Page:United States Statutes at Large Volume 68A.djvu/166

 126

INTERNAL REVENUE CODE OF 1954

to the undistributed earnings and profits of the acquiring corporation for such taxable year (computed without regard to any earnings and profits received from the distributor or transferor corporation, as described in subparagraph (A) of this paragraph) as the number of days in the taxable year after the date of distribution or transfer bears to the total number of days in the taxable year. (3) CAPITAL LOSS CAERYOVEE.—The capital loss carryover determined under section 1212, subject to the following conditions and limitations: (A) The taxable year of the acquiring corporation to which the capital loss carri^^over of the distributor or transferor corporation is first carried shall be the first taxable year ending after the date of distribution or transfer. (B) The capital loss carryover shall be a short-term capital loss in the taxable year determined under subparagraph (A) b u t shall be limited to an amount which bears the same ratio to the net capital gain (determined without regard to a short-term capital loss attributable to capital loss carryover), if any, of the acquiring corporation in such taxable year as the number of days in the taxable year after the date of distribution or transfer bears to the total number of days in the taxable year. (C) For purposes of determining the amount of such capital loss carryover to taxable years following the taxable year determined under subparagraph (A), the net capital gain in the taxable year determined under subparagraph (A) shall be considered to be an amount equal to the amount determined under subparagraph (B). (4) M E T H O D OF ACCOUNTING.—The acquiring corporation shall use the method of accounting used by the distributor or transferor corporation on the date of distribution or transfer unless different methods were used by several distributor or transferor corporations or by a distributor or transferor corporation and the acquiring corporation. If different methods were used, the acquiring corporation shall use the method or combination of methods of computing taxable income adopted pursuant to regulations prescribed by the Secretary or his delegate. (5) INVENTOEIES.—In any case in which inventories are received by the acquiring corporation, such inventories shall be taken by such corporation (in determining its income) on the same basis on which such inventories were taken by the distributor or transferor corporation, unless different methods were used by several distributor or transferor corporations or by a distributor or transferor corporation and the acquiring corporation. If different methods were used, the acquiring corporation shall use the method or combination of methods of taldng inventory adopted pursuant to regulations prescribed by the Secretary or his delegate. (6) M E T H O D OP COMPUTING DEPEECIATION ALLOWANCE.—The

acquiring corporation shall be treated as the distributor or transferor corporation for purposes of computing the depreciation allowance under paragraphs (2), (3), and (4) of section 167(b) on property acquired in a distribution or transfer with respect to that part or § 381(c)(2)(B)

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