Page:United States Statutes at Large Volume 72 Part 1.djvu/1712

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PUBLIC LAW 86-866HSEPT. 2, 1968

[72 S T A T.

if such sale occurred in, or such deduction was allowed for, a period on or after the changeover date and before the taxpayer's 1956 ladjustment date. (3) DEPRECIATION ALLOWABLE FROM CHANGEOVER TO I 9 5 6 ADJUSTMENT DATE.—For depreciation allowable, under the terms

and conditions prescribed by the Commissioner in connection with the changeover, for all periods on and after the changeover date and before the taxpayer's 1956 adjustment date. This subsection shall apply only with respect to taxable years beginning lafter December 31, 1955. (e)

26 USC 1016.

EFFECT ON PERIOD FROM CHANGEOVER TO 1956

ADJUSTMENT

DATE.—If the taxpayer has made an election under this section, then in determining the adjusted basis of any retirement-straight line property as of any time on or after the cnangeover date and before the taxpayer's 1956 adjustment date, in lieu of the adjustments for depreciation provided in section 1016(a)(2) and (3) of the Internal Revenue Code of 1954 and the corresponding provisions of prior revenue laws, the following adjustments shall be made: (1) FOR PRESCRIBED RESERVE.—For the amount of the reserve

prescribed by the Commissioner in connection with the changeover. (2) FOR ALLOWABLE DEPRECIATION.—For the depreciation allowable under the terms and conditions prescribed by the Commissioner in connection with the changeover. This subsection shall not apply in determining adjusted basis for purposes of section 437(c) of the Internal Revenue Code of 1939. This subsection shall apply only with respect to taxable years beginning on or after the changeover date and before the taxpayer's 1956 adjustment date. (f) EQUITY INVESTED CAPITAL, ETC.—If an election is made under this section, then (notwithstanding the terms and conditions prescribed by the Commissioner in connection with the changeover) — (1) EQUITY INVESTED CAPITAL.—In determining equity invested capital under sections 458 and 718 of the Internal Revenue Code of 1939, accumulated earnings and profits as of the changeover date, and as of the beginning of each taxable year thereafter, shall be reduced by the depreciation sustained before March 1, 1913, as computed under subsection (d)(1)(B); and (2) DEFINITION OF EQUITY CAPITAL.—In determining the adjusted basis of assets for the purpose of section 437(c) of the Internal Revenue Code of 1939 (and in addition to any other adjustments required by such Code), the basis shall be reduced by depreciation sustained oefore March 1, 1913 (as computed under subsection (d)), together with any depreciation allowable under subsection (e)(2) for any period before the year for which the excess profits credit is being computed. (g) DEFINITIONS.—For purposes of this section— (1) DEPRECIATION.—The term "depreciation" means exhaustion, wear and tear, and obsolescence. (2) CHANGEOVER.—The term "changeover" means a change from the retirement to the straight line method of computing the allowance of deductions for depreciation. (3) CHANGEOVER DATE.—The term "changeover date" means the first day of the first taxable year for which the changeover was effective. (4) 1956 ADJUSTMENT DATE.—The term "1956 adjustment date" means, in the case of any taxpayer, the first day of his first taxable year beginning after December 31, 1955. (5) PREDECESSOR.—The term "predecessor" means any person from whom property of a kind or class to which this section refers

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