after February 28, 1913. The remainder, if any, of the gain recog- nized under such paragraph (1) shall be taxed as a gain from the exchange of property. (f) APPLICATION OF SECTION.-T he provisions of this section shall not apply to an exchange or distribution unless (1) the order of the Securities and Exchange Commission in obedience to which such exchange or distribution was made recites that such exchange or dis- tribution is necessary or appropriate to effectuate the provisions of section 11 (b) of the Public Utility Holding Company Act of 1935, 49 Stat. 820, (U. S . C ., Sup. III, Title 15, § 79 (b)), (2) such order specifies and itemizes the stock and securities and other property which are ordered to be transferred and received upon such exchange or distribution, and (3) such exchange or distribution was made in obedience to such order and was completed within the time prescribed therefor in such order. (g) NON-APPLICATION OF OTmER PROVISIONS.- If an exchange or distribution made in obedience to an order of the Securities and Exchange Commission is within any of the provisions of this section and may also be considered to be within any of the provisions of section 112 (other than the provisions of paragraph (8) of subsection (b)), then the provisions of this section only shall apply. SEC. 372. BASIS FOR DETERMINING GAIN OR LOSS. (a) ExcHANGES GENERALLY.- If the property was acquired upon an exchange subject to the provisions of section 371 (a), (b), or (e), the basis shall be the same as in the case of the property exchanged, decreased in the amount of any money received by the taxpayer and increased in the amount of gain or decreased in the amount of loss to the taxpayer that was recognized upon such exchange under the law applicable to the year in which the exchange was made. If the property so acquired consisted in part of the type of property per- mitted by section 371 (a) or (b) to be received without the recogni- tion of gain or loss, and in part of nonexempt property, the basis provided in this subsection shall be allocated between the properties (other than money) received, and for the purpose of the allocation there shall be assigned to such nonexempt property (other than money) an amount equivalent to its fair market value at the date of the exchange. This subsection shall not apply to property acquired by a corporation by the issuance of its stock or securities as the con- sideration in whole or in part for the transfer of the property to it. (b) TRANSFEKS TO CORPORATIONS.- If, in connection with a transfer subject to the provisions of section 371 (a), (b), or (e), the property was acquired by a corporation, either as paid-in surplus or as a con- tribution to capital, or in consideration for stock or securities issued by the corporation receiving the property (including cases where part of the consideration for the transfer of such property to the corporation consisted of property or money in addition to such stock or securities), then the basis shall be the same as it would be in the hands of the transferor, increased in the amount of gain or decreased in the amount of loss recognized to the transferor upon such transfer under the law applicable to the year in which the transfer was made. (c) DISTRIBUTIONS OF STOCK OR SECURITIES. -If the stock or securi- ties were received in a distribution subject to the provisions of sec- tion 371 (c), then the basis in the case of the stock in respect of which the distribution was made shall be apportioned, under rules and reg- ulations prescribed by the Commissioner with the approval of the Secretary, between such stock and the stock or securities distributed. (d) TRANSFERS WIrrTH SYSTEM GROUP. - I f the property was ac- quired by a corporation which is a member of a system group upon a transfer or distribution described in section 371 (d) (1), then the basis shall be the same as it would be in the hands of the transferor; except that if such property is stock or securities issued by the cor- INCOME TAX 101
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