Page:United States Statutes at Large Volume 78.djvu/897

 78 STAT. ]

PUBLIC LAW 88-570-SEPT. 2, 1964

855

" (B) the amount of the gain on the sale of such property returned as income for periods prior to such reacquisition. " (2) LIMITATION.—The amount of ^ain determined under pararaph (1) resulting from a reacquisition during any taxable year eginning after the date of the enactment of this section shall not exceed the amount by which the price at which the real property was sold exceeded its adjusted basis, reduced by the sum of— " (A) the amount of the gain on the sale of such property returned as income for periods prior to the reacquisition of such property, and " (B) the amount of money and the fair market value of other property (other than obligations of the purchaser received with respect to the sale of such property) paid or transferred by the seller in connection with the reacquisition of such property. For purposes of this paragraph, the price at which real property is sold is the gross sales price reduced by the selling commissions, legal fees, and other expenses incident to the sale of such property which are properly taken into account in determining g a m or loss on such sale. "(3) G A I N RECOGNIZED.—Except as provided in this section, the gain determined under this subsection resulting from a reacquisition to which subsection (a) applies shall be recognized, notwithstanding any other provision of this subtitle. "(c) BASIS or EEACQUIRED REAL PROPERTY.—If subsection (a) applies to the reacquisition of any real property, the basis of such property upon such reacquisition shall be the adjusted basis of the indebtedness to the seller secured by such property (determined as of the date of reacquisition), increased by the sum of— "(1) the amount of the gain determined under subsection (b) resulting from such reacquisition, and "(2) the amount described in subsection (b)(2)(B). If any indebtedness to the seller secured by such property is not discharged upon the reacquisition of such property, the basis of such indebtedness shall be zero.

f

" (d) INDEBTEDNESS TREATED AS WORTHLESS PRIOR TO REACQUISI-

TION.—If, prior to a reacquisition of real property to which subsection (a) applies, the seller has treated indebtedness secured by such property as having become worthless or partially worthless— "(1) such seller shall be considered as receiving, upon the reacquisition of such property, an amount equal to the amount of such indebtedness treated by him as having become worthless, and "(2) the adjusted basis of such indebtedness shall be increased (as of the date of reacquisition) by an amount equal to the amount so considered as received by such seller. " (e) PRINCIPAL RESIDENCES.—If—

"(1) subsection (a) applies to a reacquisition of real property with respect to the sale of which— " (A) an election under section 121 (relating to gain from sale or exchange of residence of an individual who has attained age 65) is in effect, or " (B) gain was not recognized under section 1034 (relating to sale or exchange of residence); and " (2) within one year after the date of the reacquisition of such property by the seller, such property is resold by him, then, under regulations prescribed by the Secretary or his delegate, subsections (b), (c), and (d) of this section shall not apply to the reacquisition of such property and, for purposes of applying sections 31-667 0-65—57

Ante,

p. 38.

68A Stat. 306. 26 USC 1034.

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