Page:United States Statutes at Large Volume 68A.djvu/384

 344

INTERNAL REVENUE CODE OF 1954

(2) PORTION TREATED AS ORDINARY INCOME.—To the extent that such amount plus the aggregate of the amounts of previous such recoveries exceed that part of the aggregate of such deductions, which did not result in a reduction of any tax of the taxpayer under such chapters and do not exceed that part of the aggregate of such deductions which did result in a reduction of any tax of the taxpayer under such chapters, such amount shall be included in gross income b u t shall not be deemed a gain on the involuntary conversion of property as a result of its destruction or seizure. (3) PORTION TREATED AS GAIN ON INVOLUNTARY CONVERSION.—

To the extent that such amount plus the aggregate of the amounts of previous such recoveries exceed the aggregate of the allowable deductions in prior taxable years on account of the destruction or seizure of property described in such section 127(a), such amount shall be considered a gain on the involuntary conversion of property as a result of its destruction or seizure and shall be recognized or not recognized as provided in section 1033 (relating to involuntary conversions). (4) OBLIGATIONS NOT DISCHARGED.—If for any previous taxable

year the taxpayer chose under section 127(b) of the Internal Revenue Code of 1939 to treat any obligations and liabilities as discharged or satisfied out of the property or interest described in such section 127(a), and if such obligations and liabilities were not so discharged or satisfied, the amount of such obligations and liabilities treated as discharged or satisfied under such section 127 (b) shall be considered for purposes of this part as a deduction by reason of such section 127(a) which did not result in a reduction of any tax of the taxpayer under such chapters 1 or 2. (5) ALLOWABLE DEDUCTION NOT ALLOWED.—For purposes of this subsection, an allowable deduction for any taxable year on account of the destruction or seizure of property described in such section 127(a) shall, to the extent not allowed in computing the tax of the taxpayer for such taxable year, be considered an allowable deduction which did not result in a reduction of any tax of the taxpayer under such chapters 1 or 2. SEC. 1333. TAX ADJUSTMENT MEASURED BY PRIOR BENEFITS.

If this section applies to the taxable year pursuant to an election made by the taxpayer under section 1335 or section 127(c)(5) of the Internal Revenue Code of 1939— (1) AMOUNT OF RECOVERY.—The amount of the recovery in the

taxable year of any money or property in respect of property considered under section 127(a) of the Internal Revenue Code of 1939 as destroyed or seized, shall be an amount equal to the aggregate of such money and the fair market value of such property, determined as of the date of the recovery. For purposes of this section, in the case of the recovery of the same property or interest considered under such section 127(a) as destroyed or seized, the fair market value of such property or interest shall, at the option of the taxpayer, be considered an amount equal to the adjusted basis (for determining loss) of such property or interest in the hands of the taxpayer on the date such property or interest was considered under such section 127(a) as destroyed or seized. The amount of the recovery determined under this paragraph shall be reduced for pur§ 1332(b)(2)

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