§1238 — Repealed. Pub. L. 101–508, title XI, § 11801(a)(35), Nov. 5, 1990, 104 Stat. 1388–521]
41 citing cases
Statute Text — 26 U.S.C. §1238
[§ 1238. Repealed. Pub. L. 101–508, title XI, § 11801(a)(35), Nov. 5, 1990, 104 Stat. 1388–521] Section, acts Aug. 16, 1954, ch. 736, 68A Stat. 332; Oct. 4, 1976, Pub. L. 94–455, title XIX, §§ 1901(b)(3)(K), 1951(c)(2)(A), 90 Stat. 1793, 1840, related to amortization in excess of depreciation. Statutory Notes and Related Subsidiaries Savings ProvisionFor provisions that nothing in repeal by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.
Treasury Regulations
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Treas. Reg. §1.1238-1Amortization in excess of depreciation
(a) In general. Section 1238 provides that if a taxpayer is entitled to a deduction for amortization of an emergency facility under section 168, and if the facility is later sold or exchanged, any gain realized shall be considered as ordinary income to the extent that the amortization deduction exceeds normal depreciation. Thus, under section 1238 gain from a sale or exchange of property shall be considered as ordinary income to the extent that its adjusted basis is less than its adjusted basis would be if it were determined without regard to section 168. If an entire facility is certified under section 168(e), the taxpayer may use allowances for depreciation based on any rate and method which would have been proper if the basis of the facility were not subject to amortization under section 168, in determining what the adjusted basis of the facility would be if it were determined without regard to section 168. If only a portion of a facility is certified under section 168(e), allowances for depreciation based on the rate and method properly used with respect to the uncertified part of the facility are used in determining what the adjusted basis of the facility would be if it were determined without regard to section 168. The principles of this paragraph may be illustrated by the following examples:
(b) Substituted basis. If a taxpayer acquires other property in an exchange for an emergency facility with respect to which amortization deductions have been allowed or allowable, and if the basis in his hands of the other property is determined by reference to the basis of the emergency facility, then the basis of the other property is determined with regard to section 168, and therefore the provisions of section 1238 apply with respect to gain realized on a subsequent sale or exchange of the other property. The provisions of section 1238 also apply to gain realized on the sale or exchange of an emergency facility (or other property acquired, as described in the preceding sentence, in exchange for an emergency facility) by a taxpayer in whose hands the basis of the facility (or other property) is determined by reference to its basis in the hands of another person to whom deductions were allowable or allowed with respect to the facility under section 168.
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Treas. Reg. §1.1238-1(a)In general.
In general. Section 1238 provides that if a taxpayer is entitled to a deduction for amortization of an emergency facility under section 168, and if the facility is later sold or exchanged, any gain realized shall be considered as ordinary income to the extent that the amortization deduction exceeds normal depreciation. Thus, under section 1238 gain from a sale or exchange of property shall be considered as ordinary income to the extent that its adjusted basis is less than its adjusted basis would be if it were determined without regard to section 168. If an entire facility is certified under section 168(e), the taxpayer may use allowances for depreciation based on any rate and method which would have been proper if the basis of the facility were not subject to amortization under section 168, in determining what the adjusted basis of the facility would be if it were determined without regard to section 168. If only a portion of a facility is certified under section 168(e), allowances for depreciation based on the rate and method properly used with respect to the uncertified part of the facility are used in determining what the adjusted basis of the facility would be if it were determined without regard to section 168. The principles of this paragraph may be illustrated by the following examples:
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Treas. Reg. §1.1238-1(b)Substituted basis.
Substituted basis. If a taxpayer acquires other property in an exchange for an emergency facility with respect to which amortization deductions have been allowed or allowable, and if the basis in his hands of the other property is determined by reference to the basis of the emergency facility, then the basis of the other property is determined with regard to section 168, and therefore the provisions of section 1238 apply with respect to gain realized on a subsequent sale or exchange of the other property. The provisions of section 1238 also apply to gain realized on the sale or exchange of an emergency facility (or other property acquired, as described in the preceding sentence, in exchange for an emergency facility) by a taxpayer in whose hands the basis of the facility (or other property) is determined by reference to its basis in the hands of another person to whom deductions were allowable or allowed with respect to the facility under section 168.
41 Citing Cases
105-34, § 1238(a), 111 Stat. 788, 1026. Hamel, T.C. Memo. 2024-62, at *7–8. In Hamel, T.C. Memo. 2024-62, at *7, we said: Under a plain reading of the newly enacted wording, the effect of the amendment was to remove partnership- 9 As the Supreme Court has said, in the cases that come before us “the question that matters [is]: Does the statute authorize the
105-34, § 1238(b)(2), 111 Stat. 788, 1026], the effect of th[at] amendment was to remove partnership-item penalties from the deficiency procedures . . . .”); see also Hamel v. Commissioner, T.C. Memo. 2025-19, at *9–10 (addressing a similar challenge regarding section 6230(a)(2)(A)(i) made in a motion for reconsideration and concluding that “[o]ur foregoin
105-34, § 1238(a), 111 Stat. 788, 1026. Before the 1997 amendment section 6221 provided in part: Except as otherwise provided in this subchapter, the tax treatment of any partnership item shall be determined at the partnership level. After the 1997 amendment section 6221 provided in part: Except as otherwise provided in this subchapter, the tax treatment o
and their partners were enacted by Congress in the Tax Equity and Fiscal ResponsibilityAct of 1982 (TEFRA), Pub. L. No. 97-248, sec. 402(a), 96 Stat. at 648, and amended by Congress in the Taxpayer ReliefAct of 1997 (TRA 1997), Pub. L. No. 105-34, sec. 1238, 111 Stat. at 1026. The determinations of partnership items in partnership-level proceedings are binding on the partners and may not be challenged in subsequent partner-level proceedings. See secs. 6230(c)(4), 7422(h). Section 6226 provides f
1238, 111 Stat. at 1026. 4Sec. 301.6231(a)(6)-lT(a), Temporary Proced. & Admin. Regs., 64 Fed. Reg. 3840 (Jan. 26, 1999); see also sec. 301.6231(a)(6)-1(a)(1), Proced. & Admin. Regs. 5In most Son ofBOSS cases--as in the case at hand and in Petaluma FX Partners, LLC v. Commissioner, 135 T.C. 581 (2010) (Petaluma III), on remand from Petaluma FX
1238, 111 Stat. 1026, I respectfully dissent. I. The Court of Appeals Opinion In Petaluma I we held, among other things, that (1) we had jurisdiction to decide whether the partnership used to achieve the challenged tax benefits was a sham and/or lacked economic substance, (2) we also had jurisdiction to decide that the partners' outside bases
1238(a), 111 Stat. 1026, Congress amended sec. 6221 to include, as an item to be determined at the partnership level, the applicability of any penalty, addition to tax, or additional amount which relates to an adjustment to a partnership item, effective for partnership taxable years ending after Aug. 5, 1997. Consequently, we have jurisdiction
able years ending after Aug. 5, 1997, the partnership-level proceeding includes the determination of penalties, additions to tax, or additional amounts relating to an adjustment to partnership items. See Taxpayer Relief Act of 1997, Pub. L. 105-34, sec. 1238(a), 111 Stat. 1026. The sec. 6662(a) accuracy-related penalty in this proceeding, however, relates to 1996 (i.e., prior to the effective date of the amendment to sec. 6221) and is, thus, an affected item dependent on factual determinations t
equire partner level determinations. For the years at issue, the additions to tax for negligence are affected items requiring factual determinations at - 8 - the individual partner level. Id. at 745. The Taxpayer Relief Act of 1997, Pub. L. 105-34, sec. 1238, 111 Stat. 1026, amended sections 6221, 6226, and 6230 to provide that the partnership- level proceeding is now to include the determination of the applicability of any penalty or addition to tax relating to an adjustment to a partnership it
105-34, section 1238(a), 111 Stat.
n 6221 to provide that the applicability of any penalty, addition to tax, or additional amount that relates to an adjustment to a partnership item shall be determined at the partnership level. See Taxpayer - 19 - Relief Act of 1997, Pub. L. 105-34, sec. 1238(a), 111 Stat. 1026. However, the amendment to section 6221 is effective only for partnership taxable years ending after August 5, 1997. See H. Conf. Rept. 105-220, at 685 (1997) (effective for partnership taxable years ending after the date