Taxable Years Taxable Years Taxable Years Sec. 112. (k) Assumption of li- Sec. 112. (k) Assumption of li- Sec. 112. (k) Assumption of liability not recognized. Where ability not recognized. Where ability not recognized. Where upon an exchange the taxpayer re- upon an exchange the taxpayer re- upon an exchange the taxpayer receives as part of the consideration ceives as part of the consideration ceives as part of the consideration property which would be permitted property which would be permitted property which would be permitted by subsection (b) (4) or (5) of by subsection (b) (4) or (5) of by subsection (b) (4) or (5) of this section to be received without this section to be received without this section to be received without the recognition of gain if it were the recognition of gain if it were the recognition of gain if it were the sole consideration, and as part the sole consideration, and as part the sole consideration, and as part of the consideration another party of the consideration another party of the consideration another party to the exchange assumes a liability to the exchange assumes a liability to the exchange assumes a liability of the taxpayer or acquires from of the taxpayer or acquires from of the taxpayer or acquires from the taxpayer property subject to a the taxpayer property subject to a the taxpayer property subject to a liability, such assumption or ac- liability, such assumption or ac- liability, such assumption or acquisition shall not be considered as quisition shall not be considered as quisition shall not be considered as "other property or money" received "other property or money" received "other property or money" received by the taxpayer within the mean- by the taxpayer within the mean- by the taxpayer within the meaning of subsection (c), (d), or (e) ing of subsection (c), (d), or (e) ing of subsection (c), (d), or (e) of this section and shall not pre- of this section and shall not pre- of this section and shall not prevent the exchange from being vent the exchange from being vent the exchange from being within the provisions of subsection within the provisions of subsection within the provisions of subsection (b) (4) or (5); except that if, (b) (4) or (5); except that if, (b) (4) or (5); except that if, taking into consideration the nature taking into consideration the nature taking into consideration the nature of the liability and the circum- of the liability and the circum- of the liability and the circumstances in the light of which the stances in the light of which the stances in the light of which the arrangement for the assumption or arrangement for the assumption or arrangement for the assumption or acquisition was made, it appears acquisition was made, it appears acquisition was made, it appears that the principal purpose of the that the principal purpose of the that the principal purpose of the taxpayer with respect to the as- taxpayer with respect to the as- taxpayer with respect to the assumption or acquisition was a pur-sumption or acquisition was a pur- sumption or acquisition was a purpose to avoid Federal income tax pose to avoid Federal income tax pose to avoid Federal income tax on the exchange, or, if not such on the exchange, or, if not such on the exchange, or, if not such purpose, was not a bona fide busi- purpose, was not a bona fide busi-purpose, was not a bona fide business purpose, such assumption or ness purpose, such assumption or ness purpose, such assumption or acquisition (in the amount of the acquisition (in the amount of the acquisition (in the amount of the liability) shall, for the purposes of liability) shall, for the purposes of liability) shall, for the purposes of this section, be considered as money this section, be considered as money this section, be considered as money received by the taxpayer upon the received by the taxpayer upon the received by the taxpayer upon the exchange. In any suit or proceed- exchange. In any suit or proceed- exchange. In any suit or proceeding where the burden is on the tax- ing where the burden is on the tax- ing where the burden is on the taxpayer to prove that such assump-payer to prove that such assump- payer to prove that such assumption or acquisition is not to be con- tion or acquisition is not to be con- tion or acquisition is not to be considered as money received by the sidered as money received by the sidered as money received by the taxpayer, such burden shall not be taxpayer, such burden shall not be taxpayer, such burden shall not be considered as sustained unless the considered as sustained unless the considered as sustained unless the taxpayer sustain such burden by taxpayer sustain such burden by taxpayer sustain such burden by the clear preponderance of the evi- the clear preponderance of the evi- the clear preponderance of the evidence. dence. Sec. 112, I. R. C., supra, amended by Sec. 213 (a), R. A. of 1939 by adding subdivision (k), supra, Sec. 213 (e) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1938. Sec. 112, I. R. C., supra, amended by Sec. 213 (a), R. A. of 1939 by adding subsection (k), supra, Sec. 213 (e) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1938. 18 Sec. 213 (f), R. A. of 1939, reads as follows: Sec. 213. (f) Assumption of liability not recognized under prior acts. (1) Where upon an exchange occurring in a taxable year ending after December 31, 1923, and beginning before January 1, 1939, the taxpayer received as part of the consideration property which would be permitted by subsection (b) (4) or (5) of section 112 of the Revenue Act of 1938, or the corresponding provisions of the Revenue Act of 1924 or subsequent revenue Acts, to be dence. Sec. 112, I. R. C., supra, amended by Sec. 213 (a), R. A. of 1939, by adding subsection (k), supra, Sec. 213 (e) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1938. received without the recognition of gain if it were the sole consideration, and as part of the consideration another party to the exchange assumed a liability of the taxpayer or acquired from the taxpayer property subject to a liability, such assumption or acquisition shall not be considered as "other property or money' received by the taxpayer within the meaning of subsection (e), (d), or (e) of section 112 of the Revenue Act of 1938, or the corresponding provisions of the Revenue Act of 1924 or subsequent revenue Acts, and shall not prevent the exchange from being within the provisions of sub ability, such assumption or acquisi- Taxable Years Beginning before 1939 Sec. 112. (k) Assumption of li- Sec. 112. (k) Assumption of li- Sec. 112. (k) Assumption of ability not recognized.—Where ability not recognized. Where liability not recognized. upon an exchange the taxpayer re- upon an exchange the taxpayer receives as part of the consideration ceives as part of the consideration property which would be permitted property which would be permitted by subsection (b) (4) or (5) of by subsection (b) (4) or (5) of this this section to be received without section to be received without the the recognition of gain if it were recognition of gain if it were the the sole consideration, and as part sole consideration, and as part of of the consideration another party the consideration another party to to the exchange assumes a liability the exchange assumes a liability of of the taxpayer or acquires from the taxpayer or acquires from the the taxpayer property subject to a taxpayer property subject to a liliability, such assumption or acquisition shall not be considered as "other property or money" received by the taxpayer within the meaning of subsection (c), (d), or (e) of this section and shall not prevent the exchange from being the exchange from being within the within the provisions of subsection provisions of subsection (b) (4) or (b) (4) or (5); except that if, (5); except that if, taking into taking into consideration the nature consideration the nature of the liof the liability and the circum- ability and the circumstances in the stances in the light of which the light of which the arrangement for arrangement for the assumption or the assumption or acquisition was acquisition was made, it appears made, it appears that the principal that the principal purpose of the purpose of the taxpayer with retaxpayer with respect to the as-spect to the assumption or acquisisumption or acquisition was a pur- tion was a purpose to avoid Fedpose to avoid Federal income tax eral income tax on the exchange, or, on the exchange, or, if not such if not such purpose, was not a bona purpose, was not a bona fide busi- fide business purpose, such assumpness purpose, such assumption or tion or acquisition (in the amount acquisition (in the amount of the of the liability) shall, for the purliability) shall, for the purposes of poses of this section, be considered this section, be considered as money as money received by the taxpayer received by the taxpayer upon the upon the exchange. In any suit or exchange. In any suit or proceed- proceeding where the burden is on ing where the burden is on the tax- the taxpayer to prove that such aspayer to prove that such assump-sumption or acquisition is not to be tion or acquisition is not to be con- considered as money received by the sidered as money received by the taxpayer, such burden shall not be taxpayer, such burden shall not be considered as sustained unless the considered as sustained unless the taxpayer sustains such burden by taxpayer sustains such burden by the clear preponderance of the evithe clear preponderance of the evidence. dence. section (b) (4) or (5) of section 112 of the Revenue Act of 1938, or the corresponding provisions of the Revenue Act of 1924 or subsequent revenue Acts; except that if, in the determination of the tax liability of such taxpayer for the taxable year in which the exchange occurred, by a decision of the Board of Tax Appeals or of a court which became final before the ninetieth day after the date of enactment of the Revenue Act of 1939, or by a closing agreement, gain was recognized to such taxpayer by reason of such assumption or acquisition of Retroactivity See fn. 13 for retroactive amendment of Sec. 112, R. A. of 1938, and corresponding provisions of prior acts made by Sec. 213 (f), R. A. of 1939. property, then for the purposes of section 112 of the Revenue Act of 1938, and corresponding provisions of the Revenue Act of 1924 or subsequent revenue Acts, such assumption or acquisition (in the amount of the liability considered in computing the gain) shall be considered as money received by the taxpayer upon the exchange. (2) Paragraph (1) shall be effective with respect to the Revenue Act of 1924 and subsequent revenue Acts as of the date of enactment of each such Act. Taxable Years Sec. 113. Adjusted basis for determining gain or loss. Sec. 113. (a) Basis (unadjusted) Taxable Years Sec. 113. Adjusted basis for determining gain or loss. Sec. 113. (a) Basis (unadjusted) Taxable Years Sec. 113. Adjusted basis for determining gain or loss. Sec. 113. (a) Basis (unadjusted) of property. The basis of prop- of property.-The basis of prop- of property. The basis of property shall be the cost of such property shall be the cost of such property shall be the cost of such property; except thaterty; except that— erty; except that Sec. 113. (a) (1) Inventory Sec. 113. (a) (1) Inventory Sec. 113. (a) (1) Inventory value. If the property should have value. If the property should have value. If the property should have been included in the last inventory, been included in the last inventory, been included in the last inventory, the basis shall be the last inventory the basis shall be the last inventory the basis shall be the last inventory value thereof. value thereof. value thereof. Sec. 113. (a) (2) Gifts after Sec. 113. (a) (2) Gifts after Sec. 113. (a) (2) Gifts after December 31, 1920.-If the prop- December 31, 1920.-If the prop- December 31, 1920.-If the property was acquired by gift after erty was acquired by gift after erty was acquired by gift after December 31, 1920, the basis shall December 31, 1920, the basis shall December 31, 1920, the basis shall be the same as it would be in the be the same as it would be in the be the same as it would be in the hands of the donor or the last pre- hands of the donor or the last pre- hands of the donor or the last preceding owner by whom it was not ceding owner by whom it was not ceding owner by whom it was not acquired by gift, except that if acquired by gift, except that for acquired by gift, except that for such basis (adjusted for the period the purpose of determining less the purpose of determining loss prior to the date of the gift as pro- the basis shall be the basis so deter the basis shall be the basis so detervided in subsection (b)) is greater mined or the fair market value of mined or the fair market value of than the fair market value of the the property at the time of the gift, the property at the time of the gift, If the facts property at the time of the gift, whichever is lower if such basis (ad- whichever is lower. then for the purpose of determin-justed for the period prior to the necessary to determine the basis in ing loss the basis shall be such fair date of the gift as provided in sub- the hands of the donor or the last market value. If the facts neces-section (b)) is greater than the fair preceding owner are unknown to sary to determine the basis in the market value of the property at the the donee, the Commissioner shall, hands of the donor or the last pre- time of the gift, then for the pur- if possible, obtain such facts from ceding owner are unknown to the pose of determining loss the basis such donor or last preceding owner, donee, the Commissioner shall, if shall be such fair market value. If or any other person cognizant possible, obtain such facts from the facts necessary to determine the thereof. If the Commissioner finds such donor or last preceding owner, basis in the hands of the donor or it impossible to obtain such facts, any other person cognizant the last preceding owner are un- the basis in the hands of such donor thereof. If the Commissioner finds known to the donee, the Commis- or last preceding owner shall be it impossible to obtain such facts, sioner shall, if possible, obtain such the fair market value of such propthe basis in the hands of such donor facts from such donor or last pre-erty as found by the Commissioner or last preceding owner shall be ceding owner, or any other person as of the date or approximate date the fair market value of such prop-cognizant thereof. If the Commis at which, according to the best inerty as found by the Commissioner sioner finds it impossible to obtain formation that the Commissioner is as of the date or approximate date such facts, the basis in the hands able to obtain, such property was at which, according to the best in- of such donor or last preceding acquired by such donor or last preformation that the Commissioner is owner shall be the fair market value ceding owner. able to obtain, such property was of such property as found by the Commissioner as of the date or apacquired by such donor or last preproximate date at which, according ceding owner. to the best information that the Commissioner is able to obtain, such property was acquired by such donor or last preceding owner. or Sec. 113 (a) (2), I. R. C., supra, amended by Sec. 143 (a), R. A. of 1942, to read as above. Sec. 101 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1941. For Sec. 113 (a) (2), I. R. C., before amendment, see 1942 column. Sec. 113 (a) (2), I. R. C., supra, amended by Sec. 143 (a), R. A. of 1942, by omitting language in stricken through type and adding language in italics. Sec. 101 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1941. Sec. 113. (a) (3) Transfer in Sec. 113. (a) (3) Transfer in trust after December 31, 1920.-trust after December 31, 1920.If the property was acquired after If the property was acquired after December 31, 1920, by a transfer in December 31, 1920, by a transfer in Sec. 113. (a) (3) Transfer in trust after December 31, 1920.If the property was acquired after December 31, 1920, by a transfer in Taxable Years Sec. 113. Adjusted basis for determining gain or loss. Taxable Years Sec. 113. Adjusted basis for determining gain or loss. Sec. 113. (a) Basis (unadjusted) Sec. 113. (a) Basis (unadjusted) of property. The basis of prop- of property. The basis of property shall be the cost of such property shall be the cost of such property; except thaterty; except that— Taxable Years Beginning before 1939 Sec. 113. Adjusted basis for determining gain or loss. Sec. 113. (a) Basis (unadjusted) of property. Sec. 113. (a) (1) Inventory Sec. 113. (a) (1) Inventory Sec. 113. (a) (1) Inventory value. If the property should have value. If the property should have value. been included in the last inventory, been included in the last inventory, the basis shall be the last inventory the basis shall be the last inventory value thereof. value thereof. Sec. 113. (a) (2) Gifts after Sec. 113. (a) (2) Gifts after December 31, 1920.-If the prop- December 31, 1920. If the property was acquired by gift after erty was acquired by gift after December 31, 1920, the basis shall December 31, 1920, the basis shall be the same as it would be in the be the same as it would be in the hands of the donor or the last pre- hands of the donor or the last preceding owner by whom it was not ceding owner by whom it was not acquired by gift, except that for acquired by gift, except that for the the purpose of determining loss purpose of determining loss the the basis shall be the basis so deter-basis shall be the basis so determined or the fair market value of mined or the fair market value of the property at the time of the gift, the property at the time of the gift, whichever is lower. If the facts whichever is lower. If the facts necessary to determine the basis in necessary to determine the basis in the hands of the donor or the last the hands of the donor or the last preceding owner are unknown to preceding owner are unknown to the donee, the Commissioner shall, the donee, the Commissioner shall, if possible, obtain such facts from if possible, obtain such facts from such donor or last preceding owner, such donor or last preceding owner, any other person cognizant or any other person cognizant thereof. If the Commissioner finds thereof. If the Commissioner finds it impossible to obtain such facts, it impossible to obtain such facts, the basis in the hands of such donor the basis in the hands of such donor or last preceding owner shall be or last preceding owner shall be the fair market value of such prop- the fair market value of such property as found by the Commissioner erty as found by the Commissioner as of the date or approximate date as of the date or approximate date at which, according to the best in- at which, according to the best information that the Commissioner is formation that the Commissioner is able to obtain, such property was able to obtain, such property, was acquired by such donor or last pre-acquired by such donor or last preceding owner. ceding owner. or See p. 154, Eighth Edition. Sec. 113. (a) (2) Gifts after December 31, 1920. See p. 154, Eighth Edition. Sec. 113. (a) (3) Transfer in trust after December 31, 1920.If the property was acquired after December 31, 1920, by a transfer in Sec. 113. (a) (3) Transfer in Sec. 113. (a) (3) Transfer in See p. 156, Eighth Edition. Taxable Years trust (other than by a transfer in trust by a gift, bequest or devise) the basis shall be the same as it would be in the hands of the grantor, increased in the amount of gain or decreased in the amount of loss recognized to the grantor upon such transfer under the law applicable to the year in which the transfer was made. Sec. 113 (a) (3), I. R. C., supra, amended by Sec. 143 (b), R. A. of 1942, by adding word "gift" before word "bequest". Sec. 101 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1941. trust (other than by a transfer in trust (other than by a transfer in Sec. 113 (a) (3), I. R. C., supra, amended by Sec. 143 (b), R. A. of 1942, by adding word "gift" shown in italics. Sec. 101 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1941. Sec. 113. (a) (4) Gift or trans- Sec. 113. (a) (4) Gift or transfer in trust before January 1, fer in trust before January 1, 1921. If the property was 1921. If the property was acquired by gift or transfer in trust quired by gift or transfer in trust on or before December 31, 1920, on or before December 31, 1920, the basis shall be the fair market the basis shall be the fair market value of such property at the time value of such property at the time of such acquisition. of such acquisition. Sec. 113. (a) (4) Gift or transfer in trust before January 1, ac- 1921.-If the property was асquired by gift or transfer in trust on or before December 31, 1920, the basis shall be the fair market value of such property at the time of such acquisition. Sec. 113. (a) (5) Property trans- Sec. 113. (a) (5) Property trans- Sec. 113. (a) (5) Property transmitted at death.-If the property mitted at death. If the property mitted at death. If the property was acquired by bequest, devise, or was acquired by bequest, devise, or was acquired by bequest, devise, or inheritance, or by the decedent's es- inheritance, or by the decedent's es- inheritance, or by the decedent's estate from the decedent, the basis tate from the decedent, the basis tate from the decedent, the basis shall be the fair market value of shall be the fair market value of shall be the fair market value of such property at the time of such such property at the time of such such property at the time of such acquisition. In the case of property acquisition. In the case of property acquisition. In the case of property transferred in trust to pay the in- transferred in trust to pay the in- transferred in trust to pay the income for life to or upon the order come for life to or upon the order come for life to or upon the order or direction of the grantor, with the or direction of the grantor, with the or direction of the grantor, with the right reserved to the grantor at all right reserved to the grantor at all right reserved to the grantor at all times prior to his death to revoke times prior to his death to revoke times prior to his death to revoke the trust, the basis of such property the trust, the basis of such property the trust, the basis of such property in the hands of the persons entitled in the hands of the persons entitled in the hands of the persons entitled under the terms of the trust instru- under the terms of the trust instru under the terms of the trust instrument to the property after the ment to the property after the ment to the property after the grantor's death shall, after such grantor's death shall, after such grantor's death shall, after such death, be the same as if the trust death, be the same as if the trust death, be the same as if the trust instrument had been a will executed instrument had been a will executed instrument had been a will executed on the day of the grantor's death. on the day of the grantor's death. on the day of the grantor's death. For the purpose of this paragraph For the purpose of this paragraph For the purpose of this paragraph property passing without full and property passing without full and property passing without full and adequate consideration under a adequate consideration under a adequate consideration under а general power of appointment ex- general power of appointment ex- general power of appointment exercised by will shall be deemed to ercised by will shall be deemed to ercised by will shall be deemed to be property passing from the indi- be property passing from the indi- be property passing from the individual exercising such power by be-vidual exercising such power by be-vidual exercising such power by bequest or devise. If the property quest or devise. If the property quest or devise. If the property was acquired by bequest, devise, or was acquired by bequest, devise, or was acquired by bequest, devise, or inheritance, or by the decedent's es- inheritance, or by the decedent's es- inheritance, or by the decedent's estate from the decedent, and if the tate from the decedent, and if the tate from the decedent, and if the decedent died after August 26, decedent died after August 26, decedent died after August 26, 1937, and if the property consists 1937, and if the property consists of stock or securities of a foreign of stock or securities of a foreign corporation, which with respect to corporation, which with respect to its taxable year next preceding the its taxable year next preceding the date of the decedent's death was, date of the decedent's death was, 1937, and if the property consists of stock or securities of a foreign corporation, which with respect to its taxable year next preceding the date of the decedent's death was, |