Page:United States Statutes at Large Volume 53 Part 1.djvu/56

 CODIFICATION OF INTERNAL REVENUE LAWS 44 manner described in section 372, the basis shall be that prescribed in such section with respect to such property. (18) PROPErrT RECEVED IN CERTAIN CORPORATE LIQUIDATIONS.- If the property was acquired by a shareholder in the liquidation of a corporation in cancellation or redemption of stock with respect to which gain was realized, but with respect to which, as the result of an election made by him under paragraph (7) of section 112 (b), of the Revenue Act of 1938, 52 Stat. 487, the extent to which gain was recognized was determined under such para- graph, then the basis shall be the same as the basis of such stock cancelled or redeemed in the liquidation, decreased in the amount of any money received by him, and increased in the amount of gain recognized to him. (b) ADTiSTED BAsIs. - 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 subsection (a), adjusted as hereinafter provided. (1) GENERAL RULE. -Proper adjustment in respect of the prop- erty shall in all cases be made- (A) For expenditures, receipts, losses, or other items, prop- erly chargeable to capital account, including taxes and other carrying charges on unimproved and unproductive real property, but no such adjustment shall be made for taxes or other carrying charges for which deductions have been taken by the taxpayer in determining net income for the taxable year or prior taxable years; (B) in respect of any period since February 28, 1913, for exhaustion, wear and tear, obsolescence, amortization, and deple- tion, to the extent allowed (but not less than the amount allow- able) under this chapter or prior income tax laws. Where for any taxable year prior to 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; (C) in respect of any period prior to March 1, 1913, for exhaustion, wear and tear, obsolescence, amortization, and deple- tion, to the extent sustained; (D) in the case of stock (to the extent not provided for in the foregoing subparagraphs) 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, Feb. 24, 1919, c. 18, 40 Stat. 1057, or the Revenue Act of 1921, Nov. 23, 1921, c. 136, 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); (E) to the extent provided in section 337 (f) in the case of the stock of United States shareholders in a foreign personal holding company; and (F) to the extent provided in section 28 (h) in the case of amounts specified in a shareholder's consent made under sec- tion 28. (2) SUBSTTUrrED BASIS. -The term "substituted basis" as used in this subsection means a basis determined under any provision 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-

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