Sec. 127. (c) (2) Amount of gain Sec. 127. (c) (2) Amount of gain Sec. 127. (c) (2) Amount of gain includible. The amount of the re- includible.-The amount of the re- includible.-The amount of the recovery of any money or property in covery of any money or property in covery of any money or property in respect of property considered un- respect of property considered un- respect of property considered under subsection (a) as destroyed or der subsection (a) as destroyed or der subsection (a) as destroyed or seized shall be an amount equal to seized shall be an amount equal to seized shall be an amount equal to the aggregate of such money and the aggregate of such money and the aggregate of such money and the fair market value of such prop- the fair market value of such prop- the fair market value of such property, determined as of the date of erty, determined as of the date of erty, determined as of the date of the recovery. To the extent that the recovery. To the extent that the recovery. To the extent that such amount plus the aggregate of such amount plus the aggregate of such amount plus the aggregate of the amounts of previous such re- the amounts of previous such re- the amounts of previous such recoveries do not exceed that part of coveries do not exceed that part of coveries do not exceed that part of the aggregate of the allowable de- the aggregate of the allowable de- the aggregate of the allowable deductions in prior taxable years on ductions in prior taxable years on ductions in prior taxable years on account of the destruction or seizure account of the destruction or seizure account of the destruction or seizure of property described in subsection of property described in subsection of property described in subsection (a) which did not result in a re- (a) which did not result in a re- (a) which did not result in a reduction of any tax of the taxpayer duction of any tax of the taxpayer duction of any tax of the taxpayer under this chapter, such amount under this chapter, such amount under this chapter, such amount shall not be includible in gross in- shall not be includible in gross in-shall not be includible in gross income and shall not be deemed gain come and shall not be deemed gain come and shall not be deemed gain upon the involuntary conversion of upon the involuntary conversion of upon the involuntary conversion of property as a result of its destruc- property as a result of its destruc- property as a result of its destruction or seizure. To the extent that tion or seizure. To the extent that tion or seizure. To the extent that such amount plus the aggregate of such amount plus the aggregate of such amount plus the aggregate of the amounts of previous such re- the amounts of previous such re- the amounts of previous such recoveries exceed that part of the ag- coveries exceed that part of the ag-coveries exceed that part of the aggregate of such deductions which gregate of such deductions which gregate of such deductions which did not result in a reduction of any did not result in a reduction of any did not result in a reduction of any tax of the taxpayer under this chap- tax of the taxpayer under this chap- tax of the taxpayer under this chapter and do not exceed that part of ter and do not exceed that part of ter and do not exceed that part of the aggregate of such deductions the aggregate of such deductions the aggregate of such deductions which did result in a reduction of which did result in a reduction of which did result in a reduction of any tax of the taxpayer under this any tax of the taxpayer under this any tax of the taxpayer under this chapter, such amount shall be in- chapter, such amount shall be in- chapter, such amount shall be included in gross income but shall not cluded in gross income but shall not cluded in gross income but shall not be deemed a gain upon the involun- be deemed a gain upon the involun- be deemed a gain upon the involuntary conversion of property as a tary conversion of property as a tary conversion of property as a result of its destruction or seizure. result of its destruction or seizure. result of its destruction or seizure. To the extent that such amount plus To the extent that such amount plus To the extent that such amount plus the aggregate of the amounts of the aggregate of the amounts of the aggregate of the amounts of previous such recoveries exceed the previous such recoveries exceed the previous such recoveries exceed the aggregate of the allowable deduc- aggregate of the allowable deduc- aggregate of the allowable deductions in prior taxable years on ac- tions in prior taxable years on ac- tions in prior taxable years on account of the destruction or seizure count of the destruction or seizure count of the destruction or seizure of property described in subsection of property described in subsection of property described in subsection (a), such amount shall be consid- (a), such amount shall be consid- (a), such amount shall be considered a gain upon the involuntary ered a gain upon the involuntary ered a gain upon the involuntary conversion of property as a result conversion of property as a result conversion of property as a result of its destruction or seizure and of its destruction or seizure and of its destruction or seizure and (Continued on page 370.) (Continued on page 370.) (Continued on page 370.) Taxable Years Taxable Years Taxable Years shall be recognized or not recog- shall be recognized or not recog-shall be recognized or not recognized as provided in section 112 nized as provided in section 112 nized as provided in section 112 (f). If for any previous taxable (f). If for any previous taxable (f). If for any previous taxable year the taxpayer chooses under year the taxpayer chooses under year the taxpayer chooses under subsection (b) to treat any obliga- subsection (b) to treat any obliga-subsection (b) to treat any obligations and liabilities as discharged or tions and liabilities as discharged or tions and liabilities as discharged or satisfied out of the property or in- satisfied out of the property or in- satisfied out of the property or interest described in subsection (a), terest described in subsection (a), terest described in subsection (a), and if such obligations and liabil- and if such obligations and liabil- and if such obligations and liabil ities were not so discharged or ities were not so discharged or ities were not so discharged or satisfied, the amount of such obliga- satisfied, the amount of such obliga- satisfied, the amount of such obligations and liabilities treated as dis- tions and liabilities treated as dis- tions and liabilities treated as discharged or satisfied under subsec- charged or satisfied under subsec- charged or satisfied under subsection (b) shall be considered for the tion (b) shall be considered for the tion (b) shall be considered for the purposes of this section as a deduc- purposes of this section as a deduc- purposes of this section as a deduetion by reason of this section which tion by reason of this section which tion by reason of this section which did not result in a reduction of any did not result in a reduction of any did not result in a reduction of any tax of the taxpayer under this tax of the taxpayer under this tax of the taxpayer under this chapter. For the purposes of this chapter. For the purposes of this chapter. For the purposes of this paragraph an allowable deduction paragraph an allowable deduction paragraph an allowable deduction for any taxable year on account of for any taxable year on account of for any taxable year on account of the destruction or seizure of prop- the destruction or seizure of prop- the destruction or seizure of property described in subsection (a) erty described in subsection (a) erty described in subsection (a) shall, to the extent not allowed in shall, to the extent not allowed in shall, to the extent not allowed in computing the tax of the taxpayer computing the tax of the taxpayer computing the tax of the taxpayer for such taxable year, be considered for such taxable year, be considered for such taxable year, be considered an allowable deduction which did an allowable deduction which did an allowable deduction which did not result in a reduction of any tax not result in a reduction of any tax not result in a reduction of any tax of the taxpayer under this chapter. of the taxpayer under this chapter. of the taxpayer under this chapter. Sec. 127. (c) (3) Restoration of value of investments referable to destroyed or seized property.-For the purposes of paragraphs (1) and (2), the restoration in whole or in part of the value of any interest described in subsection (a) (3) by reason of any recovery of money or property in respect of property to which such interest related and which was considered under subsection (a) (1) or (2) as destroyed or seized shall be deemed a recovery of property in respect of property considered under subsection (a) as destroyed or seized. Sec. 127. (c) (3) Restoration of value of investments referable to destroyed or seized property.-For the purposes of paragraphs (1) and (2), the restoration in whole or in part of the value of any interest described in subsection (a) (3) by reason of any recovery of money or property in respect of property to which such interest related and which was considered under subsection (a) (1) or (2) as destroyed or seized shall be deemed a recovery of property in respect of property considered under subsection (a) as destroyed or seized. Sec. 127. (d) Basis of recovered Sec. 127. (c) (3) Restoration of value of investments referable to destroyed or seized property.-For the purposes of paragraphs (1) and (2), the restoration in whole or in part of the value of any interest described in subsection (a) (3) by reason of any recovery of money or property in respect of property to which such interest related and which was considered under subsection (a) (1) or (2) as destroyed or seized shall be deemed a recovery of property in respect of property considered under subsection (a) as destroyed or seized. Sec. 127. (d) Basis of recovered Sec. 127. (d) Basis of recovered property. The unadjusted basis of property.-The unadjusted basis of property.-The unadjusted basis of property recovered in respect of property recovered in respect of property recovered in respect of property considered destroyed or property considered destroyed or property considered destroyed or seized under subsection (a) shall be seized under subsection (a) shall be seized under subsection (a) shall be determined under this subsection. determined under this subsection. determined under this subsection. Such basis shall be an amount equal Such basis shall be an amount equal Such basis shall be an amount equal to the fair market value of such to the fair market value of such to the fair market value of such property, determined as of the date property, determined as of the date property, determined as of the date of the recovery, reduced by an of the recovery, reduced by an of the recovery, reduced by an amount equal to the excess of the amount equal to the excess of the amount equal to the excess of the aggregate of such fair market value aggregate of such fair market value aggregate of such fair market value and the amounts of previous recov- and the amounts of previous recov- and the amounts of previous recoreries of money or property in re- eries of money or property in re-eries of money or property in respect of property considered under spect of property considered under spect of property considered under subsection (a) as destroyed or seized subsection (a) as destroyed or seized subsection (a) as destroyed or seized (Continued in fourth column.) (Continued in fifth column.) (Continued in sixth column.) Taxable Years Taxable Years Taxable Years 371 is over the aggregate of the allowable over the aggregate of the allowable over the aggregate of the allowable deductions in prior taxable years on deductions in prior taxable years on | deductions in prior taxable years on account of the destruction or seiz- account of the destruction or seiz-account of the destruction or seizure of property described in subsec-ure of property described in subsec-ure of property described in subsection (a), and increased by that por- tion (a), and increased by that por- tion (a), and increased by that portion of the amount of the recovery tion of the amount of the recovery tion of the amount of the recovery under subsection (c) under subsection (c) is which which under subsection (c) is which treated as a recognized gain from treated as a recognized gain from treated as a recognized gain from the involuntary conversion of prop- the involuntary conversion of prop- the involuntary conversion of property. Upon application of the tax-erty. Upon application of the tax-erty. Upon application of the taxpayer, the aggregate of the bases payer, the aggregate of the bases payer, the aggregate of the bases (determined under the preceding (determined under the preceding (determined under the preceding sentence) of any properties recov- sentence) of any properties recov-sentence) of any properties recovered in respect of properties con- ered in respect of properties con- ered in respect of properties considered under subsection (a) as sidered under subsection (a) as sidered under subsection (a) as destroyed or seized may be allocated destroyed or seized may be allocated destroyed or seized may be allocated among the properties so recovered among the properties so recovered among the properties so recovered in such manner as the Commissioner in such manner as the Commissioner in such manner as the Commissioner may determine under regulations may determine under regulations may determine under regulations prescribed by him with the approval prescribed by him with the approval prescribed by him with the approval of the Secretary, and the amounts of the Secretary, and the amounts of the Secretary, and the amounts so allocated to any such property so allocated to any such property so allocated to any such property so recovered shall be the unadjusted so recovered shall be the unadjusted so recovered shall be the unadjusted basis of such property in lieu of basis of such property in lieu of basis of such property in lieu of the unadjusted basis of such prop- the unadjusted basis of such prop- the unadjusted basis of such property determined under the preced- erty determined under the preced- erty determined under the preceding sentence. ing sentence. ing sentence. Sec. 127. (e) Partial worthless Sec. 127. (e) Partial worthlessSec. 127. (e) Partial worthlessness of certain investments in de-ness of certain investments in de-ness of certain investments in destroyed or seized property. stroyed or seized property. stroyed or seized property. Sec. 127. (e) (1) Destruction or seizure of investment.-If a taxpayer owns not less than 50 per centum of each class of stock of a corporation, if such corporation has property described in subsection (a) (1) or (2) deemed to be destroyed or seized, the adjusted basis for determining loss of which is at least 75 per centum of the adjusted basis for determining loss of all such corporation's property, and if such corporation completely liquidates (by distributing all the assets which it is able to distribute and all its rights to assets which it is not able to distribute, including the right to the recovery of the property described in subsection (a) (1) and (2)) within one year after such property is deemed to be destroyed or seized, or within six months after the date of the enactment of the Revenue Act of 1942, whichever is the later, then that part of the loss by the taxpayer on such liquidation which would be attributable to the destruction or seizure of such property, as established to the satisfaction of the Commissioner, shall be treated for the purposes of this (Continued on page 372.) Sec. 127. (e) (1) Destruction or Sec. 127. (e) (1) Destruction or seizure of investment.-If a tax- seizure of investment.-If a taxpayer owns not less than 50 per payer owns not less than 50 per centum of each class of stock of a centum of each class of stock of a corporation, if such corporation has corporation, if such corporation has property described in subsection property described in subsection (a) (1) or (2) deemed to be de- (a) (1) or (2) deemed to be destroyed or seized, the adjusted basis stroyed or seized, the adjusted basis for determining loss of which is at for determining loss of which is at least 75 per centum of the adjusted least 75 per centum of the adjusted basis for determining loss of all basis for determining loss of all such corporation's property, and if such corporation's property, and if such corporation completely liqui- such corporation completely liquidates (by distributing all the assets dates (by distributing all the assets which it is able to distribute and all which it is able to distribute and all its rights to assets which it is not its rights to assets which it is not able to distribute, including the able to distribute, including the right to the recovery of the property right to the recovery of the property described in subsection (a) (1) and described in subsection (a) (1) and (2)) within one year after such|(2)) within one year after such property is deemed to be destroyed property is deemed to be destroyed or seized, or within six months after or seized, or within six months after the date of the enactment of the the date of the enactment of the Revenue Act of 1942, whichever is Revenue Act of 1942, whichever is the later, then that part of the loss the later, then that part of the loss by the taxpayer on such liquidation by the taxpayer on such liquidation which would be attributable to the which would be attributable to the destruction or seizure of such prop-destruction or seizure of such property, as established to the satisfaction of the Commissioner, shall be treated for the purposes of this (Continued on page 372.) erty, as established to the satisfaction of the Commissioner, shall be treated for the purposes of this (Continued on page 372.) Taxable Years Taxable Years Taxable Years chapter as a loss by the taxpayer chapter as a loss by the taxpayer chapter as a loss by the taxpayer upon the destruction or seizure of upon the destruction or seizure of upon the destruction or seizure of the part of the stock or other in- the part of the stock or other in- the part of the stock or other interest of the taxpayer to which such terest of the taxpayer to which such terest of the taxpayer to which such loss is allocable. Such part of the loss is allocable. Such part of the loss is allocable. Such part of the stock or other interest of the tax-stock or other interest of the tax-stock or other interest of the taxpayer shall be treated for the pur- payer shall be treated for the pur-payer shall be treated for the purposes of subsections (b), (c), and poses of subsections (b), (c), and poses of subsections (b), (c), and (d) as property described in sub- (d) as property described in sub-(d) as property described in subsection (a) (3). section (a) (3). section (a) (3). Sec. 127. (e) (2) Application of paragraph (1).-For the purposes of paragraph (1)— Sec. 127. (e) (2) Application of Sec. 127. (e) (2) Application of paragraph (1).-For the purposes paragraph (1).—For the purposes of paragraph (1)— of paragraph (1)— (A) In determining the adjusted (A) In determining the adjusted basis of all the property of the cor- basis of all the property of the corporation, there shall be excluded poration, there shall be excluded money in the United States, bank money in the United States, bank deposits, the right to receive money deposits, the right to receive money from any person not situated in a country at war with the United States or in a territory under the control of such a country, and obligations issued or guaranteed as to principal or interest by the United States, except that there shall not be excluded any such property which is destroyed or seized as described in subsection (a) within or before the taxable period. from any person not situated in a (A) In determining the adjusted basis of all the property of the corporation, there shall be excluded money in the United States, bank deposits, the right to receive money from any person not situated in a country at war with the United States or in a territory under the control of such a country, and obligations issued or guaranteed as to principal or interest by the United States, except that there shall not be excluded any such property which is destroyed or seized as described in subsection (a) within or before the taxable period. (B) The adjusted basis of prop(B) The adjusted basis of prop- (B) The adjusted basis of property of such corporation shall be erty of such corporation shall be erty of such corporation shall be determined as of the date immedi- determined as of the date immedi- determined as of the date immedi ately preceding the first date on ately preceding the first date on ately preceding the first date on which any property was destroyed which any property was destroyed which any property was destroyed or seized, as described in subsection or seized, as described in subsection or seized, as described in subsection (a), or as of any later date falling (a), or as of any later date falling (a), or as of any later date falling within or before the taxable period within or before the taxable period within or before the taxable period on the basis of which such determi- on the basis of which such determi- on the basis of which such determi a will produce will produce greater nation will produce a greater a greater nation nation amount. amount. amount. Sec. 127. (f) Determination of Sec. 127. (f) Determination of Sec. 127. (f) Determination of tax benefits.-The determination tax benefits.-The determination tax benefits.-The determination as to whether and to what extent as to whether and to what extent as to whether and to what extent an allowable deduction on account an allowable deduction on account an allowable deduction on account of the destruction or seizure of of the destruction or seizure of of the destruction or seizure of property described in subsection property described in subsection property described in subsection(a) (a) did or did not result in a re- (a) did or did not result in a re- did or did not result in a reduction duction of any tax of the taxpayer duction of any tax of the taxpayer of any tax of the taxpayer under under this chapter shall be made in under this chapter shall be made in this chapter shall be made in acaccordance with regulations pre- accordance with regulations pre-cordance with regulations prescribed scribed by the Commissioner with scribed by the Commissioner with by the Commissioner with the apthe approval of the Secretary. the approval of the Secretary. proval of the Secretary. Taxable Years the taxable year of a tax imposed by the United States which has been held unconstitutional, and in respect of which a deduction was allowed in a prior taxable year may be excluded from gross income for the taxable year, and the deduction allowed in respect thereof in such prior taxable year treated as not having been allowable, if the taxable year of a tax imposed the taxable year of a tax imposed Sec. 128. (a) The taxpayer Sec. 128. (a) The taxpayer Sec. 128. (a) The taxpayer elects in writing (at such time and elects in writing (at such time and elects in writing (at such time and in such manner as may be pre-in such manner as may be pre- in such manner as may be prescribed by regulations prescribed by scribed by regulations prescribed by scribed by regulations prescribed by the Commissioner with the approval the Commissioner with the approval the Commissioner with the approval of the Secretary) to treat such de- of the Secretary) to treat such de- of the Secretary) to treat such deduction as not having been allow-duction as not having been allow-duction as not having been allowable for such prior taxable year, able for such prior taxable year, able for such prior taxable year, and Sec. 128. (b) The taxpayer consents in writing to the assessment, within such period as may be agreed upon, of any deficiencies resulting from such treatment, even though the statutory period for the assessment of any such deficiency had expired prior to the filing of such consent. Sec. 128, I. R. C., supra, added to I. R. C. by Sec. 157 (a), R. A. of 1942. Sec. 157 (b) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1940. (Continued on page 374.) and and Sec. 128. (b) The taxpayer consents in writing to the assessment, within such period as may be agreed upon, of any deficiencies resulting from such treatment, even though the statutory period for the assessment of any such deficiency had expired prior to the filing of such consent. Sec. 128, I. R. C. supra, added to I. R. C. by Sec. 157 (a), R. A. of 1942. Sec. 157 (b) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1940. (Continued on page 374.) |