Act of 1924. paragraph to be received without the recognition of gain, but also of other property or money, then or (1) If the corporation receiving such other property money distributes it in pursuance of the plan of reorganization, no gain to the corporation shall be recognized from the exchange, but (2) If the corporation receiving such other property or money does not distribute it in pursuance of the plan of reorganization, the gain, if any, to the corporation shall be recognized, but in an amount not in excess of the sum of such money and the fair market value of such other property so received, which is not so distributed. SEC. 203. (f) If an exchange would be within the provisions of paragraph (1), (2), (3), or (4) of subdivision (b) if it were not for the fact that the property received in exchange consists not only of property permitted by such paragraph to be received without the recognition of gain or loss, but also of other property or money, then no loss from the exchange shall be recognized. SEC. 203. (g) The distribution, in pursuance of a plan of reorganization, by or on behalf of a corporation a party to the reorganization, of its stock or securities or stock or securities in a corporation a party to the reorganization, shall not be considered a distribution of earnings or profits within the meaning of subdivision (b) of section 20140 for the purpose of determining the taxability of subsequent distributions by the corporation. SEC. 203. (h) As used in this section and sections 20140 and 204 (1) The term "reorganization" means (A) a merger or consolidation (including the acquisition by one corporation of 40 Sec. 201, p. 10. Act of 1924. Act of 1921. Act of 1918. at least a majority of the voting stock and at least a majority of the total number of shares of all other classes of stock of another corporation, or substantially all the properties of another corporation), or (B) a transfer by a corporation of all or a part of its assets to another corporation if immediately after the transfer the transferor or its stockholders or both are in control of the corporation to which the assets are transferred, or (C) a recapitalization, or (D) a mere change in identity, form, or place of organization, however effected. (2) The term "a party to a reorganization" includes a corporation resulting from a reorganization and includes both corporations in the case of an acquisition by one corporation of at least a majority of the voting stock and at least a majority of the total number of shares of all other classes of stock of another corporation. SEC. 203. (i) As used in this section the term "control" means the ownership of at least 80 per centum of the voting stock and at least 80 per centum of the total number of shares of all other classes of stock of the corporation. BASIS FOR DETERMINING GAIN OR LOSS, DEPLETION, AND DEPRECIATION. SEC. 204. (a) The basis for determining the gain or loss from the sale or other disposition of property acquired after February 28, 1913, shall be the cost of such property; except that (1) If the property should have been included in the last SEC. 202. (a) That for the purpose of ascertaining the gain derived or loss sustained from the sale or other disposition of property, real, personal, mixed, the basis1 shall be SEC. 202. (a) That the basis. for ascertaining the gain derived or loss sustained from a sale or other disposition of property, real, personal, or mixed, acquired after February 28, 1913, shall be the cost of such (2) In the case of property property; except thatacquired on or after that date, (1) In the case of such prop- the cost12 thereof; or the inven 41 The intent and purpose of Sec. 202 of the Act of 1918 is this: That where a part, but not all, of an actual gain accrues after March 1, 1913, only so much as accrues after that date is income, and where a part, but not all, of an actual loss accrues after March 1, 1913, only so much as accrues after that date is deductible." Ludington v. McCaughn (Col.), (D. C., E. D. Penn. 1923) 290 Fed. 604. 42 (a) Where certificates of stock are sold representing different purchases at different costs, and such certificates can be identified, the actual cost of each, or respectively, should be used in determining the loss or gain resulting from such sale. Towne v. McElligott (Act. Col.), (D. C., S. D. N. Y. 1921) 274 Fed. 960. 42 (b) Where one certificate representing a stock dividend is issued to a stockholder who owns stock purchased at different prices, the cost of such stock dividend certificate for the purpose of determining loss or gain when sold is ascertained as follows: (1) Prorate the correct number of new shares represented by such stock dividend certificate to the various purchases of old stock. (2) In the case of each purchase divide Act of 1917. Act of 1916. Act of 1913. the cost of the old shares purchased by the sum of the old and new shares, which are allocable to such purchase. (3) Multiply this quotient by the number of new shares prorated to such purchase. The sum of these products is the cost of the stock dividend certifi cate. If only a part of the shares represented by such stock dividend certificate are sold, apply the shares sold to the original purchases in the order of such purchases. Towne v. McElligott (Act. Col.), (D. C., S. D. N. Y. 1921) 274 Fed. 960. 42 (c) After the declaration of a stock dividend, the old shares and the new shares combined represent what the old shares represented before the declaration. When an old or new share is sold, the cost thereof for the purpose of determining loss or gain is ascertained as follows: Divide the cost of the old shares by the sum of the number of the old shares and the new shares combined. Towne v. McElligott (Act. Col.), (D. C., S. D. N. Y. 1921) 274 Fed. 960. Act of 1924. inventory, the basis shall be the last inventory value thereof; (2) If the property was acquired by gift after December 31, 1920, the basis shall be the same as it would be in the hands of the donor or the last preceding owner by whom it was not acquired by gift. If the facts necessary to determine such basis are unknown to the donee, the Commissioner shall, if possible, obtain such facts from such donor or last preceding owner, or any other person cognizant thereof. It the Commissioner finds it impossible to obtain such facts, the basis shall be the fair market value of such property as found by the Commissioner as of the date or approximate date at which, according to the best information that the Commissioner is able to obtain, such property was acquired by such donor or last preceding owner; (3) If the property was acquired after December 31, 1920, by a transfer in trust (other than by a transfer in trust by 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. The provisions of this paragraph shall not apply to the acquisition of such property interests as are specified in subdivision (c) or (e) of section 4024 of the Revenue Act of 1921 or in subdivision (c), (d), or (f) of section 30245 of this Act; (4) If the property was acquired 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; erty, which should be included tory value, if the inventory is in the inventory, the basis shall made in accordance with section be the last inventory value 203.43 thereof; (2) [1] In the case of such property, acquired by gift after December 31, 1920, the basis shall be the same as that which it would have in the hands of the donor or the last preceding owner by whom it was not acquired by gift. If the facts necessary to determine such basis are unknown to the donee, the Commissioner shall, if possible, obtain such facts from such donor or last preceding owner, or any other person cognizant thereof. If the Commis sioner finds it impossible to obtain such facts, the basis shall be the value of such property as found by the Commissioner as of the date or approximate date at which, according to the best information the Commissioner is able to obtain, such property was acquired by such donor or last preceding owner. (2) [2] In the case of such property acquired by gift on or before December 31, 1920, the basis for ascertaining gain or loss from a sale or other disposition thereof shall be the fair market price or value of such property at the time of such acquisition. (5) If the property was ac- (3) In the case of such propquired by bequest, devise, or in- erty, acquired by bequest, deheritance, the basis shall be the vise, or inheritance, the basis fair market value of such prop-shall be the fair market price or 43 Sec. 203, p. 38. The date referred to above is March 1, 1913. See Sec. 202. (a) (1) post. 44 Sec. 402 (c) and (e), pp. 350, 354. |