Page:United States Statutes at Large Volume 68A.djvu/356

 316

INTERNAL REVENUE CODE OF 1954

or the corresponding provisions of prior internal revenue laws shall be applied to reduce the basis for determining gain or loss on sale or exchange of the following categories of property in the hands of the transferor immediately after the transfer, and property acquired within 24 months after such transfer by an expenditure or investment to which section 1081(b) relates on account of the acquisition of which gain is not recognized under such subsection, in the following order: (A) property of a character subject to the allowance for depreciation under section 167; (B) property (not described in subparagraph (A)) with respect to which a deduction for amortization is allowable under section 168 or 169; (C) property with respect to which a deduction for depletion is allowable under section 611 b u t not allowable under section 613; (D) stock and securities of corporations not members of the system group of which the transferor is a member (other than stock or secm-ities of a corporation of which the transferor is a subsidiary); (E) securities (other than stock) of corporations which are members of the system group of which the transferor is a member (other than securities of the transferor or of a corporation of which the transferor is a subsidiary); (F) stock of corporations which are members of the system group of which the transferor is a member (other than stock of the transferor or of a corporation of which the transferor is a subsidiary); (G) all other remaining property of the transferor (other than stock or securities of the transferor or of a corporation of which the transferor is a subsidiary). The manner and amount of the reduction to be applied to particular property within any of the categories described in subparagraphs (A) to (G), inclusive, shall be determined under regulations prescribed by the Secretary or his delegate. (3) BASIS IN CASE OF PRE-1942 ACQUISITION.—Notwithstanding

the provisions of paragraph (1) or (2), if the property was acquired in a taxable year beginning before January 1, 1942, in any manner described in section 372 of the Internal Revenue Code of 1939 before its amendment by the Revenue Act of 1942, the basis shall be that prescribed in such section (before its amendment by such Act) with respect to such property. (b) TRANSFERS TO CORPORATIONS.—If, in connection with a transfer subject to the provisions of section 1081(a), (b), or (e) or the corresponding provisions of prior internal revenue laws, the property was acquired by a corporation, either as paid-in surplus or as a contribution to capital, or in consideration for stock or securities issued by the corporation receiving the property (including cases where part of the consideration for the transfer of such property to the corporation consisted of property or money in addition to such stock or securities), then the basis shall be the same as it would be in the hands of the transferor, increased in the amount of gain or decreased in the amount of loss recognized to the transferor on such transfer under the law applicable to the year in which the transfer was made. § 1082(a)(2)

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