74TH C ONGRESS . SESS. II. CH. 690. JU NE 22, 1936 .
1685 within the meaning of section 112 (b) (6), then the b asis s hall be Ante, p .1679. the same as it would be in the hands of the transferor. BASIS ESTABLISHED BY REVENUE ACT OF 1934 .-If the prop- Basis established by (16)
Revenue Act of 1934 . e rty wa s acqu ired, after Febru ary 2 8, 191 3, in any ta xable ear Vol . 48, p.706. beginning prior to January 1, 1936, and the basis thereof, for- the purposes of the Revenue Act of 1934 was prescribed by section 113 (a) (6), (7), or (8) of such Act, then for the purposes of this Act the basis shall be the same as the basis therein prescribed in the Revenue Act of 1934 . b AD3 USTED BAsIs .-The ad j usted basis for determining the Adjusted basis for de- g
termining gain or loss . gain or loss from the sale or other disposition of property, whenever acquired, shall be the basis determined under subsection (a), adjusted as hereinafter provided . (1) GEN ER AL RULE .-Proper adjustment in respect of the prop- General rule. erty shall in all cases be made- (A) for expenditures, re ceipts, losses, or other items, properly Expen ditur es, etc ., chargeable to capital chargeable to capital account, including taxes and other carry- account . ing charges on unimproved and unproductive real property, but Restr icti on . no such adjustment shall be made for taxes or other carrying charges for which deductions have been taken by the taxpayer in determining net income for the taxable year or prior taxable years ; (B) in respect of any period since February 28, 1913, for Depletion, etc ., since ex hausti on, w ear an d tea r, obs olesc ence, amort izati on, an d dep le- Fe bruar y 2b, 1913 . tion, to the extent allowed (but not less than the amount allow- able) unde r this Act or prior income tax laws . Where for any Based on discovery taxable year prior to the taxable year 1932 the depletion allow- co me r percentage or ance was based on discovery value or a percentage of income, then the a djustment for depletion for su ch year shall be based on the dep letion which would have been a llowable for such year if computed without reference to discovery value or a percentage of income ; (C) in respect of any period prior to March 1, 1913, for Any period prior to exhaustion, wear and tear, obsolescence, amortization, and deple- March 1, 1913 . tion, to the extent sustained ; (D) in the case of stock (to the extent not provided for in Basis reduce d by tax- the foregoing subparagraphs) for the amount of distributions free, etc ., distributions . previously made which, under the law app licable to the year in whic h the distr ibutio n was made, eithe r were tax- free o r were appl icabl e in r educti on of basis (not including distributions made by a corporation, which was classified as a personal service corporation under the provisions of the Revenue Act of 1918 or Vol. 40, p. 1070; Vol . 1921 , out of i ts ear nings or pr ofits which were taxab le in accor d- 42, p . 245, ante with the provisions of section 218 of the Revenue Act of 1918 or 1921) . (2) SUBSTITUTED BAsIs.-The term "substituted basis" as used Substituted basis . in this subsection means a basis determined under any provision Determination of . of subsection (a) of this section or under any corresponding pro- vision of a prior income tax law, providing that the basis shall be determined- (A) by reference to the basis in the hands of a transferor, donor, or grantor, or (B) by reference to other property held at any time by the person for whom the basis is to be determined . Whenever it appears that the basis of property in the hands of Adjustments . the taxpayer is a substituted basis, then the adjustments provided in paragraph (1) of this subsection shall be made after first mak- ing in res pect of such substituted basis proper adjustments of a similar nature in respect of the period during which the property
