PUBLIC LAWS-CH. 289-MAY 28, 1938 "Initial payments" defined. Change from accrual to installment basis. Gain or loss upon disposition of install- ment obligations. Basis. Transmission at death of obligations. Post, p. 485 . Allocation of income and deductions. Provisions if same interests control two or more businesses. Change of account- ing period. Net income com- puted on basis of new period. disposition was in a taxable year beginning prior to January 1, 1934, the percentage of the selling price prescribed in the law applicable to such year), the income may, under regulations prescribed by the Com- missioner with the approval of the Secretary, be returned on the basis and in the manner above prescribed in this section. As used in this section the term "initial payments" means the payments received in cash or property other than evidences of indebtedness of the pur- chaser during the taxable period in which the sale or other disposition is made. (c) CHANGE FROM ACCRUAL TO INSTALLMENT BASIS.-If a taxpayer entitled to the benefits of subsection (a) elects for any taxable year to report his net income on the installment basis, then in computing his income for the year of change or any subsequent year, amounts actually received during any such year on account of sales or other dispositions of property made in any prior year shall not be excluded. (d) GAIN OR Loss UPON DISPOSrION OF INSTALLMENT OBLIGA- TONS. - I f an installment obligation is satisfied at other than its face value or distributed, transmitted, sold, or otherwise disposed of, gain or loss shall result to the extent of the difference between the basis of the obligation and (1) in the case of satisfaction at other than face value or a sale or exchange-the amount realized, or (2) in case of a distribution, transmission, or disposition otherwise than by sale or exchange-the fair market value of the obligation at the time of such distribution, transmission, or disposition. Any gain or loss so result- ing shall be considered as resulting from the sale or exchange of the property in respect of which the installment obligation was received. The basis of the obligation shall be the excess of the face value of the obligation over an amount equal to the income which would be returnable were the obligation satisfied in full. This subsection shall not apply to the transmission at death of installment obligations if there is filed with the Commissioner, at such time as he may by regu- lation prescribe, a bond in such amount and with such sureties as he may deem necessary, conditioned upon the return as income, by the person receiving any payment on such obligations, of the same pro- portion of such payment as would be returnable as income by the decedent if he had lived and had received such payment. If an installment obligation is distributed by one corporation to another corporation in the course of a liquidation, and under section 112 (b) (6) no gain or loss with respect to the receipt of such obligation is recognized in the case of the recipient corporation, then no gain or loss with respect to the distribution of such obligation shall be recog- nized in the case of the distributing corporation. SEC. 45. ALLOCATION OF INCOME AND DEDUCTIONS. In any case of two or more organizations, trades, or businesses (whether or not incorporated, whether or not organized in the United States, and whether or not affiliated) owned or controlled directly or indirectly by the same interests, the Commissioner is authorized to distribute, apportion, or allocate gross income or deductions between or among SUch organizations, trades, or businesses, if he determines that such distribution, apportionment, or allocation is necessary in order to prevent evasion of taxes or clearly to reflect the income of any of such organizations, trades, or businesses. SEC. 46. CHANGE OF ACCOUNTING PERIOD. If a taxpayer changes his accounting period from fiscal year to calendar year, from calendar year to fiscal year, or from one fiscal year to another, the net income shall, with the approval of the Com- missioner, be computed on the basis of such new accounting period, subject to the provisions of section 47. 474 [52 STAT.
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