Determination of. of subsection (a) of this section or under any corresponding pro- vision of a prior income tax law, providing that the basis shall be determined - (A) by reference to the basis in the hands of a transferor, donor, or grantor, or (B) b y reference t o other proper ty held at an y time by the person for whom the basis is to be determined. Whenever it ap pears that th e basis of pr operty in the hands of the taxpayer is a substituted basis, then the adjustments provided in paragraph (1) of this subsection shall be made after first mak- ing in respect of such substituted basis proper adjustments of a Adjustment- similar nature in respect of the period during which the property was held by the transfero r, donor, or grantor, or du ring 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.
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