§1016 — Adjustments to basis
148 citing cases
Statute Text — 26 U.S.C. §1016
Proper adjustment in respect of the property shall in all cases be made—
for expenditures, receipts, losses, or other items, properly chargeable to capital account, but no such adjustment shall be made—
for—
taxes or other carrying charges described in section 266; or
expenditures described in section 173 (relating to circulation expenditures),
for which deductions have been taken by the taxpayer in determining taxable income for the taxable year or prior taxable years; or
for mortality, expense, or other reasonable charges incurred under an annuity or life insurance contract;
in respect of any period since
February 28, 1913
, for exhaustion, wear and tear, obsolescence, amortization, and depletion, to the extent of the amount—
allowed as deductions in computing taxable income under this subtitle or prior income tax laws, and
resulting (by reason of the deductions so allowed) in a reduction for any taxable year of the taxpayer’s taxes under this subtitle (other than chapter 2, relating to tax on self-employment income), or prior income, war-profits, or excess-profits tax laws,
but not less than the amount allowable under this subtitle or prior income tax laws. Where no method has been adopted under section 167 (relating to depreciation deduction), the amount allowable shall be determined under the straight line method. Subparagraph (B) of this paragraph shall not apply in respect of any period since
February 28, 1913
, and before
January 1, 1952
, unless an election has been made under section 1020 (as in effect before the date of the enactment of the Tax Reform Act of 1976). Where for any taxable year before the taxable year 1932 the depletion allowance was based on discovery value or a percentage of income, then the adjustment for depletion for such year shall be based on the depletion which would have been allowable for such year if computed without reference to discovery value or a percentage of income;
in respect of any period—
before
March 1, 1913
,
since
February 28, 1913
, during which such property was held by a person or an organization not subject to income taxation under this chapter or prior income tax laws,
since
February 28, 1913
, and before
January 1, 1958
, during which such property was held by a person subject to tax under part I of subchapter L (or the corresponding provisions of prior income tax laws), to the extent that paragraph (2) does not apply, and
since
February 28, 1913
, during which such property was held by a person subject to tax under part II of subchapter L as in effect prior to its repeal by the Tax Reform Act of 1986 (or the corresponding provisions of prior income tax laws), to the extent that paragraph (2) does not apply,
for exhaustion, wear and tear, obsolescence, amortization, and depletion, to the extent sustained;
in the case of stock (to the extent not provided for in the foregoing paragraphs) for the amount of distributions previously made which, under the law applicable to the year in which the distribution was made, either were tax-free or were applicable in reduction of basis (not including distributions made by a corporation which was classified as a personal service corporation under the provisions of the Revenue Act of 1918 (
40 Stat. 1057
), or the Revenue Act of 1921 (
42 Stat. 227
), out of its earnings or profits which were taxable in accordance with the provisions of section 218 of the Revenue Act of 1918 or 1921);
in the case of any bond (as defined in section 171(d)) the interest on which is wholly exempt from the tax imposed by this subtitle, to the extent of the amortizable bond premium disallowable as a deduction pursuant to section 171(a)(2), and in the case of any other bond (as defined in section 171(d)) to the extent of the deductions allowable pursuant to section 171(a)(1) (or the amount applied to reduce interest payments under section 171(e)(2)) with respect thereto;
in the case of any municipal bond (as defined in section 75(b)), to the extent provided in section 75(a)(2);
in the case of a residence the acquisition of which resulted, under section 1034 (as in effect on the day before the date of the enactment of the Taxpayer Relief Act of 1997), in the nonrecognition of any part of the gain realized on the sale, exchange, or involuntary conversion of another residence, to the extent provided in section 1034(e) (as so in effect);
in the case of property pledged to the Commodity Credit Corporation, to the extent of the amount received as a loan from the Commodity Credit Corporation and treated by the taxpayer as income for the year in which received pursuant to section 77, and to the extent of any deficiency on such loan with respect to which the taxpayer has been relieved from liability;
for amounts allowed as deductions as deferred expenses under section 616(b) (relating to certain expenditures in the development of mines) and resulting in a reduction of the taxpayer’s taxes under this subtitle, but not less than the amounts allowable under such section for the taxable year and prior years;
Repealed.
Pub. L. 94–455, title XIX, § 1901(b)(21)(G)
,
Oct. 4, 1976
,
90 Stat. 1798
]
for deductions to the extent disallowed under section 268 (relating to sale of land with unharvested crops), notwithstanding the provisions of any other paragraph of this subsection;
Repealed.
Pub. L. 113–295, div. A, title II, § 221(a)(75)
,
Dec. 19, 2014
,
128 Stat. 4049
]
Repealed.
Pub. L. 108–357, title IV, § 413(c)(19)
,
Oct. 22, 2004
,
118 Stat. 1509
]
for amounts allowed as deductions under section 174 or 174A(c) and resulting in a reduction of the taxpayers’ taxes under this subtitle, but not less than the amounts allowable under such section for the taxable year and prior years;
for deductions to the extent disallowed under section 272 (relating to disposal of coal or domestic iron ore), notwithstanding the provisions of any other paragraph of this subsection;
in the case of any evidence of indebtedness referred to in section 811(b) (relating to amortization of premium and accrual of discount in the case of life insurance companies), to the extent of the adjustments required under section 811(b) (or the corresponding provisions of prior income tax laws) for the taxable year and all prior taxable years;
to the extent provided in section 1367 in the case of stock of, and indebtedness owed to, shareholders of an S corporation;
to the extent provided in section 961 in the case of stock in controlled foreign corporations (or foreign corporations which were controlled foreign corporations) and of property by reason of which a person is considered as owning such stock;
to the extent provided in section 50(c), in the case of expenditures with respect to which a credit has been allowed under section 38;
for amounts allowed as deductions under section 59(e) (relating to optional 10-year writeoff of certain tax preferences);
to the extent provided in section 1059 (relating to reduction in basis for extraordinary dividends);
in the case of qualified replacement property the acquisition of which resulted under section 1042 in the nonrecognition of any part of the gain realized on the sale or exchange of any property, to the extent provided in section 1042(d),
1
1 So in original. The comma probably should be a semicolon.
in the case of property the acquisition of which resulted under section 1043, 1045, or 1397B in the nonrecognition of any part of the gain realized on the sale of other property, to the extent provided in section 1043(c), 1045(b)(3), or 1397B(b)(4), as the case may be,
1
Repealed.
Pub. L. 113–295, div. A, title II, § 221(a)(34)(G)
,
Dec. 19, 2014
,
128 Stat. 4042
]
Repealed.
Pub. L. 113–295, div. A, title II, § 221(a)(2)(D)
,
Dec. 19, 2014
,
128 Stat. 4037
]
to the extent provided in sections 23(g) and 137(e),
1
Repealed.
Pub. L. 115–141, div. U, title IV, § 401(d)(4)(B)(iv)
,
Mar. 23, 2018
,
132 Stat. 1209
]
in the case of a facility with respect to which a credit was allowed under section 45F, to the extent provided in section 45F(f)(1),
1
in the case of railroad track with respect to which a credit was allowed under section 45G, to the extent provided in section 45G(e)(3),
1
to the extent provided in section 179B(c),
1
to the extent provided in section 179D(e),
1
to the extent provided in section 45L(e), in the case of amounts with respect to which a credit has been allowed under section 45L,
1
to the extent provided in section 25C(g), in the case of amounts with respect to which a credit has been allowed under section 25C,
1
to the extent provided in section 25D(f), in the case of amounts with respect to which a credit has been allowed under section 25D,
1
to the extent provided in section 30B(h)(4),
1
to the extent provided in section 30C(e)(1),
1
to the extent provided in section 30D(f)(1),
1
and
to the extent provided in subsections (b)(2) and (c) of section 1400Z–2.
Whenever it appears that the basis of property in the hands of the taxpayer is a substituted basis, then the adjustments provided in subsection (a) shall be made after first making in respect of such substituted basis proper adjustments of a similar nature in respect of the period during which the property was held by the transferor, donor, or grantor, or during which the other property was held by the person for whom the basis is to be determined. A similar rule shall be applied in the case of a series of substituted bases.
If an additional estate tax is imposed under section 2032A(c)(1) with respect to any interest in property and the qualified heir makes an election under this subsection with respect to the imposition of such tax, the adjusted basis of such interest shall be increased by an amount equal to the excess of—
the fair market value of such interest on the date of the decedent’s death (or the alternate valuation date under section 2032, if the executor of the decedent’s estate elected the application of such section), over
the value of such interest determined under section 2032A(a).
In the case of any partial disposition for which an election under this subsection is made, the increase in basis under paragraph (1) shall be an amount—
which bears the same ratio to the increase which would be determined under paragraph (1) (without regard to this paragraph) with respect to the entire interest, as
the amount of the tax imposed under section 2032A(c)(1) with respect to such disposition bears to the adjusted tax difference attributable to the entire interest (as determined under section 2032A(c)(2)(B)).
For purposes of subparagraph (A), the term “partial disposition” means any disposition or cessation to which subsection (c)(2)(D), (h)(1)(B), or (i)(1)(B) of section 2032A applies.
Any increase in basis under this subsection shall be deemed to have occurred immediately before the disposition or cessation resulting in the imposition of the tax under section 2032A(c)(1).
If the tax under section 2032A(c)(1) is imposed with respect to qualified replacement property (as defined in section 2032A(h)(3)(B)) or qualified exchange property (as defined in section 2032A(i)(3)), the increase in basis under paragraph (1) shall be made by reference to the property involuntarily converted or exchanged (as the case may be).
An election under this subsection shall be made at such time and in such manner as the Secretary shall by regulations prescribe. Such an election, once made, shall be irrevocable.
If an election is made under this subsection with respect to any additional estate tax imposed under section 2032A(c)(1), for purposes of section 6601 (relating to interest on underpayments), the last date prescribed for payment of such tax shall be deemed to be the last date prescribed for payment of the tax imposed by section 2001 with respect to the estate of the decedent (as determined for purposes of section 6601).
If—
the taxpayer acquires any automobile with respect to which a tax was imposed by section 4064, and
the use of such automobile by the taxpayer begins not more than 1 year after the date of the first sale for ultimate use of such automobile,
the basis of such automobile shall be reduced by the amount of the tax imposed by section 4064 with respect to such automobile. In the case of importation, if the date of entry or withdrawal from warehouse for consumption is later than the date of the first sale for ultimate use, such later date shall be substituted for the date of such first sale in the preceding sentence.
For treatment of separate mineral interests as one property, see section 614.
Treasury Regulations
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Treas. Reg. §1.1016-1Adjustments to basis; scope of section
Section 1016 and §§ 1.1016-2 to 1.1016-10, inclusive, contain the rules relating to the adjustments to be made to the basis of property to determine the adjusted basis as defined in section 1011. However, if the property was acquired from a decedent before his death, see § 1.1014-6 for adjustments on account of certain deductions allowed the taxpayer for the period between the date of acquisition of the property and the date of death of the decedent. If an election has been made under the Retirement-Straight Line Adjustment Act of 1958 (26 U.S.C. 1016 note), see § 1.9001-1 for special rules for determining adjusted basis in the case of a taxpayer who has changed from the retirement to the straight-line method of computing depreciation allowances.
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Treas. Reg. §1.1016-10Substituted basis
(a) Whenever it appears that the basis of property in the hands of the taxpayer is a substituted basis, as defined in section 1016(b), the adjustments indicated in §§ 1.1016-1 to 1.1016-6, inclusive, shall be made after first making in respect of such substituted basis proper adjustments of a similar nature in respect of the period during which the property was held by the transferor, donor, or grantor, or during which the other property was held by the person for whom the basis is to be determined. In addition, whenever it appears that the basis of property in the hands of the taxpayer is a substituted basis, as defined in section 1016(b)(1), the adjustments indicated in §§ 1.1016-7 to 1.1016-9, inclusive, and in section 1017 shall also be made, whenever necessary, after first making in respect of such substituted basis a proper adjustment of a similar nature in respect of the period during which the property was held by the transferor, donor, or grantor. Similar rules shall also be applied in the case of a series of substituted bases.
(b)cation of this section may be illustrated by the following example:
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Treas. Reg. §1.1016-10(a)Whenever it appears that the basis of property in the hands of the taxpayer is a substituted basis, as defined in section 1016(b), the adjustments indicated in §§ 1.
Whenever it appears that the basis of property in the hands of the taxpayer is a substituted basis, as defined in section 1016(b), the adjustments indicated in §§ 1.1016-1 to 1.1016-6, inclusive, shall be made after first making in respect of such substituted basis proper adjustments of a similar nature in respect of the period during which the property was held by the transferor, donor, or grantor, or during which the other property was held by the person for whom the basis is to be determined. In addition, whenever it appears that the basis of property in the hands of the taxpayer is a substituted basis, as defined in section 1016(b)(1), the adjustments indicated in §§ 1.1016-7 to 1.1016-9, inclusive, and in section 1017 shall also be made, whenever necessary, after first making in respect of such substituted basis a proper adjustment of a similar nature in respect of the period during which the property was held by the transferor, donor, or grantor. Similar rules shall also be applied in the case of a series of substituted bases.
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Treas. Reg. §1.1016-10(b)§1.1016-10(b)
cation of this section may be illustrated by the following example:
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Treas. Reg. §1.1016-2Items properly chargeable to capital account
(a) The cost or other basis shall be properly adjusted for any expenditure, receipt, loss, or other item, properly chargeable to capital account, including the cost of improvements and betterments made to the property. No adjustment shall be made in respect of any item which, under any applicable provision of law or regulation, is treated as an item not properly chargeable to capital account but is allowable as a deduction in computing net or taxable income for the taxable year. For example, in the case of oil and gas wells no adjustment may be made in respect of any intangible drilling and development expense allowable as a deduction in computing net or taxable income. See the regulations under section 263(c).
(b) The application of the foregoing provisions may be illustrated by the following example:
(c) Adjustments to basis shall be made for carrying charges such as taxes and interest, with respect to property (whether real or personal, improved or unimproved, and whether productive or unproductive), which the taxpayer elects to treat as chargeable to capital account under section 266, rather than as an allowable deduction. The term taxes for this purpose includes duties and excise taxes but does not include income taxes.
(d) Expenditures described in section 173 to establish, maintain, or increase the circulation of a newspaper, magazine, or other periodical are chargeable to capital account only in accordance with and in the manner provided in the regulations under section 173.
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Treas. Reg. §1.1016-2(a)The cost or other basis shall be properly adjusted for any expenditure, receipt, loss, or other item, properly chargeable to capital account, including the cost of improvements and betterments made to the property.
The cost or other basis shall be properly adjusted for any expenditure, receipt, loss, or other item, properly chargeable to capital account, including the cost of improvements and betterments made to the property. No adjustment shall be made in respect of any item which, under any applicable provision of law or regulation, is treated as an item not properly chargeable to capital account but is allowable as a deduction in computing net or taxable income for the taxable year. For example, in the case of oil and gas wells no adjustment may be made in respect of any intangible drilling and development expense allowable as a deduction in computing net or taxable income. See the regulations under section 263(c).
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Treas. Reg. §1.1016-2(b)§1.1016-2(b)
The application of the foregoing provisions may be illustrated by the following example:
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Treas. Reg. §1.1016-2(c)Adjustments to basis shall be made for carrying charges such as taxes and interest, with respect to property (whether real or personal, improved or unimproved, and whether productive or unproductive), which the taxpayer elects to treat as chargeable to capital account under section 266, rather than as an allowable deduction.
Adjustments to basis shall be made for carrying charges such as taxes and interest, with respect to property (whether real or personal, improved or unimproved, and whether productive or unproductive), which the taxpayer elects to treat as chargeable to capital account under section 266, rather than as an allowable deduction. The term taxes for this purpose includes duties and excise taxes but does not include income taxes.
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Treas. Reg. §1.1016-2(d)Expenditures described in section 173 to establish, maintain, or increase the circulation of a newspaper, magazine, or other periodical are chargeable to capital account only in accordance with and in the manner provided in the regulations under section 173.
Expenditures described in section 173 to establish, maintain, or increase the circulation of a newspaper, magazine, or other periodical are chargeable to capital account only in accordance with and in the manner provided in the regulations under section 173.
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Treas. Reg. §1.1016-3Exhaustion, wear and tear, obsolescence, amortization, and depletion for periods since February 28, 1913
(a) In general—(1) Adjustment where deduction is claimed. (i) For taxable periods beginning on or after January 1, 1952, the cost or other basis of property shall be decreased for exhaustion, wear and tear, obsolescence, amortization, and depletion by the greater of the following two amounts:
(a) The amount allowed as deductions in computing taxable income, to the extent resulting in a reduction of the taxpayer's income taxes, or
(b) The amount allowable for the years involved.
See paragraph (b) of this section. Where the taxpayer makes an appropriate election the above rule is applicable for periods since February 28, 1913, and before January 1, 1952. See paragraph (d) of this section. For rule for such periods where no election is made, see paragraph (c) of this section.
(ii) The determination of the amount properly allowable for exhaustion, wear and tear, obsolescence, amortization, and depletion must be made on the basis of facts reasonably known to exist at the end of the taxable year. A taxpayer is not permitted to take advantage in a later year of the taxpayer's prior failure to take any such allowance or the taxpayer's taking an allowance plainly inadequate under the known facts in prior years. In the case of depreciation, if in prior years the taxpayer has consistently taken proper deductions under one method, the amount allowable for such prior years may not be increased, even though a greater amount would have been allowable under another proper method. For rules governing losses on retirement or disposition of depreciable property, including rules for determining basis, see § 1.167(a)-8, 1.168(i)-1(e), or 1.168(i)-8, as applicable. The application of this paragraph is illustrated by the following example (for purposes of this example, assume section 167(f)(1) as in effect on September 19, 2013, applies to taxable years beginning on or after January 1, 2014):
(2) Adjustment for amount allowable where no depreciation deduction claimed. (i) If the taxpayer has not taken a depreciation deduction either in the taxable year or for any prior taxable year, adjustments to basis of the property for depreciation allowable shall be determined by using the straight-line method of depreciation. (See § 1.1016-4 for adjustments in the case of persons exempt from income taxation.)
(ii) For taxable years beginning after December 31, 1953, and ending after August 16, 1954, if the taxpayer with respect to any property has taken a deduction for depreciation properly under one of the methods provided in section 167(b) for one or more years but has omitted the deduction in other years, the adjustment to basis for the depreciation allowable in such a case will be the deduction under the method which was used by the taxpayer with respect to that property. Thus, if A acquired property in 1954 on which he properly computed his depreciation deduction under the method described in section 167(b)(2) (the declining-balance method) for the first year of its useful life but did not take a deduction in the second and third year of the asset's life, the adjustment to basis for depreciation allowable for the second and third year will be likewise computed under the declining-balance method.
(3) Adjustment for depletion deductions with respect to taxable years before 1932. Where for any taxable year before the taxable year 1932 the depletion allowance was based on discovery value or a percentage of income, then the adjustment for depletion for such year shall not exceed a depletion deduction which would have been allowable for such year if computed without reference to discovery value or a percentage of income.
(b) Adjustment for periods beginning on or after January 1, 1952. The decrease required by paragraph (a) of this section for deductions in respect of any period beginning on or after January 1, 1952, shall be whichever is the greater of the following amounts:
(1) The amount allowed as deductions in computing taxable income under subtitle A of the Code or prior income tax laws and resulting (by reason of the deductions so allowed) in a reduction for any taxable year of the taxpayer's taxes under subtitle A of the Code (other than chapter 2, relating to tax on self-employment income) or prior income, war-profits, or excess-profits tax laws; or
(2) The amount properly allowable as deductions in computing taxable income under subtitle A of the Code or prior income tax laws (whether or not the amount properly allowable would have caused a reduction for any taxable year of the taxpayer's taxes).
(c) Adjustment for periods since February 28, 1913, and before January 1, 1952, where no election made. If no election has been properly made under section 1020, or under section 113(d) of the Internal Revenue Code of 1939 (see paragraph (d) of this section), the decrease required by paragraph (a) of this section for deductions in respect of any period since February 28, 1913, and before January 1, 1952, shall be whichever of the following amounts is the greater:
(1) The amount allowed as deductions in computing net income under chapter 1 of the Internal Revenue Code of 1939 or prior income tax laws;
(2) The amount properly allowable in computing net income under chapter 1 of the Internal Revenue Code of 1939 or prior income tax laws.
For the purpose of determining the decrease required by this paragraph, it is immaterial whether or not the amount under subparagraph (1) of this paragraph or the amount under subparagraph (2) of this paragraph would have resulted in a reduction for any taxable year of the taxpayer's taxes.
(d) Adjustment for periods since February 28, 1913, and before January 1, 1952, where election made. If an election has been properly made under section 1020, or under section 113(d) of the Internal Revenue Code of 1939, the decrease required by paragraph (a) of this section for deductions in respect of any period since February 28, 1913, and before January 1, 1952, shall be whichever is the greater of the following amounts:
(1) The amount allowed as deductions in computing net income under chapter 1 of the Internal Revenue Code of 1939 or prior income tax laws and resulting (by reason of the deductions so allowed) in a reduction for any taxable year of the taxpayer's taxes under such chapter 1 (other than subchapter E, relating to tax on self-employment income), subchapter E, chapter 2, of the Internal Revenue Code of 1939, or prior income, war-profits, or excess-profits tax laws;
(2) The amount properly allowable as deductions in computing net income under chapter 1 of the Internal Revenue Code of 1939 or prior income tax laws (whether or not the amount properly allowable would have caused a reduction for any taxable year of the taxpayer's taxes).
(e) Determination of amount allowed which reduced taxpayer's taxes. (1) As indicated in paragraphs (b) and (d) of this section, there are situations in which it is necessary to determine (for the purpose of ascertaining the basis adjustment required by paragraph (a) of this section) the extent to which the amount allowed as deductions resulted in a reduction for any taxable year of the taxpayer's taxes under subtitle A (other than chapter 2 relating to tax on self-employment income) of the Code, or prior income, war-profits, or excess-profits tax laws. This amount (amount allowed which resulted in a reduction of the taxpayer's taxes) is hereinafter referred to as the tax-benefit amount allowed. For the purpose of determining whether the tax-benefit amount allowed exceeded the amount allowable, a determination must be made of that portion of the excess of the amount allowed over the amount allowable which, if disallowed, would not have resulted in an increase in any such tax previously determined. If the entire excess of the amount allowed over the amount allowable could be disallowed without any such increase in tax, the tax-benefit amount allowed shall not be considered to have exceeded the amount allowable. In such a case (if paragraph (b) or (d) of this section is applicable) the reduction in basis required by paragraph (a) of this section would be the amount properly allowable as a deduction. If only part of such excess could be disallowed without any such increase in tax, the tax-benefit amount allowed shall be considered to exceed the amount allowable to the extent of the remainder of such excess. In such a case (if paragraph (b) or (d) of this section is applicable), the reduction in basis required by paragraph (a) of this section would be the amount of the tax-benefit amount allowed.
(2) For the purpose of determining the tax-benefit amount allowed the tax previously determined shall be determined under the principles of section 1314. The only adjustments made in determining whether there would be an increase in tax shall be those resulting from the disallowance of the amount allowed. The taxable years for which the determination is made shall be the taxable year for which the deduction was allowed and any other taxable year which would be affected by the disallowance of such deduction. Examples of such other taxable years are taxable years to which there was a carryover or carryback of a net operating loss from the taxable year for which the deduction was allowed, and taxable years for which a computation under section 111 or section 1333 was made by reference to the taxable year for which the deduction was allowed. In determining whether the disallowance of any part of the deduction would not have resulted in an increase in any tax previously determined, proper adjustment must be made for previous determinations under section 1311, or section 3801 of the Internal Revenue Code of 1939, and for any previous application of section 1016(a)(2)(B), or section 113(b) (1)(B)(ii) of the Internal Revenue Code of 1939.
(3) If a determination under section 1016(a)(2)(B) must be made with respect to several properties for each of which the amount allowed for the taxable year exceeded the amount allowable, the tax-benefit amount allowed with respect to each of such properties shall be an allocated portion of the tax-benefit amount allowed determined by reference to the sum of the amounts allowed and the sum of the amounts allowable with respect to such several properties.
(4) In the case of property held by a partnership or trust, the computation of the tax-benefit amount allowed shall take into account the tax benefit of the partners or beneficiaries, as the case may be, from the deduction by the partnership or trust of the amount allowed to the partnership or the trust. For this purpose, the determination of the amount allowed which resulted in a tax benefit to the partners or beneficiaries shall be made in the same manner as that provided above with respect to the taxes of the person holding the property.
(5) A taxpayer seeking to limit the adjustment to basis to the tax-benefit amount allowed for any period, in lieu of the amount allowed, must establish the tax-benefit amount allowed. A failure of adequate proof as to the tax-benefit amount allowed with respect to one period does not preclude the taxpayer from limiting the adjustment to basis to the tax-benefit amount allowed with respect to another period for which adequate proof is available. For example, a corporate transferee may have available adequate records with respect to the tax effect of the deduction of erroneous depreciation for certain taxable years, but may not have available adequate records with respect to the deduction of excessive depreciation for other taxable years during which the property was held by its transferor. In such case the corporate transferee shall not be denied the right to apply this section with respect to the erroneous depreciation for the period for which adequate proof is available.
(f) Determination of amount allowable in prior taxable years. (1) One of the factors in determining the adjustment to basis as of any date is the amount of depreciation, depletion, etc., allowable for periods prior to such date. The amount allowable for such prior periods is determined under the law applicable to such prior periods; all adjustments required by the law applicable to such periods are made in determining the adjusted basis of the property for the purpose of determining the amount allowable. Provisions corresponding to the rules in section 1016(a)(2)(B) described in paragraphs (d) and (e) of this section, which limit adjustments to the tax-benefit amount allowed where an election is properly exercised, were first enacted by the Act of July 14, 1952 (66 Stat. 629). That law provided that corresponding rules are deemed to be includible in all revenue laws applicable to taxable years ending after December 31, 1931. Accordingly, those rules shall be taken into account in determining the amount of depreciation, etc., allowable for any taxable year ending after December 31, 1931. For example, if the adjusted basis of property held by the taxpayer since January 1, 1930, is determined as of January 1, 1955, and if an election was properly made under section 1020, or section 113(d) of the Internal Revenue Code of 1939, then the amount allowable which is taken into account in computing the adjusted basis as of January 1, 1955, shall be determined by taking those rules into account for all taxable years ending after December 31, 1931. The Act of July 14, 1952, made no change in the law applicable in determining the amount allowable for taxable years ending before January 1, 1932. If there was a final decision of a court prior to the enactment of the Act of July 14, 1952, determining the amount allowable for a particular taxable year, such determination shall be adjusted. In such case the adjustment shall be made only for the purpose of taking the provision of that law into account and only to the extent made necessary by such provisions.
(2) Although the Act of July 14, 1952, amended the law applicable to all taxable years ending after December 31, 1931, the amendment does not permit refund, credit, or assessment of a deficiency for any taxable year for which such refund, credit, or assessment was barred by any law or rule of law.
(g) Property with transferred basis. The following rules apply in the determination of the adjustments to basis of property in the hands of a transferee, donee, or grantee which are required by section 1016(b), or section 113(b)(2) of the Internal Revenue Code of 1939, with respect to the period the property was held by the transferor, donor, or grantor:
(1) An election or a revocation of an election under section 1020, or section 113(d) of the Internal Revenue Code of 1939, by a transferor, donor, or grantor, which is made after the date of the transfer, gift, or grant of the property shall not affect the basis of such property in the hands of the transferee, donee, or grantee. An election or a revocation of an election made before the date of the transfer, gift, or grant of the property shall be taken into account in determining under section 1016(b) the adjustments to basis of such property as of the date of the transfer, gift, or grant, whether or not an election or a revocation of an election under section 1020, or section 113(d) of the Internal Revenue Code of 1939, was made by the transferee, donee, or grantee.
(2) An election by the transferee, donee, or grantee or a revocation of such an election shall be applicable in determining the adjustments to basis for the period during which the property was held by the transferor, donor, or grantor, whether or not the transferor, donor, or grantor had made an election or a revocation of an election, provided that the property was held by the transferee, donee, or grantee at any time on or before the date on which the election or revocation was made.
(h) Application to a change in method of accounting. For purposes of determining whether a change in depreciation or amortization for property subject to section 167, 168, 197, 1400I, 1400L(c), to section 168 prior to its amendment by the Tax Reform Act of 1986 (100 Stat. 2121) (former section 168), or to an additional first year depreciation deduction provision of the Internal Revenue Code (for example, section 168(k), 1400L(b), or 1400N(d)) is a change in method of accounting under section 446(e) and the regulations under section 446(e), section 1016(a)(2) does not permanently affect a taxpayer's lifetime income.
(i) Examples. The application of section 1016(a) (1) and (2) may be illustrated by the following examples:
(j) Effective/applicability dates—(1) In general. Except as provided in paragraphs (j)(2) and (j)(3) of this section, this section applies on or after December 30, 2003. For the applicability of regulations before December 30, 2003, see § 1.1016-3 in effect prior to December 30, 2003 (§ 1.1016-3 as contained in 26 CFR part 1 edition revised as of April 1, 2003).
(2) Depreciation or amortization changes. Paragraph (h) of this section applies to a change in depreciation or amortization for property subject to section 167, 168, 197, 1400I, 1400L(c), to former section 168, or to an additional first year depreciation deduction provision of the Internal Revenue Code (for example, section 168(k), 1400L(b), or 1400N(d)) for taxable years ending on or after December 30, 2003.
(3) Application of § 1.1016-3T(a)(1)(ii)—(i) In general. Paragraph (a)(1)(ii) of this section applies to taxable years beginning on or after January 1, 2014. Except as provided in paragraphs (j)(3)(ii) and (j)(3)(iii) of this section, § 1.1016-3(a)(1)(ii) as contained in 26 CFR part 1 edition revised as of April 1, 2011, applies to taxable years beginning before January 1, 2014.
(ii) Early application of § 1.1016-3(a)(1)(ii). A taxpayer may choose to apply paragraph (a)(1)(ii) of this section to taxable years beginning on or after January 1, 2012.
(iii) Optional application of TD 9564. A taxpayer may choose to apply § 1.1016-3T(a)(1)(ii) as contained in TD 9564 (76 FR 81060) December 27, 2011, to taxable years beginning on or after January 1, 2012, and before January 1, 2014.
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Treas. Reg. §1.1016-3(a)§1.1016-3(a)
The amount allowed as deductions in computing taxable income, to the extent resulting in a reduction of the taxpayer's income taxes, or
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Treas. Reg. §1.1016-3(b)Adjustment for periods beginning on or after January 1, 1952.
Adjustment for periods beginning on or after January 1, 1952. The decrease required by paragraph (a) of this section for deductions in respect of any period beginning on or after January 1, 1952, shall be whichever is the greater of the following amounts:
(1) The amount allowed as deductions in computing taxable income under subtitle A of the Code or prior income tax laws and resulting (by reason of the deductions so allowed) in a reduction for any taxable year of the taxpayer's taxes under subtitle A of the Code (other than chapter 2, relating to tax on self-employment income) or prior income, war-profits, or excess-profits tax laws; or
(2) The amount properly allowable as deductions in computing taxable income under subtitle A of the Code or prior income tax laws (whether or not the amount properly allowable would have caused a reduction for any taxable year of the taxpayer's taxes).
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Treas. Reg. §1.1016-3(c)Adjustment for periods since February 28, 1913, and before January 1, 1952, where no election made.
Adjustment for periods since February 28, 1913, and before January 1, 1952, where no election made. If no election has been properly made under section 1020, or under section 113(d) of the Internal Revenue Code of 1939 (see paragraph (d) of this section), the decrease required by paragraph (a) of this section for deductions in respect of any period since February 28, 1913, and before January 1, 1952, shall be whichever of the following amounts is the greater:
(1) The amount allowed as deductions in computing net income under chapter 1 of the Internal Revenue Code of 1939 or prior income tax laws;
(2) The amount properly allowable in computing net income under chapter 1 of the Internal Revenue Code of 1939 or prior income tax laws.
For the purpose of determining the decrease required by this paragraph, it is immaterial whether or not the amount under subparagraph (1) of this paragraph or the amount under subparagraph (2) of this paragraph would have resulted in a reduction for any taxable year of the taxpayer's taxes.
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Treas. Reg. §1.1016-3(d)Adjustment for periods since February 28, 1913, and before January 1, 1952, where election made.
Adjustment for periods since February 28, 1913, and before January 1, 1952, where election made. If an election has been properly made under section 1020, or under section 113(d) of the Internal Revenue Code of 1939, the decrease required by paragraph (a) of this section for deductions in respect of any period since February 28, 1913, and before January 1, 1952, shall be whichever is the greater of the following amounts:
(1) The amount allowed as deductions in computing net income under chapter 1 of the Internal Revenue Code of 1939 or prior income tax laws and resulting (by reason of the deductions so allowed) in a reduction for any taxable year of the taxpayer's taxes under such chapter 1 (other than subchapter E, relating to tax on self-employment income), subchapter E, chapter 2, of the Internal Revenue Code of 1939, or prior income, war-profits, or excess-profits tax laws;
(2) The amount properly allowable as deductions in computing net income under chapter 1 of the Internal Revenue Code of 1939 or prior income tax laws (whether or not the amount properly allowable would have caused a reduction for any taxable year of the taxpayer's taxes).
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Treas. Reg. §1.1016-3(e)Determination of amount allowed which reduced taxpayer's taxes.
Determination of amount allowed which reduced taxpayer's taxes. (1) As indicated in paragraphs (b) and (d) of this section, there are situations in which it is necessary to determine (for the purpose of ascertaining the basis adjustment required by paragraph (a) of this section) the extent to which the amount allowed as deductions resulted in a reduction for any taxable year of the taxpayer's taxes under subtitle A (other than chapter 2 relating to tax on self-employment income) of the Code, or prior income, war-profits, or excess-profits tax laws. This amount (amount allowed which resulted in a reduction of the taxpayer's taxes) is hereinafter referred to as the tax-benefit amount allowed. For the purpose of determining whether the tax-benefit amount allowed exceeded the amount allowable, a determination must be made of that portion of the excess of the amount allowed over the amount allowable which, if disallowed, would not have resulted in an increase in any such tax previously determined. If the entire excess of the amount allowed over the amount allowable could be disallowed without any such increase in tax, the tax-benefit amount allowed shall not be considered to have exceeded the amount allowable. In such a case (if paragraph (b) or (d) of this section is applicable) the reduction in basis required by paragraph (a) of this section would be the amount properly allowable as a deduction. If only part of such excess could be disallowed without any such increase in tax, the tax-benefit amount allowed shall be considered to exceed the amount allowable to the extent of the remainder of such excess. In such a case (if paragraph (b) or (d) of this section is applicable), the reduction in basis required by paragraph (a) of this section would be the amount of the tax-benefit amount allowed.
(2) For the purpose of determining the tax-benefit amount allowed the tax previously determined shall be determined under the principles of section 1314. The only adjustments made in determining whether there would be an increase in tax shall be those resulting from the disallowance of the amount allowed. The taxable years for which the determination is made shall be the taxable year for which the deduction was allowed and any other taxable year which would be affected by the disallowance of such deduction. Examples of such other taxable years are taxable years to which there was a carryover or carryback of a net operating loss from the taxable year for which the deduction was allowed, and taxable years for which a computation under section 111 or section 1333 was made by reference to the taxable year for which the deduction was allowed. In determining whether the disallowance of any part of the deduction would not have resulted in an increase in any tax previously determined, proper adjustment must be made for previous determinations under section 1311, or section 3801 of the Internal Revenue Code of 1939, and for any previous application of section 1016(a)(2)(B), or section 113(b) (1)(B)(ii) of the Internal Revenue Code of 1939.
(3) If a determination under section 1016(a)(2)(B) must be made with respect to several properties for each of which the amount allowed for the taxable year exceeded the amount allowable, the tax-benefit amount allowed with respect to each of such properties shall be an allocated portion of the tax-benefit amount allowed determined by reference to the sum of the amounts allowed and the sum of the amounts allowable with respect to such several properties.
(4) In the case of property held by a partnership or trust, the computation of the tax-benefit amount allowed shall take into account the tax benefit of the partners or beneficiaries, as the case may be, from the deduction by the partnership or trust of the amount allowed to the partnership or the trust. For this purpose, the determination of the amount allowed which resulted in a tax benefit to the partners or beneficiaries shall be made in the same manner as that provided above with respect to the taxes of the person holding the property.
(5) A taxpayer seeking to limit the adjustment to basis to the tax-benefit amount allowed for any period, in lieu of the amount allowed, must establish the tax-benefit amount allowed. A failure of adequate proof as to the tax-benefit amount allowed with respect to one period does not preclude the taxpayer from limiting the adjustment to basis to the tax-benefit amount allowed with respect to another period for which adequate proof is available. For example, a corporate transferee may have available adequate records with respect to the tax effect of the deduction of erroneous depreciation for certain taxable years, but may not have available adequate records with respect to the deduction of excessive depreciation for other taxable years during which the property was held by its transferor. In such case the corporate transferee shall not be denied the right to apply this section with respect to the erroneous depreciation for the period for which adequate proof is available.
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Treas. Reg. §1.1016-3(f)Determination of amount allowable in prior taxable years.
Determination of amount allowable in prior taxable years. (1) One of the factors in determining the adjustment to basis as of any date is the amount of depreciation, depletion, etc., allowable for periods prior to such date. The amount allowable for such prior periods is determined under the law applicable to such prior periods; all adjustments required by the law applicable to such periods are made in determining the adjusted basis of the property for the purpose of determining the amount allowable. Provisions corresponding to the rules in section 1016(a)(2)(B) described in paragraphs (d) and (e) of this section, which limit adjustments to the tax-benefit amount allowed where an election is properly exercised, were first enacted by the Act of July 14, 1952 (66 Stat. 629). That law provided that corresponding rules are deemed to be includible in all revenue laws applicable to taxable years ending after December 31, 1931. Accordingly, those rules shall be taken into account in determining the amount of depreciation, etc., allowable for any taxable year ending after December 31, 1931. For example, if the adjusted basis of property held by the taxpayer since January 1, 1930, is determined as of January 1, 1955, and if an election was properly made under section 1020, or section 113(d) of the Internal Revenue Code of 1939, then the amount allowable which is taken into account in computing the adjusted basis as of January 1, 1955, shall be determined by taking those rules into account for all taxable years ending after December 31, 1931. The Act of July 14, 1952, made no change in the law applicable in determining the amount allowable for taxable years ending before January 1, 1932. If there was a final decision of a court prior to the enactment of the Act of July 14, 1952, determining the amount allowable for a particular taxable year, such determination shall be adjusted. In such case the adjustment shall be made only for the purpose of taking the provision of that law into account and only to the extent made necessary by such provisions.
(2) Although the Act of July 14, 1952, amended the law applicable to all taxable years ending after December 31, 1931, the amendment does not permit refund, credit, or assessment of a deficiency for any taxable year for which such refund, credit, or assessment was barred by any law or rule of law.
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Treas. Reg. §1.1016-3(g)Property with transferred basis.
Property with transferred basis. The following rules apply in the determination of the adjustments to basis of property in the hands of a transferee, donee, or grantee which are required by section 1016(b), or section 113(b)(2) of the Internal Revenue Code of 1939, with respect to the period the property was held by the transferor, donor, or grantor:
(1) An election or a revocation of an election under section 1020, or section 113(d) of the Internal Revenue Code of 1939, by a transferor, donor, or grantor, which is made after the date of the transfer, gift, or grant of the property shall not affect the basis of such property in the hands of the transferee, donee, or grantee. An election or a revocation of an election made before the date of the transfer, gift, or grant of the property shall be taken into account in determining under section 1016(b) the adjustments to basis of such property as of the date of the transfer, gift, or grant, whether or not an election or a revocation of an election under section 1020, or section 113(d) of the Internal Revenue Code of 1939, was made by the transferee, donee, or grantee.
(2) An election by the transferee, donee, or grantee or a revocation of such an election shall be applicable in determining the adjustments to basis for the period during which the property was held by the transferor, donor, or grantor, whether or not the transferor, donor, or grantor had made an election or a revocation of an election, provided that the property was held by the transferee, donee, or grantee at any time on or before the date on which the election or revocation was made.
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Treas. Reg. §1.1016-3(h)Application to a change in method of accounting.
Application to a change in method of accounting. For purposes of determining whether a change in depreciation or amortization for property subject to section 167, 168, 197, 1400I, 1400L(c), to section 168 prior to its amendment by the Tax Reform Act of 1986 (100 Stat. 2121) (former section 168), or to an additional first year depreciation deduction provision of the Internal Revenue Code (for example, section 168(k), 1400L(b), or 1400N(d)) is a change in method of accounting under section 446(e) and the regulations under section 446(e), section 1016(a)(2) does not permanently affect a taxpayer's lifetime income.
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Treas. Reg. §1.1016-3(i)Examples.
Examples. The application of section 1016(a) (1) and (2) may be illustrated by the following examples:
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Treas. Reg. §1.1016-3(j)Effective/applicability dates—(1) In general.
Effective/applicability dates—(1) In general. Except as provided in paragraphs (j)(2) and (j)(3) of this section, this section applies on or after December 30, 2003. For the applicability of regulations before December 30, 2003, see § 1.1016-3 in effect prior to December 30, 2003 (§ 1.1016-3 as contained in 26 CFR part 1 edition revised as of April 1, 2003).
(2) Depreciation or amortization changes. Paragraph (h) of this section applies to a change in depreciation or amortization for property subject to section 167, 168, 197, 1400I, 1400L(c), to former section 168, or to an additional first year depreciation deduction provision of the Internal Revenue Code (for example, section 168(k), 1400L(b), or 1400N(d)) for taxable years ending on or after December 30, 2003.
(3) Application of § 1.1016-3T(a)(1)(ii)—(i) In general. Paragraph (a)(1)(ii) of this section applies to taxable years beginning on or after January 1, 2014. Except as provided in paragraphs (j)(3)(ii) and (j)(3)(iii) of this section, § 1.1016-3(a)(1)(ii) as contained in 26 CFR part 1 edition revised as of April 1, 2011, applies to taxable years beginning before January 1, 2014.
(ii) Early application of § 1.1016-3(a)(1)(ii). A taxpayer may choose to apply paragraph (a)(1)(ii) of this section to taxable years beginning on or after January 1, 2012.
(iii) Optional application of TD 9564. A taxpayer may choose to apply § 1.1016-3T(a)(1)(ii) as contained in TD 9564 (76 FR 81060) December 27, 2011, to taxable years beginning on or after January 1, 2012, and before January 1, 2014.
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Treas. Reg. §1.1016-4Exhaustion, wear and tear, obsolescence, amortization, and depletion; periods during which income was not subject to tax
(a) Adjustments to basis must be made for exhaustion, wear and tear, obsolescence, amortization, and depletion to the extent actually sustained in respect of:
(1) Any period before March 1, 1913,
(2) Any period since February 28, 1913, during which the property was held by a person or organization not subject to income taxation under chapter 1 of the Code or prior income tax laws,
(3) Any period since February 28, 1913, and before January 1, 1958, during which the property was held by a person subject to tax under part I, subchapter L, chapter 1 of the Code, or prior income tax law, to the extent that section 1016(a)(2) does not apply, and
(4) Any period since February 28, 1913, during which such property was held by a person subject to tax under part II of subchapter L, chapter 1 of the Code, or prior income tax law, to the extent that section 1016(a)(2) does not apply.
(b) The amount of the adjustments described in paragraph (a) of this section actually sustained is that amount charged off on the books of the taxpayer where such amount is considered by the Commissioner to be reasonable. Otherwise, the amount actually sustained will be the amount that would have been allowable as a deduction:
(1) During the period described in paragraph (a) (1) or (2) of this section, had the taxpayer been subject to income tax during those periods, or
(2) During the period described in paragraph (a) (3) or (4) of this section, with respect to property held by a taxpayer described in that paragraph, to the extent that section 1016(a)(2) was inapplicable to such property during that period.
In the case of a taxpayer subject to the adjustment required by subparagraph (1) or (2) of this paragraph, depreciation shall be determined by using the straight line method.
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Treas. Reg. §1.1016-4(a)§1.1016-4(a)
Adjustments to basis must be made for exhaustion, wear and tear, obsolescence, amortization, and depletion to the extent actually sustained in respect of:
(1) Any period before March 1, 1913,
(2) Any period since February 28, 1913, during which the property was held by a person or organization not subject to income taxation under chapter 1 of the Code or prior income tax laws,
(3) Any period since February 28, 1913, and before January 1, 1958, during which the property was held by a person subject to tax under part I, subchapter L, chapter 1 of the Code, or prior income tax law, to the extent that section 1016(a)(2) does not apply, and
(4) Any period since February 28, 1913, during which such property was held by a person subject to tax under part II of subchapter L, chapter 1 of the Code, or prior income tax law, to the extent that section 1016(a)(2) does not apply.
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Treas. Reg. §1.1016-4(b)The amount of the adjustments described in paragraph (a) of this section actually sustained is that amount charged off on the books of the taxpayer where such amount is considered by the Commissioner to be reasonable.
The amount of the adjustments described in paragraph (a) of this section actually sustained is that amount charged off on the books of the taxpayer where such amount is considered by the Commissioner to be reasonable. Otherwise, the amount actually sustained will be the amount that would have been allowable as a deduction:
(1) During the period described in paragraph (a) (1) or (2) of this section, had the taxpayer been subject to income tax during those periods, or
(2) During the period described in paragraph (a) (3) or (4) of this section, with respect to property held by a taxpayer described in that paragraph, to the extent that section 1016(a)(2) was inapplicable to such property during that period.
In the case of a taxpayer subject to the adjustment required by subparagraph (1) or (2) of this paragraph, depreciation shall be determined by using the straight line method.
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Treas. Reg. §1.1016-5Miscellaneous adjustments to basis
(a) Certain stock distributions. (1) In the case of stock, the cost or other basis must be diminished by the amount of distributions previously made which, under the law applicable to the year in which the distribution was made, either were tax free or were applicable in reduction of basis (not including distributions made by a corporation which was classified as a personal service corporation under the provisions of the Revenue Act of 1918 (40 Stat. 1057) or the Revenue Act of 1921 (42 Stat. 227), out of its earnings or profits which were taxable in accordance with the provisions of section 218 of the Revenue Act of 1918 or the Revenue Act of 1921). For adjustments to basis in the case of certain corporate distributions, see section 301 and the regulations thereunder.
(2) The application of subparagraph (1) of this paragraph may be illustrated by the following example:
(b) Amortizable bond premium—(1) In general. A holder's basis in a bond is reduced by the amount of bond premium used to offset qualified stated interest income under § 1.171-2. This reduction occurs when the holder takes the qualified stated interest into account under the holder's regular method of accounting.
(2) Special rules for taxable bonds. A holder's basis in a taxable bond is reduced by the amount of bond premium allowed as a deduction under § 1.171-3(c)(5)(ii) (relating to the issuer's call of a taxable bond) or under § 1.171-2(a)(4)(i)(A) (relating to excess bond premium).
(3) Special rule for tax-exempt obligations. A holder's basis in a tax-exempt obligation is reduced by the amount of excess bond premium that is treated as a nondeductible loss under § 1.171-2(a)(4)(ii).
(c) Municipal bonds. In the case of a municipal bond (as defined in section 75(b)), basis shall be adjusted to the extent provided in section 75 or as provided in section 22(o) of the Internal Revenue Code of 1939, and the regulations thereunder.
(d) Sale or exchange of residence. Where the acquisition of a new residence results in the nonrecognition of any part of the gain on the sale, or exchange, or involuntary conversion of the old residence, the basis of the new residence shall be reduced by the amount of the gain not so recognized pursuant to section 1034(a), or section 112(n) of the Internal Revenue Code of 1939, and the regulations thereunder. See section 1034(e) and the regulations thereunder.
(e) Loans from Commodity Credit Corporation. In the case of property pledged to the Commodity Credit Corporation, the basis of such property shall be increased by the amount received as a loan from such corporation and treated by the taxpayer as income for the year in which received under section 77, or under section 123 of the Internal Revenue Code of 1939. The basis of such property shall be reduced to the extent of any deficiency on such loan with respect to which the taxpayer has been relieved from liability.
(f) Deferred development and exploration expenses. Expenditures for development and exploration of mines or mineral deposits treated as deferred expenses under sections 615 and 616, or under the corresponding provisions of prior income tax laws, are chargeable to capital account and shall be an adjustment to the basis of the property to which they relate. The basis so adjusted shall be reduced by the amount of such expenditures allowed as deductions which results in a reduction for any taxable year of the taxpayer's taxes under subtitle A (other than chapter 2 relating to tax on self-employment income) of the Code, or prior income, war-profits, or excess-profits tax laws, but not less than the amounts allowable under such provisions for the taxable year and prior years. This amount is considered as the tax-benefit amount allowed and shall be determined in accordance with paragraph (e) of § 1.1016-3. For example, if a taxpayer purchases unexplored and undeveloped mining property for $1,000,000 and at the close of the development stage has incurred exploration and development costs of $9,000,000 treated as deferred expenses, the basis of such property at such time for computing gain or loss will be $10,000,000. Assuming that the taxpayer in this example has operated the mine for several years and has deducted allowable percentage depletion in the amount of $2,000,000 and has deducted allowable deferred exploration and development expenditures of $2,000,000, the basis of the property in the taxpayer's hands for purposes of determining gain or loss from a sale will be $6,000,000.
(g) Sale of land with unharvested crop. In the case of an unharvested crop which is sold, exchanged, or involuntarily converted with the land and which is considered as property used in the trade or business under section 1231, the basis of such crop shall be increased by the amount of the items which are attributable to the production of such crop and which are disallowed, under section 268, as deductions in computing taxable income. The basis of any other property shall be decreased by the amount of any such items which are attributable to such other property, notwithstanding any provisions of section 1016 or of this section to the contrary. For example, if the items attributable to the production of an unharvested crop consist only of fertilizer costing $100 and $50 depreciation on a tractor used only to cultivate such crop, and such items are disallowed under section 268, the adjustments to the basis of such crop shall include an increase of $150 for such items and the adjustments to the basis of the tractor shall incude a reduction of $50 for depreciation.
(h) Consent dividends. (1) In the case of amounts specified in a shareholder's consent to which section 28 of the Internal Revenue Code of 1939 applies, the basis of the consent stock shall be increased to the extent provided in subsection (h) of such section.
(2) In the case of amounts specified in a shareholder's consent to be treated as a consent dividend to which section 565 applies, the basis of the consent stock shall be increased by the amount which, under section 565(c)(2), is treated as contributed to the capital of the corporation.
(i) Stock in foreign personal holding company. In the case of the stock of a United States shareholder in a foreign personal holding company, basis shall be adjusted to the extent provided in section 551(f) or corresponding provisions of prior income tax laws.
(j) Research and experimental expenditures. Research and experimental expenditures treated as deferred expenses under section 174(b) are chargeable to capital account and shall be an adjustment to the basis of the property to which they relate. The basis so adjusted shall be reduced by the amount of such expenditures allowed as deductions which results in a reduction for any taxable year of the taxpayer's taxes under subtitle A (other than chapter 2 relating to tax on self-employment income) of the Code, or prior income, war-profits, or excess-profits tax laws, but not less than the amounts allowable under such provisions for the taxable year and prior years. This amount is considered as the tax-benefit amount allowed and shall be determined in accordance with paragraph (e) of § 1.1016-3.
(k) Deductions disallowed in connection with disposal of coal or domestic iron ore. Basis shall be adjusted by the amount of the deductions disallowed under section 272 with respect to the disposal of coal or domestic iron ore covered by section 631.
(l) Expenditures attributable to grants or loans covered by section 621. In the case of expenditures attributable to a grant or loan made to a taxpayer by the United States for the encouragement of exploration for, or development or mining of, critical and strategic minerals or metals, basis shall be adjusted to the extent provided in section 621, or in section 22(b)(15) of the Internal Revenue Code of 1939.
(m) Trademark and trade name expenditures. Trademark and trade name expenditures treated as deferred expenses under section 177 are chargeable to capital account and shall be an adjustment to the basis of the property to which they relate. The basis so adjusted shall be reduced by the amount of such expenditures allowed as deductions which results in a reduction for any taxable year of the taxpayer's taxes under subtitle A (other than chapter 2, relating to tax on self-employment income) of the Code, but not less than the amounts allowable under such section for the taxable year and prior years. This amount is considered as the tax-benefit amount allowed and shall be determined in accordance with paragraph (e) of § 1.1016-3.
(n) Life insurance companies. In the case of any evidence of indebtedness referred to in section 818(b), the basis shall be adjusted to the extent of the adjustments required under section 818(b) (or the corresponding provisions of prior income tax laws) for the taxable year and all prior taxable years. The basis of any such evidence of indebtedness shall be reduced by the amount of the adjustment required under section 818(b) (or the corresponding provision of prior income tax laws) on account of amortizable premium and shall be increased by the amount of the adjustment required under section 818(b) on account of accruable discounts.
(o) Stock and indebtedness of electing small business corporation. In the case of a shareholder of an electing small business corporation, as defined in section 1371(b), the basis of the shareholder's stock in such corporation, and the basis of any indebtedness of such corporation owing to the shareholder, shall be adjusted to the extent provided in §§ 1.1375-4, 1.1376-1, and 1.1376-2.
(p) Gift tax paid on certain property acquired by gift. Basis shall be adjusted by that amount of the gift tax paid in respect of property acquired by gift which, under section 1015(d), is an increase in the basis of such property.
(q) Section 38 property. In the case of property which is or has been section 38 property (as defined in section 48(a)), the basis shall be adjusted to the extent provided in section 48(g) and in section 203(a)(2) of the Revenue Act of 1964.
(r) Stock in controlled foreign corporations and other property. In the case of stock in controlled foreign corporations (or foreign corporations which were controlled foreign corporations) and of property by reason of which a person is considered as owning such stock, the basis shall be adjusted to the extent provided in section 961.
(s) Original issue discount. In the case of certain corporate obligations issued at a discount after May 27, 1969, the basis shall be increased under section 1232(a)(3)(E) by the amount of original issue discount included in the holder's gross income pursuant to section 1232(a)(3).
(t) Section 23 credit. In the case of property with respect to which a credit has been allowed under section 23 or former section 44C (relating to residential energy credit), basis shall be adjusted as provided in paragraph (k) of § 1.23-3.
(u) Gas guzzler tax. In the case of an automobile upon which the gas guzzler tax was imposed, the basis shall be reduced as provided in section 1016 (d).
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Treas. Reg. §1.1016-5(a)Certain stock distributions.
Certain stock distributions. (1) In the case of stock, the cost or other basis must be diminished by the amount of distributions previously made which, under the law applicable to the year in which the distribution was made, either were tax free or were applicable in reduction of basis (not including distributions made by a corporation which was classified as a personal service corporation under the provisions of the Revenue Act of 1918 (40 Stat. 1057) or the Revenue Act of 1921 (42 Stat. 227), out of its earnings or profits which were taxable in accordance with the provisions of section 218 of the Revenue Act of 1918 or the Revenue Act of 1921). For adjustments to basis in the case of certain corporate distributions, see section 301 and the regulations thereunder.
(2) The application of subparagraph (1) of this paragraph may be illustrated by the following example:
148 Citing Cases
ed basis of the Note in the hands of CSC Germany at the time of the contribution. Except as otherwise provided in subchapters C, K, and P, the adjusted basis of property is the property’s basis, determined under section 1012, adjusted as provided in section 1016. I.R.C. § 1011(a). Section 1012, for its part, provides that “[t]he basis of property shall be the cost of such property, except as otherwise provided.” I.R.C. § 1012(a). The cost of property is the amount paid for it. Treas. Reg. § 1.10
Specifically, the taxpayer must also maintain written records establishing (1) the item’s manner of acquisition as well as either the item’s approximate date of acquisition or the approximate date the property was substantially completed and (2) the cost or other basis, adjusted as provided by section 1016, of property donated by the taxpayer during the taxable year.
35 [*35] (b) Petitioners have not adequately explained why their customers purportedly used checks so frequently only when they bought gift jewelry but so infrequently for sales in the regular course of business. Shahbaz testified that “we wanted to avoid . . . credit card” processing fees on the gift jewelry. It is unclear, however, why t
Specifically, the taxpayer must also maintain written records establishing (1) the item’s manner of acquisition as well as either the item’s approximate date of acquisition or the approximate date the property was substantially completed and (2) the cost or other basis, adjusted as provided by section 1016, of property donated by the taxpayer during the taxable year.
), adjusted as provided in section 1016.”12 Section 1012, in turn, provides that “[t]he basis of property shall [generally] be the cost of such property.” Section 263A then clarifies this definition of basis as it applies to taxpayer-produced real property (or other tangible property) such as the Tate.
d from the sale of real property. Someone who sells property is taxed on the gain, not on the sale price. See §§ 1001(a), 1011. The seller gets “basis” for the amount he paid for the property, and his basis is then adjusted according to the rules in section 1016. See § 1012. Adjusted basis is typically what a property owner paid for the property plus what he later spent to improve it, minus allowed or allowable depreciation. §§ 1011(a), 1012(a), 1016; see also Simonsen v. Commissioner, 150 T.C.
Specifically, the taxpayer must also maintain written records establishing (1) the item’s manner of acquisition as well as either the item’s approximate date of acquisition or date the property was substantially completed and (2) the cost or other basis, adjusted as provided by section 1016, of property donated by the taxpayer during the taxable year.
Specifically, the taxpayer must also maintain written records establishing: (1) the item’s manner of acquisition as well as either the item’s approximate date of acquisition or the approximate date the property was substantially completed and (2) the cost or other basis, adjusted as provided by section 1016, of property donated by the taxpayer during the taxable year.
These provisions set forth the regulatory requirements (discussed above) that an apprai- sal summary "shall include" information concerning the manner in which the donor acquired the donated property, the date on which he acquired it, and the "cost or other basis ofthe property adjusted as required by section 1016." Ibid.
Perhaps this is a subtle concession by Andersen, but it has no effect on our conclusion because we disagree with his choice ofdepreciation method.
og- nized. Section 1011(a) provides that the adjusted basis for determining gain from the sale ofproperty is the basis determined under section 1012 or other applicable sections ofsubchapter O ofthe Code (e.g., section 1015), adjusted as provided in section 1016. Section 1012(a) provides that generally the basis ofproperty is the cost ofthe property. Section 1015(a) provides that generally the basis ofproperty acquired by gift is to be the same as it would be in the hands ofthe donor. Section 3A
- 19 - [*19] decline in value to be considered a casualty loss, the Coateses' adjusted basis in property A must be at least $210,000.8 We hold that the Coateses' adjusted basis in property A is at least $210,000.
are incorrect. Nonetheless, neither party objected to trying the issue. We exercise our discretion to determine Evans's basis in the Newport Beach property. A property's adjusted basis is equal to its cost, plus or minus the adjustments required by section 1016. See sec. 1011(a). One type ofadjustment is to increase basis by the cost incurred to develop the property. See secs. 263A, 1016(a); sec. 1.263(a)-1(d)(2), Income Tax Regs. The taxpayerbears the burden ofproving the cost. See Chandler v.
Section 1016 provides that a basis shall be adjusted "for expenditures * * * properly chargeable to capital account." We have determined that petitioners made capital improve- ments with a cost of$295,000 to Rose Hill during 2000-2005.
erence to the amount realized from the disposition ofthe property and the property's adjusted basis. See sec. 1001(a). In general, adjusted basis is - 10 - determined with reference to the cost ofthe property, see sec. 1012, adjusted as provided in section 1016. The transaction statements generated in connection with the stock petitioner acquired in the employee stock plan show the acquisition and the disposition of the stock that petitioner acquired as a participant. The statements, however, do
1001(c); see also sec.
1001(c); see also sec.
12 T.C. 235, 238 (1949), aff'd, 180 F.2d 140 (8th Cir. 1950). Section 1011 provides that a taxpayer's adjusted basis for determiningthe gain or loss from the sale or other disposition ofproperty shall be its cost, adjusted to the extent provided in section 1016. See also sec. 1012. A property's cost is - 7 - [*7] "the amount paid for such property in cash or other property." Sec. 1.1012-1(a), Income Tax Regs. The term "cost" includes "any indebtedness to the seller for the purchase price ofthe
Capital Gain Section 1001(a) provides that "[t]he gain from the sale or other disposition ofproperty shall be the excess ofthe amount realized therefrom over the adjusted basis provided in section 1011 for determining gain".
Cost or Other Basis Requirement An appraisal summarymust include "[t]he cost or other basis ofthe property adjusted as provided by section 1016".22 Sec.
Section 1016 provides that proper adjustments to basis in respect ofproperty shall in all cases be made for expenditures properly chargeable to capital.
is in the property from the amount he realized from its sale. Section 1011 provides that a taxpayer's adjusted basis for determining the gain or loss from the sale or other disposition ofproperty shall be its cost, adjusted to the extent provided in section 1016. See also sec. 1012. A property's cost is "the amount paid for such property in cash or other property." Sec. 1.1012-1(a), Income Tax Regs. The term "cost" includes "any indebtedness to the seller for the purchase price ofthe property an
Further, no adjustmentunder section 1016 is required.7 Accordingly, Ms.
, Income Tax Regs. Our holding in Smith did not authorize an upward adjustment ofbasis on the basis of property tax assessments. Subject to exceptions not applicable here, the adjusted basis ofproperty is generally its cost, adjusted as provided in section 1016. Sees. 1011 and 1012. a. Pine Avenue Property At trial petitioner testified that he was still in the process ofconstructing the Pine Avenue structure during 2006 and that the construction process was no more than 85% complete at the end o
is in the property from the amount he realized from its sale. Section 1011 provides that a taxpayer's adjusted basis for determining the gain or loss from the sale or other disposition ofproperty shall be its cost, adjusted to the extent provided in section 1016. See also sec. 1012. A property's cost is "the amount paid for such property in cash or other property." Sec. 1.1012-1(a), Income Tax Regs. The term "cost" includes "any indebtedness to the seller for the purchase price ofthe property an
1001(c); see also sec.
loss from the sale or other disposition ofproperty reflects the difference between the amount realized and the property's adjusted basis. See sec. 1001(a). Adjusted basis is generally basis determined under section 1012, adjusted as determined under section 1016. Sec. 1011. Under section 1012, basis is generally the property's cost. In the case ofstock in an S corporation, - 10 - [*10] adjustments to basis include adjustments required under section 1367.1° Sec. 1016(a)(17). On briefthe parties f
Section 1011(a) generally provides that a taxpayer's adjusted basis for determining the gain from the sale or other disposition of property shall be its cost, adjusted to the extent provided by section 1016." See also sec.
e (130,599) 130,599 Total 177,905 Someone who sells property is taxed on the gain, not the sale price. See secs. 1001(a), 1011. The seller gets "basis" for the amount he paid for the property, and his basis is then adjusted according to the rules in section 1016. See secs. 1012, 1016. The gain is basically the amount the seller receives reduced by the seller's adjusted basis in the property. See sec. 1011. The Commissioner argues that the Esrigs had more gain on the sale oftheir properties in 20
Because Oglesby sold the rental property for a tax loss during 2005, we hold that his loss should be increased by $4,150, the amount -for which he claimed a deduction.
After the transfer in 1992 the two cotenants, petitioner and Benedict, held the property with a total basis of $320,000. There was a subsequent transfer of the property between the cotenants. ,As part of the 1998 divorce settlement, Benedict was required to-deed to petitioner his remaining ownership interest in the property. Petitioner t
to improve it. Secs. 1011, 1012, 1016. A taxpayer can't generally ded ct these payments right away because ithey provide a benefi that lasts longer than just one taxable year. But before calculating the capital gain the basis must be adjusted under section 1016. And depreciation is one of those adjustments we need to figu e out in this case. See sec. 1016 (a) (2) . Most property oesn't just fall apa t one day, it s In his pretrial memorandum and at trial the Commissioner referred to this as Will
2008-46 (the basis of property, under section 1012, is generally defined as,cost and that cost is adjusted pursuant to section 1016) ; see also Kikalos v .
ting, acquiring, or defending title to the Del Mar Avenue property . Payment of the judgment obtained by the attorney was a nondeductible personal expense under section 262 and did not increase petitioners' basis in the Del Mar Avenue property under section 1016 . See Heger v . Commissioner , T .C . Memo . 1993-408, affd . without published opinion 35 F .3d 561 (5th Cir . 1994) . Petitioners claim that they borrowed $25,000 from relatives and repaid the loan at the time the Del Mar Avenue proper
value of the property at the time of the gift, then, for purposes of determining loss, the basis shall be the fair market value. Sec. 1015(a). A taxpayer's adjusted basis for determining gain or loss is the taxpayer's basis, adjusted as provided in section 1016. Sec. 1011(a). Under section 1016(a) (1), the basis of property must be adjusted for, among other things, expenditures, receipts, losses, or other items, properly chargeable to capital. 3(...continued) respondent's bank deposits analysis
For the determination of the adjusted basis of the property at the end of the taxable year see section 1016 and the regulations thereunder.
265(b)(2)(A), "the taxpayer's average adjusted bases (within the meaning of section 1016) of tax-exempt obligations" is similar to the relevant text of sec .
Specifically, the taxpayer must also maintain written records establishing: (1) The item’s manner of acquisition as well as either the item’s approximate date of acquisition or the approximate date the property was substantially completed and (2) the cost or other basis, adjusted as provided by section 1016, of property donated by the taxpayer during the taxable year.
— For purposes of paragraph (1), the portion of the taxpayer’s interest expense which is allocable to tax-exempt interest is an amount which bears the same ratio to such interest expense as— (A) the taxpayer’s average adjusted bases (within the meaning of section 1016) of tax-exempt obligations acquired after August 7, 1986, bears to (B) such average adjusted bases for all assets of the taxpayer.
haritable contribution was re- quired (1) to provide in the donee acknowledgment in Form 8283 the name of such organization, its employer identification number, and its address and (2) to sign and date such donee acknowledgment. - 33 - provided by section 1016. Neither Ms. Schadle, Mr. Tutor, nor Mr. Johnston was aware that TMC had constructed a new building on KQC’s land with HHS’s grant funds. Nor was any of them aware that KQC was reporting in KQC’s 1999 return a charitable contribution in an
fair market value of the property at the time of the contribution and the method utilized in determining the fair market value; the manner and date of acquisition of the property; and the cost or other basis of the property, adjusted as provided by section 1016. See sec. 1.170A-13(b)(2)(ii) and (3)(i), Income Tax Regs. The only information in evidence is the letter from NKF confirming receipt of the truck with a description. There is no reliable evidence of the fair market value of the truck at
12 T.C. 235, 238 (1949), affd. 180 F.2d 140 (8th Cir. 1950). Section 1011 provides that a taxpayer’s adjusted basis for determining the gain or loss from the sale or other disposition of property shall be its cost, adjusted to the extent provided by section 1016. See also sec. 1012. Under section 1016(a)(1), the basis of property must be adjusted for expenditures, receipts, losses, or other items, properly chargeable to capital account. The cost of improvements and betterments made to a taxpayer
As pertinent here, section 1011(a) defines the term "adjusted basis" as the basis determined under section 1012, adjusted as provided under section 1016, and section 1012 pro- vides that the basis of property is its cost.
We disagree with respondent’s interpretation of the interplay of DEFRA section 177(d)(2) and section 1016(a)(3).
from that sale. The issue that remains for decision is petitioner’s basis in parcel 1. The adjusted basis for determining gain from the sale of property, whenever acquired, shall be the basis determined under section 1012 and adjusted as provided in section 1016. Sec. 1011(a). Under section 1012, the basis of property shall be the cost of such property. Under section 1016(a)(1), the basis of property shall be adjusted for expenditures, receipts, losses, or other items, properly chargeable to cap
r section 1012 or other applicable sections of this subchapter and subchapters C (relating to corporate distributions and adjustments), K (relating to partners and partnerships), and P (relating to capital gains and losses)), adjusted as provided in section 1016. As a general matter, section 1011 requires the use of the cost basis determined under section 1012, adjusted as provided in section 1016 (i.e., the regular adjusted cost basis), for purposes of determining gain or loss. Section 1011 doe
determining loss from the sale or other disposition of the property. Under section 1.1011-1, Income Tax Regs., adjusted basis is the cost or other basis of property under section 1012, adjusted to reflect allowable deductions for depreciation under section 1016. - 13 - The claimed loss was a term life insurance policy that had no cash surrender value upon termination, as distinguished from a whole life insurance policy that generally has a cash surrender value over time as premiums are paid. Pe
of the $76,771 claimed adjusted basis in the Barracuda. Section 1011(a) provides that the adjusted basis for determining gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Generally, under section 1012, the basis of property is its cost. The cost is the amount paid for such property in cash or other property. Sec. 1.1012-1(a), Income Tax Regs. The cost basis is increased by the cost of capital improvement
n turn, describes an "adjusted basis" provided by section 1011. The adjusted cost basis under section 1011 for determining gain or loss from the sale of property is the cost basis or other basis determined under section 1012 adjusted as provided by section 1016. Annual depletion deductions are allowed only to the owner of an "economic interest" in standing timber. See Palmer v. Bender, 287 U.S. 551, 557 (1933); Georgia-Pacific Corp. v. United States, 648 F.2d 653, 657-659 (9th Cir. 1981); sec. 1
)(1)(ii), Income Tax Regs.; see sec. 1.165-1(c)(1), Income Tax Regs. Under section 1.1011-1, Income Tax Regs., adjusted basis is the cost or other basis of property under section 1012, adjusted to reflect allowable deductions for depreciation under section 1016. Also in determining the amount of loss deductible under section 165, “fair market value” means “the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or
n in the notice of deficiency) that the Compton residence ceased being petitioner’s personal residence and instead became rental property prior to its sale. - 6 - generally is equal to the taxpayer’s cost of the property, adjusted as required under section 1016. The basis of community property transferred pursuant to a divorce depends upon the nature of the property division.5 If the division is a nontaxable one, e.g., an equal division of strictly community property, the transferee spouse recei
Section 1016 provides that proper adjustments shall be - 6 - made to the basis of property for items such as capital expenditures and depreciation allowed or allowable.
ehouse and the new warehouse were separate and distinct properties. Only the old warehouse was involved in the casualty on December 13, 1993, and it was completely destroyed before the new warehouse was even in existence. 7(...continued) provided by sec. 1016. Secs. 1.1016-2 and 1.1016-3, Income Tax Regs., provide that a taxpayer’s cost basis must be increased by the cost of improvements and betterments made to property, and decreased by amortization, depreciation, and obsolescence. - 10 - Secti
As pertinent here, (1) petitioner’s adjusted basis in determining the gain or the loss from the sale of the Church Street property is his basis in that property determined under section 1012, adjusted as provided in section 1016,88 see sec.
As pertinent here, section 1011(a) provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016, and section 1012 provides that the basis of property is its cost.
Section 1367 provides additional, special rules with respect to adjusting basis in an S corporation investment. The disagreement between the parties concerns only petitioner's cost basis in his Wedgewood investment. The parties disagree as to whether petitioner's cost basis in his Wedgewood investment includes the various payments repres
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
For Federal income tax purposes, the general rule provides that taxpayers recover tax free their cost or tax basis for property on which gain is to be computed.
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
ction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or ot er disposition of property is the basis determined under sectio t 1012, adjusted as provided in section 1016. Section 1012 provi es that the basis of property is the cost of the property an under section 362(a) such basis in a transferor carries over tó a corporation where such property is contributed tö the corporation for stock under section 35
l depreciation from 1985 through 1989.5 Pursuant to section 1011(a), the adjusted basis for determining the gain or loss from the sale or other disposition of property is the cost of the property determined under section 1012 adjusted as provided in section 1016. Section 1016(a)(2) provides, in effect, that the basis of the property shall be adjusted by the amount of depreciation previously allowed, but not less than the amount allowable, with respect to the property. Depreciation "allowed" is t
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
saction intended to reach the ultimate result. - 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016. Section 1012 provides that the basis of property is the cost of the property and under section 362(a) such basis in a transferor carries over to a corporation where such property is contributed to the corporation for stock under section
Section 1016(a)(1) provides in pertinent part that— adjustment * * * [to basis shall be made] (1) for expenditures, receipts, losses, or other items, properly chargeable to capital account * * * Petitioners contend that under section 1016, where property that is sold does not have a separate, identifiable cost or tax basis and where the property sold is sufficiently integrated with or appurtenant to related property, the taxpayer’s total cost for the related property should be charged to the tra
substantive significance but relates only to the manner of their treatment in the calculation of the PAL. Nor are we persuaded by petitioner's argument that the restoration of depreciation is required by the "proper adjustment" of basis language in section 1016. Whatever the impact of that language might be in the context of a disallowance of a deduction for depreciation which has a permanent effect, it has no bearing herein. Our conclusion that the PAL's cannot be utilized in 1991 but remain a
ant to section 1011(a), the adjusted basis for determining the gain or loss from the sale or other disposition of property is the cost of the property determined under section 1012 (with certain exceptions not material here) adjusted as provided in section 1016. Section 1016(a)(2) provides, in effect, that the basis of the property shall be adjusted by the amount of any amortization previously allowed, but not less than the amount allowable, with respect to the property. Amortization "allowed" i
ant to section 1011(a), the adjusted basis for determining the gain or loss from the sale or other disposition of property is the cost of the property determined under section 1012 (with certain exceptions not material here) adjusted as provided in section 1016. Section 1016(a)(2) provides, in effect, that the basis of the property shall be adjusted by the amount of any amortization previously allowed, but not less than the amount allowable, with respect to the property. Amortization "allowed" i
oposes the following allocation: 2 As pertinent to this case, sec. 1011 provides that the adjusted basis for determining gain or loss from the sale or other disposition of property is the cost of such property, see sec. 1012, adjusted as provided in sec. 1016. Sec. 1016(a)(1), in part, provides that proper adjustment is to be made for expenditures, receipts, losses, or other items, properly . chargeable to capital account. Sec. 1.1016-2(a), Income Tax Regs., in part, states: "The cost or other b
oposes the following allocation: 2 As pertinent to this case, sec. 1011 provides that the adjusted basis for determining gain or loss from the sale or other disposition of property is the cost of such property, see sec. 1012, adjusted as provided in sec. 1016. Sec. 1016(a)(1), in part, provides that proper adjustment is to be made for expenditures, receipts, losses, or other items, properly chargeable to capital account. Sec. 1.1016-2(a), Income Tax Regs., in part, states: “The cost or other bas
ners were not entitled to the depreciation deductions - 19 - they claimed for 1990 and 1991. Rather, receipt of the insurance proceeds without repair to the truck required Ruckman, Inc., to make a downward adjustment to its basis in the truck under section 1016. Indeed, the insurance proceeds received by Ruckman, Inc., exceeded its basis in the truck, which would preclude any casualty loss as a result of the accident and would instead ordinarily produce taxable gain. However, because respondent
oposes the following allocation: 2 As pertinent to this case, sec. 1011 provides that the adjusted basis for determining gain or loss from the sale or other disposition of property is the cost of such property, see sec. 1012, adjusted as provided in sec. 1016. Sec. 1016(a)(1), in part, provides that proper adjustment is to be made for expenditures, receipts, losses, or other items, properly chargeable to capital account. Sec. 1.1016-2(a), Income Tax Regs., in part, states: “The cost or other bas
substantive significance but relates only to the manner of their treatment in the calculation of the PAL. Nor are we persuaded by petitioner’s argument that the restoration of depreciation is required by the “proper adjustment” of basis language in section 1016. Whatever the impact of that language might be in the context of a disallowance of a deduction for depreciation which has a permanent effect, it has no bearing herein. Our conclusion that the PAL’s cannot be utilized in 1991 but remain a
uant to section 1011(a), the adjusted basis for determining the gain or loss from the sale or other disposition of property is the cost of the property determined under section 1012 (with certain exceptions not material here) adjusted as provided in section 1016. Section 1016(a)(2) provides, in effect, that the basis of the property shall be adjusted by the amount of any amortization previously allowed, but not less than the amount allowable, with respect to the property. Amortization “allowed”
the deduction for any bad debt shall be the adjusted basis provided in section 1011 for determining the loss from the sale or other disposition of property. The "adjusted basis" of property is the property's unadjusted basis, adjusted as provided in section 1016. Sec. 1011(a). Typically, a taxpayer's basis in property is the cost of that property. Sec. 1012; sec. 1.1012-1(a), Income Tax Regs. In this instance, petitioners bear the burden of proving petitioner's basis in the demand note. Rule 142
basis in the property. Section 1001 provides that the gain from the sale of property is the excess of the amount realized over the adjusted basis. The adjusted basis of property is its basis (cost) as determined under section 1011 and as adjusted by section 1016. Sec. 1012. The basis is adjusted for the costs of improvements and betterments made to the property. Sec. 1016(a)(1); sec. 1.1016-2(a), Income Tax Regs. Petitioners paid $300,000 for 137 acres of the Antioch property and sold 117 acres
As pertinent here, section 1011(a) defines the term "adjusted basis" as the basis determined under section 1012, adjusted as provided under section 1016, and section 1012 provides that the basis of property is its cost.
basis in the property. Section 1001 provides that the gain from the sale of property is the excess of the amount realized over the adjusted basis. The adjusted basis of property is its basis (cost) as determined under section 1011 and as adjusted by section 1016. Sec. 1012. The basis is adjusted for the costs of improvements and betterments made to the property. Sec. 1016(a)(1); sec. 1.1016-2(a), Income Tax Regs. Petitioners paid $300,000 for 137 acres of the Antioch property and sold 117 acres
As pertinent here, section 1011(a) defines the term "adjusted basis" as the basis determined under section 1012, adjusted as provided in section 1016, and section 1012 provides that the basis of property is its cost.
gain from the sale of property shall be the excess of the amount realized over the adjusted basis. Sec. 1001(a). The adjusted basis for determining gain or loss from the sale of property is the basis (cost) of such property, adjusted as provided in section 1016. Secs. 1011, 1012. Section 1016 adjustments to basis pertinent to the basis of a personal residence include increases due to capital expenditures, and reductions due to nonrecognition of gain on a previous residence under section 1034(e).
The "adjusted basis" of property exchanged is the property's unadjusted basis (e.g., section 1012 cost basis) adjusted as provided in section 1016 (e.g., reduced for depreciation allowable).