Act of 1924. DETERMINATION OF AMOUNT OF GAIN OR LOSS. SEC. 202. (a) Except as hereinafter provided in this section, the gain from the sale or other disposition of property shall be the excess of the amount realized therefrom over the basis provided in subdivision (a) or (b) of section 204,35 and the loss shall be the excess of such basis over the amount realized. SEC. 202. (b) In computing the amount of gain or loss under subdivision (a) proper adjustment shall be made for (1) any expenditure properly chargeable to capital account, and (2) any item of loss, exhaustion, wear and tear, obsolescence, amortization, or depletion, previously allowed with respect to such property. SEC. 202. (c) The amount realized from the sale or other disposition of property shall be the sum of any money received plus the fair market value of the property (other than money) received. SEC. 202. (d) In the case of a sale or exchange, the extent to which the gain or loss determined under this section shall be recognized for the purposes of this title, shall be determined under the provisions of section 203. ing the remainder of the taxable years; but any distribution made year shall be deemed to have during the remainder of the taxbeen made from earnings or able year shall be deemed to have profits accumulated between the been made from earnings or close of the preceding taxable profits accumulated between the year and the date of distribu- close of the preceding taxable tion, to the extent of such earn- year and the date of distribuings or profits, and if the books tion, to the extent of such earnof the corporation do not show ings or profits, and if the books the amount of such earnings or of the corporation do not show profits, the earnings or profits the amount of such earnings or for the accounting period within profits, the earnings or profits which the distribution was made for the accounting period within shall be deemed to have been ac- which the distribution was made cumulated ratably during such shall be deemed to have been period. This subdivision shall accumulated ratably during not be in effect after December such period. 31, 1921. 35 Sec. 204 (a) and (b), pp. 28, 36. BASIS FOR DETERMINING GAIN OR BASIS FOR DETERMINING GAIN OR LOSS. LOSS. Act of 1924. SEC. 202. (e) Nothing in this section shall be construed to prevent (in the case of property sold under contract providing for payment in installments) the taxation of that portion of any installment payment representing gain or profit in the year in which such payment is received. Act of 1921. SEC. 202. (f) Nothing in this section shall be construed to prevent (in the case of property sold under contract providing for payment in installments) the taxation of that portion of any installment payment representing gain or profit in the year in which such payment is received. Act of 1918. RECOGNITION OF GAIN OR LOSS SEC. 203. (a) Upon the sale or exchange of property the entire amount of the gain or loss, determined under section 202, shall be recognized, except as hereinafter provided in this section. SEC. 203. (b) (1) No gain or loss shall be recognized if property held for productive use in trade or business or for investment (not including stock in trade or other property held primarily for sale, nor stocks, bonds, notes, choses in action, certificates of trust or beneficial interest, or other securities or evidences of indebtedness or interest) is exchanged solely for property of a like kind to be held either for productive use in trade or business or for investment, or if common stock in a corporation is exchanged solely for common stock in the same corporation, or if preferred stock in a corporation is exchanged solely for preferred stock in the same corporation. (2) No gain or loss shall be recognized if stock or securities in a corporation a party to a reorganization are, in pursuance of the plan of reorganization, exchanged solely for stock or securities in such corporation or in another corporation a party to the reorganization. SEC. 202. (c) For the purSEC. 202. (b) When property poses of this title, on an ex- is exchanged for other property, change of property, real, per- the property received in exsonal or mixed, for any other change shall for the purpose of such property, no gain or loss determining gain or loss be shall be recognized unless the treated as the equivalent of cash property received in exchange to the amount of its fair market has a readily realizable market value, if any; but when in convalue; but even if the property nection with the reorganization, received in exchange has a readi- merger, or consolidation of a ly realizable market value, no corporation a person receives in gain or loss shall be recognized-place of stock or securities owned (1) 36 When any such property by him new stock or securities held for investment, or for pro- of no greater aggregate par or ductive use in trade or business face value, no gain or loss shall (not including stock-in-trade or be deemed to occur from the exother property held primarily change, and the new stock or sefor sale), is exchanged for prop-curities received shall be treated erty of a like kind or use; as taking the place of the stock, securities, or property exchanged. (2) When in the reorganiza- When in the case of any such tion of one or more corporations reorganization, merger or cona person receives in place of any solidation the aggregate par or stock or securities owned by him, face value of the new stock or stock or securities in a corpora- securities received is in excess of tion a party to or resulting from the aggregate par or face value such reorganization. The word of the stock or securities ex"reorganization," as used in changed, a like amount in par or this paragraph, includes a mer-face value of the new stock or (3) No gain or loss shall be ger or consolidation (including securities received shall be treatrecognized if a corporation a the acquisition by one corpora- ed as taking the place of the party to a reorganization ex- tion of at least a majority of the stock or securities exchanged, changes property, in pursuance voting stock and at least a ma- and the amount of the excess in of the plan of reorganization, jority of the total number of par or face value shall be treated 36 Sec. 202 (c) (1) of the Act of 1921, amended to read as follows, by the Act of March 4, 1923, effective Jan. 1, 1923: "(1) When any such property held for investment, or for productive use in trade or business (not including stock-in-trade or other property held primarily Act of 1917. Act of 1916. Act of 1913. for sale, and in the case of property held for investment not including stock, bonds, notes, choses in action, certificates of trust or beneficial interest, or other securities or evidences of indebtedness or interest), is exchanged for property of a like kind or use." Act of 1924. solely for stock or securities in another corporation a party to the reorganization. Act of 1921. shares of all other classes of stock of another corporation, or of substantially all the proper(4) No gain or loss shall be ties of another corporation), rerecognized if property is trans- capitulation, or mere change in ferred to a corporation by one identity, form, or place of oror more persons solely in ex-ganization of a corporation, change for stock or securities in (however effected); or such corporation, and immediately after the exchange such person or persons are in control of the corporation; but in the case of an exchange by two or more persons this paragraph shall apply only if the amount of the stock and securities received by each is substantially in proportion to his interest in the property prior to the exchange. (3) When (A) a person transfers any property, real, personal or mixed, to a corporation, and immediately after the transfer is in control of such corporation, or (B) two or more persons transfer any such property to a corporation, and immediately after the transfer are in control of such corporation, and the amounts of stock, securities, or both, received by such persons are in substantially the same proportion as their interests in the property before such transfer. For the purposes of this paragraph, a person is, or two or more persons are, "in control" of a corporation when owning at least 80 per centum of the voting stock and at least 80 per centum of the total number of shares of all other classes of stock of the corporation. SEC. 202. (d) (1) Where property is exchanged for other property and no gain or loss is recognized under the provisions of subdivision (c), the property received shall, for the purposes of this section, be treated as taking the place of the property exchanged therefor, except as provided in subdivision (e); (5) If property (as a result of its destruction in whole or in (2) Where property is compart, theft or seizure, or an exer- pulsorily or involuntarily concise of the power of requisition verted into cash or its equivalent or condemnation, or the threat in the manner described in paraor imminence thereof) is com- graph (12) of subdivision (a) pulsorily or involuntarily con- of section 214 37 and paragraph verted into property similar or (14) of subdivision (a) of secrelated in service or use to the tion 234,37 and the taxpayer proproperty so converted, or into ceeds in good faith to expend or money which is forthwith in set aside the proceeds of such good faith, under regulations conversion in the form and in prescribed by the Commissioner the manner therein provided, with the approval of the Secre- the property acquired shall, for tary, expended in the acquisition the purpose of this section, be 37 Sec. 214 (a) (12), p. 104; Sec. 234 (a) (14), p. 206. Act of 1918. as a gain to the extent that the fair market value of the new stock or securities is greater than the cost (or if acquired prior to March 1, 1913, the fair market value as of that date) of the stock or securities exchanged. |