Page:United States Statutes at Large Volume 53 Part 2.djvu/399

 53 STAT.] 76TH CONG. , 1ST SESS.-CH. 247-JUNE 29, 1939 SEC. 215. DISCHARGE OF INDEBTEDNESS. (a) INCOME FROM DISCHARGE OF INDEBTEDNESS.- Section 22 (b) of the Internal Revenue Code (relating to exclusions from gross income) is amended by adding at the end thereof the following new para- graph: "(9) INCOME FROM DISCHARGE OF INDEBTEDNESS.- In the case of a corporation, the amount of any income of the taxpayer attribut- able to the discharge, within the taxable year, of any indebted- ness of the taxpayer or for which the taxpayer is liable evidenced by a security (as hereinafter in this paragraph defined) if- (A) it is established to the satisfaction of the Commis- sioner, or (B) it is certified to the Commissioner by any Federal agency authorized to make loans on behalf of the United States to such corporation or by any Federal agency author- ized to exercise regulatory power over such corporation, that at the time of such discharge the taxpayer was in an unsound financial condition, and if the taxpayer makes and files at the time of filing the return, in such manner as the Commissioner, with the approval of the Secretary, by regulations prescribes, its consent to the regulations prescribed under section 113 (b) (3) then in effect. In such case the amount of any income of the taxpayer attributable to any unamortized premium (computed as of the first day of the taxable year in which such discharge occurred) with respect to such indebtedness shall not be included in gross income and the amount of the deduction attributable to any unamortized discount (computed as of the first day of the taxable year in which such discharge occurred) with respect to such indebtedness shall not be allowed as a deduc- tion. As used in this paragraph the term 'security' means any bond, debenture, note, or certificate, or other evidence of indebt- edness, issued by any corporation, in existence on June 1, 1939. This paragraph shall not apply to any discharge occurring before the date of the enactment of the Revenue Act of 1939, or in a taxable year beginning after December 31, 1942." (b) BASIS REDUCED.- Section 113 (b) of the Internal Revenue Code (relating to the adjusted basis of property) is amended by adding at the end thereof the following new paragraph: "(3) DISCHARGE OF INDEWrEDNESS.-Where in the case of a cor- poration any amount is excluded from gross income under section 22 (b) (9) on account of the discharge of indebtedness the whole or a part of the amount so excluded from gross income shall be applied in reduction of the basis of any property held (whether before or after the time of the discharge) by the tax- payer during any portion of the taxable year in which such discharge occurred. The amount to be so applied (not in excess of the amount so excluded from gross income, reduced by the amount of any deduction disallowed under section 22 (b) (9)) and the particular properties to which the reduction shall be allocated, shall be determined under regulations (prescribed by the Commissioner with the approval of the Secretary) in effect at the time of the filing of the consent by the taxpayer referred to in section 22 (b) (9). The reduction shall be made as of the first day of the taxable year in which the discharge occurred except in the case of property not held by the taxpayer on such first day, in which case it shall take effect as of the time the holding of the taxpayer began." 875 Exclusions from gross income. Ante, p. 10. I.R. C. 22(b). Income from dis- charge of corporate indebtedness. "Security" defined. Application of para- graph. Adjusted Ilnsis of property relduccd. Ante, p. 44 . I.R.C.§113(b). Discharge of indebt- edness. 98907°-39---T 2--24

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