SEVENTIETH CONGRESS . SEss. I . CH. 852. 1928.
817 bu t in the case of an exchange by two or more persons this para- graph shall apply only if the amount of the stock and securities received by each is substantially in proportion to his interest in the property prior to the exchange . (c) Gain from exchanges not solely in kind .- (1) If an exchange would be within the provisions of sub- section (b) (1), (2), (3), or (5) of this section 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, but also of other property or money, then the gain, if any, to the recipient 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 . (2) If a distribution made in pursuance of a plan of reorgani- zation is w ithin the provisions of paragraph (1) of this sub- section but has the effect of the distribution of a taxable divi- dend, then there shall be taxed as a dividend to each distributee such an amount of the gain recognized under paragraph (1) as is not in excess of his ratable share of the undistributed earnings and profits of the corporation accumulated after February 28, 1913 . The remainder, if any, of the gain recognized under paragraph (1) shall be taxed as a gain from the exchange of property. (d) Same-gain of corporation .-If an exchange would be within the provisions of subsection (b) (4) of this section if it were not for the fact that the property received in exchange consists not only of stock or securities permitted by such paragraph to be received without the recognition of gain, but also of other property or money, then- (1) If the corporation receiving such other property or 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 . (e) Loss from exchanges not solely in kind .-If an exchange would be within the provisions of subsection (b) (1) to (5 ), inclu sive , of this section if it were not for the fact that the property received in exchange consists not only of property permitted by such para- graph 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 . (f ) Inv olun tary con vers ions .-If property (as a result of its destruc- tion in whole or in part, theft or seizure, or an exercise of the powe r of req uisi tion or cond emna tion , or the thr eat or i mmin ence thereof) is compulsorily or involuntarily converted into property sim- ilar or related in service or use to the property so converted, or into money which is forthwith in good faith, under regulations pre- scribed by the Commissioner with the approval of the Secretary, expended in the acquisition of other property similar or related in service or use to the property so converted, or in the acquisition of control of a corporation owning such other property, or in the establishment of a replacement fund, no gain or loss shall be recog- Gain recognized nized . If any part of the money is not so expended, the gain, if any, part net used . shall be recognized, but in an amount not in excess of the money which is not so expended . INCOME TAX Lim itat ion . Gain from exchanges not solely in kind . Recognized if prop- er ty rec eiv ed ad di- tional to that on which none recognized . Reorganization dis- tribution construed as a taxable dividend . Reorganization with property and other stock received . No gain if distrib- uted on reorganization . Gain recognized if not distributed . No loss if property received oth er than that on which gain or loss recognized, etc. Involuntary sions . No gain or loss, ii in- voluntarily converted into similar property, etc. con vey on
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