§1082. Basis for determining gain or loss

(a) Exchanges generally

(1) Exchanges subject to the provisions of section 1081(a) or (e)

If the property was acquired on an exchange subject to the provisions of section 1081(a) or (e), or the corresponding provisions of prior internal revenue laws, the basis shall be the same as in the case of the property exchanged, decreased in the amount of any money received by the taxpayer, and increased in the amount of gain or decreased in the amount of loss to the taxpayer that was recognized on such exchange under the law applicable to the year in which the exchange was made. If the property so acquired consisted in part of the type of property permitted by section 1081(a) to be received without the recognition of gain or loss, and in part of nonexempt property, the basis provided in this subsection shall be allocated between the properties (other than money) received, and for the purpose of the allocation there shall be assigned to such nonexempt property (other than money) an amount equivalent to its fair market value at the date of the exchange. This subsection shall not apply to property acquired by a corporation by the issuance of its stock or securities as the consideration in whole or in part for the transfer of the property to it.

(2) Exchanges subject to the provisions of section 1081(b)

The gain not recognized on a transfer by reason of section 1081(b) 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 169;

(C) property with respect to which a deduction for depletion is allowable under section 611 but 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 securities 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.

(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.

(c) Distributions of stock or securities

If the stock or securities were received in a distribution subject to the provisions of section 1081(c) or the corresponding provisions of prior internal revenue laws, then the basis in the case of the stock in respect of which the distribution was made shall be apportioned, under regulations prescribed by the Secretary, between such stock and the stock or securities distributed.

(d) Transfers within system group

If the property was acquired by a corporation which is a member of a system group on a transfer or distribution described in section 1081(d)(1), then the basis shall be the same as it would be in the hands of the transferor; except that if such property is stock or securities issued by the corporation from which such stock or securities were received and they were issued-

(1) as the sole consideration for the property transferred to such corporation, then the basis of such stock or securities shall be either-

(A) the same as in the case of the property transferred therefor, or

(B) the fair market value of such stock or securities at the time of their receipt, whichever is the lower; or

(2) as part consideration for the property transferred to such corporation, then the basis of such stock or securities shall be either-

(A) an amount which bears the same ratio to the basis of the property transferred as the fair market value of such stock or securities at the time of their receipt bears to the total fair market value of the entire consideration received, or

(B) the fair market value of such stock or securities at the time of their receipt, whichever is the lower.

(Aug. 16, 1954, ch. 736, 68A Stat. 315 ; Dec. 30, 1969, Pub. L. 91–172, title VII, §704(b)(3), 83 Stat. 669 ; Dec. 10, 1971, Pub. L. 92–178, title III, §303(c)(5), 85 Stat. 522 ; Oct. 4, 1976, Pub. L. 94–455, title XIX, §§1901(b)(11)(C), 1906(b)(13)(A), 1951(c)(2)(B), title XXI, §2124(a)(3)(C), 90 Stat. 1795 , 1834, 1840, 1917; Aug. 13, 1981, Pub. L. 97–34, title II, §212(d)(2)(E), 95 Stat. 239 ; Oct. 22, 1986, Pub. L. 99–514, title II, §242(b)(1), 100 Stat. 2181 ; Nov. 5, 1990, Pub. L. 101–508, title XI, §11801(c)(6)(D), 104 Stat. 1388–524 .)

References in Text

Section 372 of the Internal Revenue Code of 1939 before its amendment by the Revenue Act of 1942, referred to in subsec. (a)(3), was classified to section 372 of former Title 26, Internal Revenue Code. Section 372 was repealed by section 7851(a)(1)(A) of this title. For table of comparisons of the 1939 Code to the 1986 Code, see Table I preceding section 1 of this title. See, also, section 7851(e) of this title for provision that references in the 1986 Code to a provision of the 1939 Code, not then applicable, shall be deemed a reference to the corresponding provision of the 1986 Code, which is then applicable.

The Revenue Act of 1942, referred to in subsec. (a)(3), is act Oct. 21, 1942, ch. 619, 56 Stat. 836 . For complete classification of this Act to the Code, see Tables.

Amendments

1990-Subsec. (a)(2)(B). Pub. L. 101–508, which directed the substitution of "169" for "169, 184, or 188", was executed by substituting "169" for "169, 184 or 188" to reflect the probable intent of Congress. See 1986 Amendment note below.

1986-Subsec. (a)(2)(B). Pub. L. 99–514 struck out ", 185," after "184".

1981-Subsec. (a)(2)(B). Pub. L. 97–34 substituted "or 188" for "188, or 191".

1976-Subsec. (a)(2). Pub. L. 94–455, §§1901 (b)(11)(C), 1906(b)(13)(A), 1951(c)(2)(B), 2124(a)(3)(C), struck out in subpar. (B) "168" before "169", "187" after "185", and substituted "188, or 191" for "or 188" and in provisions following subpar. (G) struck out "or his delegate" after "Secretary".

Subsec. (c). Pub. L. §1906(b)(13)(A), struck out "or his delegate" after "Secretary".

1971-Subsec. (a)(2)(B). Pub. L. 92–178 inserted reference to section 188.

1969-Subsec. (a)(2)(B). Pub. L. 91–172 inserted reference to sections 184, 185, and 187.

Effective Date of 1986 Amendment

Amendment by Pub. L. 99–514 applicable to that portion of the basis of any property which is attributable to expenditures paid or incurred after Dec. 31, 1986, except as otherwise provided, see section 242(c) of Pub. L. 99–514, set out as an Effective Date of Repeal note under former section 185 of this title.

Effective Date of 1981 Amendment

Amendment by Pub. L. 97–34 applicable to expenditures incurred after Dec. 31, 1981, in taxable years ending after such date, see section 212(e) of Pub. L. 97–34, set out as a note under section 46 of this title.

Effective Date of 1976 Amendment

Amendment by section 1901(b)(11)(C) of Pub. L. 94–455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.

Amendment by section 1951(c)(2)(B) of Pub. L. 94–455 applicable with respect to taxable years beginning after Dec. 31, 1976, see section 1951(d) of Pub. L. 94–455, set out as a note under section 72 of this title.

Amendment by section 2124(a)(3)(C) of Pub. L. 94–455 applicable with respect to additions to capital accounts made after June 14, 1976 and before June 15, 1981, see section 2124(a)(4) of Pub. L. 94–455, set out as an Effective Date note under section 642 of this title.

Effective Date of 1971 Amendment

Amendment by Pub. L. 92–178 applicable to taxable years ending after Dec. 31, 1971, see section 303(d) of Pub. L. 92–178, set out as a note under section 642 of this title.

Effective Date of 1969 Amendment

Amendment by Pub. L. 91–172 applicable to taxable years ending after Dec. 31, 1968, see section 704(c) of Pub. L. 91–172, set out as a note under section 169 of this title.

Savings Provision

For provisions that nothing in amendment by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101–508, set out as a note under section 29 of this title.

Section Referred to in Other Sections

This section is referred to in section 1081 of this title.