PUBLIC LAWS-CLH 289-MAY 28, 1938 Depletion, etc. Any period prior to March 1, 1913. Stock distribution reviously made, tax- tree, etc. 40 Stat. 1070; 42 8tat. 26 . Stock of U. 8. share. holders in foreign per- sonal holding com- pany. Post, p . 60. Shareholder's con- sent. Ante, p. 472. " Substituted bash defined. Adjustments. Depreciation and depletion. Basis for depreci- ation. Ant, p. 493. 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 exhaustion, wear and tear, obsolescence, amortization, and depletion, to the extent allowed (but not less than the amount allowable) under this Act or prior income tax laws. Where for any taxable year prior to the taxable year 1932 the depletion allowance was based on discovery value or a percentage of income, then the adjustment for depletion for such year shall be based on the depletion which would have been allowable for such year if computed without reference to discovery value or a percentage of income; (C) in respect of any period pror to March 1, 1913, for exhaustion, wear and tear, obsolescence, amortization, and depletion, to the extent sustained; (D) in the case of stock (to the extent not provided for in the foregoing subparagraphs) for the amount of distri- butions previously made which, under the law applicable to the year in which the distribution was made, either were tax-free or were applicable in reduction of basis (not includ- ing distributions made by a corporation, which was classified as a personal service corporation under the provisions of the Revenue Act of 1918 or 1921, out of its earnings or profits which were taxable in accordance with the provi- sions of section 218 of the Revenue Act of 1918 or 1921); (E) to the extent provided in section 337 (f) in the case of the stock of United States shareholders in a foreign personal holding company; and (F) to the extent provided in section 28 (h) in the case of amounts specified in a shareholder's consent made under section 28. (2) SUBSTrruT' BAsIs.-T he term "substituted basis" as used in this subsection means a basis determined under any provision 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 the taxpayer is a substituted basis, then the adjustments pro- vided in paragraph (1) of this subsection shall be made after first making in respect of such substituted basis proper adjust- ments of a similar nature in respect of the period during which the property was held by the transferor, donor, or grantor, or during which the other property was held by the person for whom the basis is to be determined. A similar rule shall be applied in the case of a series of substituted bases. SEC. 114 . BASIS FOR DEPRECIATION AND DEPLETION. (a) BASIS FOR DEPRECIATION. -The basis upon which exhaustion, wear and tear, and obsolescence are to be allowed in respect of any property shall be the adjusted basis provided in section 113 (b) for the purpose of determining the gain upon the sale or other disposi- tion of such property. 494 [52 STAT.
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