Taxable Years Beginning in 1943 Taxable Years Taxable Years acquired by the decedent's estate cedent if the decedent had lived and cluded in gross income, whichever from the decedent; (B) the person who, by reason of the death of the decedent, acquires the right to receive the amount, if the right to receive the amount is not acquired by the decedent's estate from the decedent; received such amount. Sec. 126. (b) Allowance of deductions and credit. The amount of any deduction specified in section 23 (a), (b), (c), or (m) (relating to deductions for expenses, interest, taxes, and depletion) or credit specified in section 31 (foreign tax credit), in respect of a decedent which is not properly allowable to the decedent in respect of the taxable period in which falls the date of his death, or a prior period, shall be allowed: year when paid,— (A) to the estate of the decedent; except that Sec. 126. (a) (2) Income in case Sec. 126. (b) (1) Expenses, inof sale, etc.-If a right, described terest, and taxes. In the case of in paragraph (1), to receive an a deduction specified in section 23 amount is transferred by the estate (a), (b), or (c) and a credit speciof the decedent or a person who re-fied' in section 31, in the taxable ceives such right by reason of the death of the decedent or by bequest, devise, or inheritance from the decedent, there shall be included in the gross income of the estate or such person, as the case may be, for the taxable period in which the transfer occurs, the fair market value of such right at the time of such transfer plus the amount by which any consideration for the transfer exceeds such fair market value. For the purposes of this paragraph, the term "transfer” includes sale, exchange, or other disposition, but does not include transfer to a person pursuant to the right of such person to receive such amount by reason of the death of the decedent or by bequest, devise, or inheritance from the de cedent. is lower) bears to the value for estate tax purposes of all the items described in subsection (a) (1). Sec. 126. (c) (2) Method of computing deduction.-For the purposes of paragraph (1): (A) The term "estate tax" means the tax imposed upon the estate of the decedent under section 810 or 860, reduced by the credits against such tax, plus the tax imposed upon the estate of the decedent under section 935, reduced by the credits against such tax. (B) The net value for estate tax purposes of all the items described in subsection (a) (1) shall be the excess of the value for estate tax purposes of all the items described in subsection (a) (1) over the deductions from the gross estate in respect of claims which represent the deductions and credit described in subsection (b). (B) if the estate of the decedent is not liable to discharge the ob- (C) The estate tax attributable ligation to which the deduction or to such net value shall be an amount credit relates, to the person who, by equal to the excess of the estate tax reason of the death of the dece-over the estate tax computed withdent or by bequest, devise, or in- out including in the gross estate heritance acquires, subject to such such net value. obligation, from the decedent an interest in property of the decedent. Sec. 126. (b) (2) Depletion.In the case of the deduction specified in section 23 (m), to the person described in subsection (a) (1) (A), (B), or (C) who, in the manner described therein, receives the income to which the deduction relates, in the taxable year when such income is received. Sec. 126. (c) Deduction for Sec. 126. (a) (3) Character of income determined by reference to decedent. The right, described in estate tax.— paragraph (1), to receive an amount shall be treated, in the Sec. 126. (c) (1) Allowance of hands of the estate of the decedent deduction.-A person who includes or any person who acquired such an amount in gross income under right by reason of the death of the subsection (a) shall be allowed, for decedent, or by bequest, devise, or the same taxable year, as a deducinheritance from the decedent, as if tion an amount which bears the it had been acquired by the estate same ratio to the estate tax ator such person in the transaction tributable to the net value for esby which the decedent acquired such tate tax purposes of all the items right; and the amount includible in described in subsection (a) (1) as gross income under paragraph (1) or (2) shall be considered in the hands of the estate or such person to have the character which it would have had in the hands of the de(Continued in second column.) the value for estate tax purposes of Sec. 126, I. R. C., supra, added to I. R. C. by Sec. 134 (e), R. A. of 1942. Sec. 134 (f) of said Act makes amendment applicable to taxable years ending after Dec. 31, 1942. (Continued on page 366.) Sec. 127. (a) Cases in which loss Sec. 127. (a) Cases in which loss deemed sustained, and time deemed deemed sustained, and time deemed sustained. For the purposes of sustained.-For the purposes of this chapterthis chapter Sec. 127. (a) (1) Property not Sec. 127. (a) (1) Property not in in enemy countries.-Property de-enemy countries.-Property stroyed or seized on or after De- stroyed or seized on or after December 7, 1941, in the course of cember 7, 1941, in the course of military or naval operations by the military or naval operations by the United States or any other country United States or any other country engaged in the present war shall engaged in the present war shall be deemed to have been destroyed be deemed to have been destroyed or seized on a date chosen by the or seized on a date chosen by the taxpayer in the manner provided in taxpayer in the manner provided in paragraph (4), which falls be- paragraph (4), which falls be Taxable Years Sec. 127. War losses. Sec. 127. (a) Cases in which loss deemed sustained, and time deemed sustained. For the purposes of this chapter Sec. 127. (a) (1) Property not in de- enemy countries.-Property destroyed or seized on or after December 7, 1941, in the course of military or naval operations by the United States or any other country engaged in the present war shall be deemed to have been destroyed or seized on a date chosen by the taxpayer in the manner provided in paragraph (4), which falls be (A) the latest date, as established to the satisfaction of the Commissioner, on which such property may be considered as not destroyed or seized, and (B) the earliest date, as established to the satisfaction of the Commissioner, on which such property may be considered as having already been destroyed or seized. tween (A) the latest date, as established to the satisfaction of the Commissioner, on which such property may be considered as not destroyed or seized, and (B) the earliest date, as established to the satisfaction of the Commissioner, on which such property may be considered as having already been destroyed or seized. For the purposes of this paragraph For the purposes of this paragraph For the purposes of this paragraph property within an area which property within an area which property within an area which comes under the control of a coun- comes under the control of a coun- comes under the control of a country at war with the United States try at war with the United States try at war with the United States after the date war with such coun- after the date war with such country after the date war with such country try is declared by the United States is declared by the United States is declared by the United States shall be deemed to have been de- shall be deemed to have been de- shall be deemed to have been destroyed or seized in the course of stroyed or seized in the course of stroyed or seized in the course of military or naval operations by military or naval operations by military or naval operations by such country, and the date specified such country, and the date specified such country, and the date specified in subparagraph (A) shall not be in subparagraph (A) shall not be in subparagraph (A) shall not be later than the latest date determined later than the latest date determined later than the latest date determineà by the Commissioner as the date on by the Commissioner as the date on by the Commissioner as the date on which such area was under the con- which such area was under the con- which such area was under the control of the United States or a coun-trol of the United States or a coun-trol of the United States or a country not at war with the United try not at war with the United States, and the date specified in subparagraph (B) shall not be later than the earliest date determined by the Commissioner as the date on which such area may be considered under the control of the country which is at war with the United States. Sec. 127. (a) (2) Property in enemy countries.-Property within any country at war with the United States, or within an area under the control of any such country on the date war with such country was declared by the United States, shall be deemed to have been destroyed or seized on the date war with such (Continued in fourth column.) States, and the date specified in sub- Sec. 127. (a) (2) Property in enemy countries.-Property within any country at war with the United States, or within an area under the control of any such country on the date war with such country was declared by the United States, shall be deemed to have been destroyed or seized on the date war with such (Continued in fifth column.) try not at war with the United States, and the date specified in subparagraph (B) shall not be later than the earliest date determined by the Commissioner as the date on which such area may be considered under the control of the country which is at war with the United States. Sec. 127. (a) (2) Property in enemy countries.-Property within any country at war with the United States, or within an area under the control of any such country on the date war with such country was declared by the United States, shall be deemed to have been destroyed or seized on the date war with such (Continued in sixth column.) Taxable Years Taxable Years Taxable Years country was declared by the United country was declared by the United country was declared by the United States. States. States. Sec. 127. (a) (3) Investments Sec. 127. (a) (3) Investments Sec. 127. (a) (3) Investments referable to destroyed or seized referable to destroyed or seized referable to destroyed or seized property. Any interest in, or with property.-Any interest in, or with property.-Any interest in, or with respect to, property described in respect to, property described in respect to, property described in paragraph (1) or (2) (including paragraph (1) or (2) (including paragraph (1) or (2) (including any interest represented by a se- any interest represented by a se- any interest represented by a security as defined in section 23 (g) curity as defined in section 23 (g) curity as defined in section 23 (g) (3) or section 23 (k) (3)) which (3) or section 23 (k) (3)) which (3) or section 23 (k) (3)) which becomes worthless shall be consid- becomes worthless shall be consid- becomes worthless shall be considered to have been destroyed or ered to have been destroyed or ered to have been destroyed or seized (and the loss therefrom shall seized (and the loss therefrom shall seized (and the loss therefrom shall be considered a loss from the de- be considered a loss from the de- be considered a loss from the destruction or seizure) on the date struction or seizure) on the date struction or seizure) on the date chosen by the taxpayer which falls chosen by the taxpayer which falls chosen by the taxpayer which falls between the dates specified in para- between the dates specified in para- between the dates specified in paragraph (1), or on the date pre- graph (1), or on the date pre- graph (1), or on the date prescribed in paragraph (2), as the scribed in paragraph (2), as the scribed in paragraph (2), as the case may be, when the last prop-case may be, when the last prop-case may be, when the last property (described in the applicable erty (described in the applicable erty (described in the applicable paragraph) to which the interest paragraph) to which the interest paragraph) to which the interest relates would be deemed destroyed relates would be deemed destroyed relates would be deemed destroyed or seized under the applicable par- or seized under the applicable par- or seized under the applicable paragraph. This paragraph shall ap-agraph. This paragraph shall ap- agraph. This paragraph shall apply only if the interest would have ply only if the interest would have ply only if the interest would have become worthless if the property become worthless if the property become worthless if the property had been destroyed. For the pur- had been destroyed. For the pur- had been destroyed. For the purposes of this paragraph, an interest poses of this paragraph, an interest poses of this paragraph, an interest shall be deemed to have become shall be deemed to have become shall be deemed to have become worthless notwithstanding the fact worthless notwithstanding the fact worthless notwithstanding the fact that such interest has a value if that such interest has a value if that such interest has a value if such value is attributable solely to such value is attributable solely to such value is attributable solely to the possibility of recovery of the the possibility of recovery of the the possibility of recovery of the property, compensation (other than property, compensation (other than property, compensation (other than insurance or similar indemnity) on insurance or similar indemnity) on insurance or similar indemnity) on account of its destruction or seizure, account of its destruction or seizure, account of its destruction or seizure, or both. Section 23 (g) (2) and or both. Section 23 (g) (2) and or both. Section 23 (g) (2) and (k) (2) shall not apply to any in- (k) (2) shall not apply to any in- (k) (2) shall not apply to any interest which under this paragraph terest which under this paragraph terest which under this paragraph is considered to have been destroyed is considered to have been destroyed is considered to have been destroyed or seized. Under regulations pre- or seized. Under regulations pre- or seized. Under regulations prescribed by the Commissioner with scribed by the Commissioner with scribed by the Commissioner with the approval of the Secretary, a the approval of the Secretary, a the approval of the Secretary, a taxpayer which 100 owns per taxpayer which per centum (excluding qualifying centum (excluding qualifying centum (excluding qualifying shares) of each class of stock of a shares) of each class of stock of a shares) of each class of stock of a corporation may elect to determine corporation may elect to determine corporation may elect to determine the worthlessness of its interest, the worthlessness of its interest, the worthlessness of its interest, described in this paragraph, in or described in this paragraph, in or described in this paragraph, in or with respect to the property of the with respect to the property of the with respect to the property of the corporation, without regard to the corporation, without regard to the corporation, without regard to the amount of the property of such amount of the property of such amount of the property of such corporation which would be ex- corporation which would be ex- corporation which would be excluded under subsection (e) (2) cluded under subsection (e) (2) cluded under subsection (e) (2) (A) in determining the adjusted (A) in determining the adjusted (A) in determining the adjusted basis of all the assets of the cor- basis of all the assets of the cor- basis of all the assets of the corporation for the purposes of sub-poration for the purposes of sub-poration for the purposes of subsection (e), but such amount shall section (e), but such amount shall section (e), but such amount shall be treated under subsection (b) (1) be treated under subsection (b) (1) be treated under subsection (b) (1) as a recovery by the taxpayer in as a recovery by the taxpayer in as a recovery by the taxpayer in the taxable year with respect to the taxable year with respect to the taxable year with respect to such interest. such interest. such interest. owns 100 per taxpayer which owns 100 (Continued on page 368.) (Continued on page 368.) (Continued on page 368.) Taxable Years Taxable Years Taxable Years Sec. 127. (a) (4) Choice of Sec. 127. (a) (4) Choice of Sec. 127. (a) (4) Choice of date. The taxpayer's choice of a date.-The taxpayer's choice of a date.-The taxpayer's choice of a date under paragraph (1) or (3) date under paragraph (1) or (3) date under paragraph (1) or (3) shall be effective only if made shall be effective only if made shall be effective only if made within such time and in such man- within such time and in such man- within such time and in such manner as may be prescribed by regu-ner as may be prescribed by regu- ner as may be prescribed by regulations prescribed by the Commis- lations prescribed by the Commis-lations prescribed by the Commissioner with the approval of the sioner with the approval of the sioner with the approval of the Secretary. Secretary. Secretary. Sec. 127. (b) Amount of loss on Sec. 127. (b) Amount of loss on destroyed or seized property. destroyed or seized property.In the case of any property or in- In the case of any property or interest in or with respect to property terest in or with respect to property deemed to be destroyed or seized deemed to be destroyed or seized under subsection (a)— under subsection (a)— Sec. 127. (b) (1) The amount of the loss on account of such property or interest shall be determined with regard to any recoveries with respect thereto in the taxable year but without regard to any possibility of recovering such property or interest, or of receiving any compensation (other than insurance or similar indemnity) on account of such property or interest in the taxable year or in any future taxable year. Sec. 127. (b) (1) The amount of the loss on account of such property or interest shall be determined with regard to any recoveries with respect thereto in the taxable year but without regard to any possibility of recovering such property or interest, or of receiving any compensation (other than insurance or similar indemnity) on account of such property or interest in the taxable year or in any future taxable year. Sec. 127. (b) Amount of loss on destroyed or seized property.— In the case of any property or interest in or with respect to property deemed to be destroyed or seized under subsection (a)— Sec. 127. (b) (1) The amount of the loss on account of such property or interest shall be determined with regard to any recoveries with respect thereto in the taxable year but without regard to any possibility of recovering such property or interest, or of receiving any compensation (other than insurance or similar indemnity) on account of such property or interest in the taxable year or in any future taxable year. Sec. 127. (b) (2) The taxpayer Sec. 127. (b) (2) The taxpayer Sec. 127. (b) (2) The taxpayer may choose to decrease the amount may choose to decrease the amount may choose to decrease the amount of the loss by all obligations or lia- of the loss by all obligations or lia- of the loss by all obligations or liabilities of the taxpayer with respect bilities of the taxpayer with respect bilities of the taxpayer with respect to such property or interest dis- to such property or interest dis- to such property or interest discharged or satisfied out of the prop-charged or satisfied out of the prop-charged or satisfied out of the property or interest upon its destruction erty or interest upon its destruction erty or interest upon its destruction or seizure, if the Commissioner is or seizure, if the Commissioner is or seizure, if the Commissioner is satisfied that such obligations or lia- satisfied that such obligations or lia- satisfied that such obligations or liabilities are so discharged or satisfied bilities are so discharged or satisfied bilities are so discharged or satisfied in a subsequent taxable year, or in a subsequent taxable year, or in a subsequent taxable that the taxpayer is unable to de- that the taxpayer is unable to de- that the taxpayer is unable to determine whether or not such obliga-termine whether or not such obliga-termine whether or not such obligations or liabilities are in fact dis- tions or liabilities are in fact dis- tions or liabilities are in fact discharged or satisfied. charged or satisfied. charged or satisfied. year, or No loss shall be deemed to have No loss shall be deemed to have No loss shall be deemed to have been sustained upon the destruction been sustained upon the destruction been sustained upon the destruction or seizure of such property or in- or seizure of such property or in- or seizure of such property or interest to the extent that it is com- terest to the extent that it is com- terest to the extent that it is compensated for by the discharge or pensated for by the discharge or pensated for by the discharge or satisfaction of obligations and lia- satisfaction of obligations and lia- satisfaction of obligations and liabilities of the taxpayer out of such bilities of the taxpayer out of such bilities of the taxpayer out of such property or interest in the taxable property or interest in the taxable property or interest in the taxable year in which such destruction or year in which such destruction or year in which such destruction or seizure is deemed to have occurred. seizure is deemed to have occurred. seizure is deemed to have occurred. The taxpayer's choice under this The taxpayer's choice under this The taxpayer's choice under this subsection shall be effective only if subsection shall be effective only if subsection shall be effective only if made within such time and in such made within such time and in such made within such time and in such manner as may be prescribed by manner as may be prescribed by manner as may be prescribed by regulations prescribed by the Com-regulations prescribed by the Com-regulations prescribed by the Commissioner with the approval of the missioner with the approval of the missioner with the approval of the Secretary. (Continued in fourth column.) Secretary. (Continued in fifth column.) Secretary. (Continued in sixth column.) |