Page:United States Statutes at Large Volume 58 Part 1.djvu/67

 78TH CONG., 2D SESS. -- CH. 63-FEB. 25,1944 difference between the adjusted basis for depletion of such timber in the hands of the taxpayer and the fair market value of such timber. Such fair market value shall be the fair market value as of the first day of the taxable year in which such timber is cut, and shall thereafter be considered as the cost of such cut timber to the taxpayer for all purposes for which such cost is a necessary factor. If a taxpayer makes an election under this paragraph such election shall apply with respect to all timber which is owned by the taxpayer or which the taxpayer has a contract right to cut and shall be binding upon the taxpayer for the taxable year for which the election is made and for all subse- quent years, unless the Commissioner, on showing of undue hard- ship, permits the taxpayer to revoke his election; such revocation, however, shall preclude any further elections under this para- graph except with the consent of the Commissioner. "(2) In the case of the disposal of timber (held for more than six months prior to such disposal) by the owner thereof under any form or type of contract by virtue of which the owner retains an economic interest in such timber, the difference between the amount received for such timber and the adjusted depletion basis thereof shall be considered as though it were a gain or loss, as the case may be, upon the sale of such timber." (b) TECHNICAL AYNDMENTr.- Section 117 (j) (1) (relating to gains and losses from involuntary conversion and from the sale or exchange of certain property used in the trade or business) is amended by inserting at the end thereof the following: "Such term also in- cludes timber with respect to which subsection (k) (1) or (2) is applicable." (c) EFFECTIVE DATE. -A provision having the effect of section 117 (k) (2) of the Internal Revenue Code inserted by the amendment made by subsection (a) shall be deemed to be included in the revenue laws respectively applicable to taxable years beginning after February 28, 1913. The amendment made by subsection (b) shall be effective as if it were made by section 151 of the Revenue Act of 1942. SEC. 128. ACQUISITIONS TO AVOID INCOME OR EXCESS PROFITS TAX. (a) IN GENERAL. -Chapter 1 is amended by inserting after section 128 the following new section: "SEC. 129. ACQUISITIONS MADE TO EVADE OR AVOID INCOME OR EXCESS PROFITS TAX. Disposal when own- er retains interest. 56 Stat. 846 . 26 U. S. C., Supp. III, § 117 (j) (1). Ante, p. 46; supra. Supra. 56 Stat. 846 . 26 U. S. C., Supp. III, 117 note. M Stat. 86. 26 U. 8. C.. Slipp. 111, § 128. "(a) DISALLOWANCE OF DEDUCTION, CREDrr, O ALOWANCE.- If (1) any person or persons acquire, on or after October 8, 1940, directly or indirectly, control of a corporation, or (2) any corporation acquires, on or after October 8, 1940, directly or indirectly, property of another corporation, not controlled, directly or indirectly, immediately prior to such acquisition, by such acquiring corporation or its stockholders, the basis of which property, in the hands of the acquiring corporation, is determined by reference to the basis in the hands of the transferor corporation, and the principal purpose for which such acquisition was made is evasion or avoidance of Federal income or excess profits tax by securing the benefit of a deduction, credit, or other allowance which such person or corporation would not otherwise enjoy, then such deduction, credit, or other allowance shall not be allowed. For the purposes of clauses (1) and (2), control means the ownership of stock possessing at least 50 per centum of the total combined voting power of all classes of stock entitled to vote or at least 50 per centum of the total value of shares of all classes of stock of the corporation. 47 58 STAT.]

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