306
INTERNAL REVENUE CODE OF 1954
subsection (a)(3) which resulted in the nonrecognition of any part of the gain reahzed as the result of a compulsory or involuntary conversion, the basis shall be the cost of such property decreased in the amount of the gain not so recognized; and if the property purchased consists of more than one piece of property, the basis determined under this sentence shall be allocated to the purchased properties in proportion to their respective costs. (d) PROPERTY
SOLD
PURSUANT
TO RECLAMATION
LAWS.—For
purposes of this subtitle, if property lying within an irrigation project is sold or otherwise disposed of in order to conform to the acreage limitation provisions of Federal reclamation laws, such sale or disposition shall be treated as an involuntary conversion to which this section applies. (e) LIVESTOCK DESTROYED BY D I S E A S E. — For purposes of this subtitle, if livestock are destroyed by or on account of disease, or are sold or exchanged because of disease, such destruction or such sale or exchange shall be treated as an involuntary conversion to which this section applies. (f) CROSS R E F E R E N C E S. — (1) For determination of the period for which the taxpayer has held property involuntarily converted, see section 1223. (2) For treatment of gains from involuntary conversions as capital gains in certain cases, see section 1231(a). SEC. 1034. SALE OR EXCHANGE OF RESIDENCE. (a) NONRECOGNITION OF G A I N. — I f property (in this section called
"old residence") used by the taxpayer as his principal residence is sold by him after December 31, 1953, and, within a period beginning 1 year before the date of such sale and ending 1 year after such date, property (in this section called "new residence") is purchased and used by the taxpayer as his principal residence, gain (if any) from such sale shall be recognized only to the extent that the taxpayer's adjusted sales price (as defined in subsection (b)) of the old residence exceeds the taxpayer's cost of purchasing the new residence. (b) ADJUSTED SALES P R I C E D E F I N E D. —
(1) IN GENERAL.—For purposes of this section, the term "adjusted sales price" means the amount realized, reduced by the aggregate of the expenses for work performed on the old residence in order to assist in its sale. (2) LIMITATIONS.—The reduction provided in paragraph (1) applies only to expenses— (A) for work performed during the 90-day period ending on the day on which the contract to sell the old residence is entered into; (B) which are paid on or before the 30th day after the date of the sale of the old residence; and (C) which are— (i) not allowable as deductions in computing taxable income under section 63(a) (defining taxable income), and (ii) not taken into account in computing the amount realized from the sale of the old residence. (3) EFFECTIVE DATE.—The reduction provided in paragraph (1) applies to expenses for work performed in any taxable year (whether beginning before, on, or after January 1, 1954), b u t only in the case § 1033(c)
�
