Lesson 3 Flashcards
§ 118 Contributions to the capital of a corporation.
(a) FTCGeneral rule.
In the case of a corporation, gross income does not include any contribution to the capital of the taxpayer.
118(b)(b) FTCContributions in aid of construction, etc.
For purposes of subsection (a) , except as provided in subsection (c) , the term “contribution to the capital of the taxpayer” does not include any contribution in aid of construction or any other contribution as a customer or potential customer.
118(c)(c) FTCSpecial rules for water and sewerage disposal utilities.
118(c)(1)(1) New Law AnalysisGeneral rule.
For purposes of this section, the term “contribution to the capital of the taxpayer” includes any amount of money or other property received from any person (whether or not a shareholder) by a regulated public utility which provides water or sewerage disposal services if—
118(c)(1)(A)(A) FTC such amount is a contribution in aid of construction,
118(c)(1)(B)(B) FTCNew Law Analysis in the case of contribution of property other than water or sewerage disposal facilities, such amount meets the requirements of the expenditure rule of paragraph (2) , and
118(c)(1)(C)(C) FTC such amount (or any property acquired or constructed with such amount) is not included in the taxpayer’s rate base for rate-making purposes.
118(c)(2)(2) FTCNew Law AnalysisExpenditure rule.
An amount meets the requirements of this paragraph if—
118(c)(2)(A)(A) FTC an amount equal to such amount is expended for the acquisition or construction of tangible property described in section 1231(b) —
118(c)(2)(A)(i)(i) FTC which is the property for which the contribution was made or is of the same type as such property, and
118(c)(2)(A)(ii)(ii) FTC which is used predominantly in the trade or business of furnishing water or sewerage disposal services,
118(c)(2)(B)(B) FTC the expenditure referred to in subparagraph (A) occurs before the end of the second taxable year after the year in which such amount was received, and
118(c)(2)(C)(C) FTC accurate records are kept of the amounts contributed and expenditures made, the expenditures to which contributions are allocated, and the year in which the contributions and expenditures are received and made.
118(c)(3)(3) Definitions.
For purposes of this subsection—
118(c)(3)(A)(A) FTCNew Law Analysis Contribution in aid of construction. The term “contribution in aid of construction” shall be defined by regulations prescribed by the Secretary, except that such term shall not include amounts paid as service charges for starting or stopping services.
118(c)(3)(B)(B) FTCNew Law Analysis Predominantly. The term “predominantly” means 80 percent or more.
118(c)(3)(C)(C) FTCNew Law Analysis Regulated public utility. The term “regulated public utility” has the meaning given such term by section 7701(a)(33) , except that such term shall not include any utility which is not required to provide water or sewerage disposal services to members of the general public in its service area.
118(c)(4)(4) FTCNew Law AnalysisDisallowance of deductions and credits; adjusted basis.
Notwithstanding any other provision of this subtitle, no deduction or credit shall be allowed for, or by reason of, any expenditure which constitutes a contribution in aid of construction to which this subsection applies. The adjusted basis of any property acquired with contributions in aid of construction to which this subsection applies shall be zero.
118(d)(d) Statute of limitations.
If the taxpayer for any taxable year treats an amount as a contribution to the capital of the taxpayer described in subsection (c) , then—
118(d)(1)(1) FTCNew Law Analysis the statutory period for the assessment of any deficiency attributable to any part of such amount shall not expire before the expiration of 3 years from the date the Secretary is notified by the taxpayer (in such manner as the Secretary may prescribe) of—
118(d)(1)(A)(A) the amount of the expenditure referred to insubparagraph (A) of subsection (c)(2) ,
118(d)(1)(B)(B) the taxpayer’s intention not to make the expenditures referred to in such subparagraph, or
118(d)(1)(C)(C) a failure to make such expenditure within the period described in subparagraph (B) of subsection (c)(2) , and
118(d)(2)(2) FTCNew Law Analysis such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment.
118(e)(e) Cross references.
118(e)(1)(1) For basis of property acquired by a corporation through a contribution to its capital, see section 362 .
118(e)(2)(2) For special rules in the case of contributions of indebtedness, see section 108(e)(6) .
§ 267(a)(1) Deduction for losses disallowed.
No deduction shall be allowed in respect of any loss from the sale or exchange of property, directly or indirectly, between persons specified in any of the paragraphs of subsection (b). The preceding sentence shall not apply to any loss of the distributing corporation (or the distributee) in the case of a distribution in complete liquidation.
§ 351 Transfer to corporation controlled by transferor.
(a) FTCGeneral rule.
No gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and immediately after the exchange such person or persons are in control (as defined in section 368(c) ) of the corporation.
351(b)(b) FTCReceipt of property.
If subsection (a) would apply to an exchange but for the fact that there is received, in addition to the stock permitted to be received under subsection (a) , other property or money, then—
351(b)(1)(1) gain (if any) to such recipient shall be recognized, but not in excess of—
351(b)(1)(A)(A) FTC the amount of money received, plus
351(b)(1)(B)(B) FTC the fair market value of such other property received; and
351(b)(2)(2) FTC no loss to such recipient shall be recognized.
351(c)(c) Special rules where distribution to shareholders.
351(c)(1)(1) FTCIn general.
In determining control for purposes of this section, the fact that any corporate transferor distributes part or all of the stock in the corporation which it receives in the exchange to its shareholders shall not be taken into account.
351(c)(2)(2) FTCNew Law AnalysisSpecial rule for section 355.
If the requirements of section 355 (or so much of section 356 as relates to section 355 ) are met with respect to a distribution described inparagraph (1) , then, solely for purposes of determining the tax treatment of the transfers of property to the controlled corporation by the distributing corporation, the fact that the shareholders of the distributing corporation dispose of part or all of the distributed stock, or the fact that the corporation whose stock was distributed issues additional stock, shall not be taken into account in determining control for purposes of this section.
351(d)(d) Services, certain indebtedness, and accrued interest not treated as property.
For purposes of this section, stock issued for—
351(d)(1)(1) FTC services,
351(d)(2)(2) FTC indebtedness of the transferee corporation which is not evidenced by a security, or
351(d)(3)(3) FTC interest on indebtedness of the transferee corporation which accrued on or after the beginning of the transferor’s holding period for the debt,
shall not be considered as issued in return for property.
351(e)(e) FTCExceptions.
This section shall not apply to—
351(e)(1)(1) FTCNew Law AnalysisTransfer of property to an investment company.
A transfer of property to an investment company. For purposes of the preceding sentence, the determination of whether a company is an investment company shall be made—
351(e)(1)(A)(A) FTCNew Law Analysis by taking into account all stock and securities held by the company, and
351(e)(1)(B)(B) FTCNew Law Analysis by treating as stocks and securities:
351(e)(1)(B)(i)(i) FTCNew Law Analysis money,
351(e)(1)(B)(ii)(ii) FTCNew Law Analysis stocks and other equity interests in a corporation, evidences of indebtedness, options, forward or futures contracts, notional principal contracts and derivatives,
351(e)(1)(B)(iii)(iii) FTCNew Law Analysis any foreign currency,
351(e)(1)(B)(iv)(iv) FTCNew Law Analysis any interest in a real estate investment trust, a common trust fund, a regulated investment company, a publicly-traded partnership (as defined in section 7704(b) ) or any other equity interest (other than in a corporation) which pursuant to its terms or any other arrangement is readily convertible into, or exchangeable for, any asset described in any preceding clause, this clause orclause (v) or (viii) ,
351(e)(1)(B)(v)(v) FTCNew Law Analysis except to the extent provided in regulations prescribed by the Secretary, any interest in a precious metal, unless such metal is used or held in the active conduct of a trade or business after the contribution,
351(e)(1)(B)(vi)(vi) FTCNew Law Analysis except as otherwise provided in regulations prescribed by the Secretary, interests in any entity if substantially all of the assets of such entity consist (directly or indirectly) of any assets described in any preceding clause or clause (viii) ,
351(e)(1)(B)(vii)(vii) FTCNew Law Analysis to the extent provided in regulations prescribed by the Secretary, any interest in any entity not described inclause (vi) , but only to the extent of the value of such interest that is attributable to assets listed in clauses (i) through(v) or clause (viii) , or
351(e)(1)(B)(viii)(viii) FTCNew Law Analysis any other asset specified in regulations prescribed by the Secretary.
The Secretary may prescribe regulations that, under appropriate circumstances, treat any asset described inclauses (i) through (v) as not so listed.
351(e)(2)(2) FTCTitle 11 or similar case.
A transfer of property of a debtor pursuant to a plan while the debtor is under the jurisdiction of a court in a title 11 or similar case (within the meaning of section 368(a)(3)(A) ), to the extent that the stock received in the exchange is used to satisfy the indebtedness of such debtor.
351(f)(f) FTCTreatment of controlled corporation.
If—
351(f)(1)(1) FTC property is transferred to a corporation (hereinafter in this subsection referred to as the “controlled corporation”) in an exchange with respect to which gain or loss is not recognized (in whole or in part) to the transferor under this section, and
351(f)(2)(2) FTC such exchange is not in pursuance of a plan of reorganization,
section 311 shall apply to any transfer in such exchange by the controlled corporation in the same manner as if such transfer were a distribution to which subpart A of part I applies.
351(g)(g) FTCNonqualified preferred stock not treated as stock.
351(g)(1)(1) FTCNew Law AnalysisIn general.
In the case of a person who transfers property to a corporation and receives nonqualified preferred stock—
351(g)(1)(A)(A) FTC subsection (a) shall not apply to such transferor, and
351(g)(1)(B)(B) FTC if (and only if) the transferor receives stock other than nonqualified preferred stock—
351(g)(1)(B)(i)(i) New Law Analysis subsection (b) shall apply to such transferor; and
351(g)(1)(B)(ii)(ii) New Law Analysis such nonqualified preferred stock shall be treated as other property for purposes of applying subsection (b) .
351(g)(2)(2) FTCNonqualified preferred stock.
For purposes of paragraph (1) —
351(g)(2)(A)(A) FTC In general. The term “nonqualified preferred stock” means preferred stock if—
351(g)(2)(A)(i)(i) FTCNew Law Analysis the holder of such stock has the right to require the issuer or a related person to redeem or purchase the stock,
351(g)(2)(A)(ii)(ii) FTCNew Law Analysis the issuer or a related person is required to redeem or purchase such stock,
351(g)(2)(A)(iii)(iii) FTCNew Law Analysis the issuer or a related person has the right to redeem or purchase the stock and, as of the issue date, it is more likely than not that such right will be exercised, or
351(g)(2)(A)(iv)(iv) FTCNew Law Analysis the dividend rate on such stock varies in whole or in part (directly or indirectly) with reference to interest rates, commodity prices, or other similar indices.
351(g)(2)(B)(B) FTCNew Law Analysis Limitations. Clauses (i) ,(ii) , and(iii) of subparagraph (A) shall apply only if the right or obligation referred to therein may be exercised within the 20-year period beginning on the issue date of such stock and such right or obligation is not subject to a contingency which, as of the issue date, makes remote the likelihood of the redemption or purchase.
351(g)(2)(C)(C) Exceptions for certain rights or obligations.
351(g)(2)(C)(i)(i) In general. A right or obligation shall not be treated as described in clause (i) ,(ii) , or(iii) of subparagraph (A) if—
351(g)(2)(C)(i)(I)(I) FTCNew Law Analysis it may be exercised only upon the death, disability, or mental incompetency of the holder, or
351(g)(2)(C)(i)(II)(II) FTCNew Law Analysis in the case of a right or obligation to redeem or purchase stock transferred in connection with the performance of services for the issuer or a related person (and which represents reasonable compensation), it may be exercised only upon the holder’s separation from service from the issuer or a related person.
351(g)(2)(C)(ii)(ii) Exception. Clause (i)(I) shall not apply if the stock relinquished in the exchange, or the stock acquired in the exchange is in—
351(g)(2)(C)(ii)(I)(I) FTCNew Law Analysis a corporation if any class of stock in such corporation or a related party is readily tradable on an established securities market or otherwise, or
351(g)(2)(C)(ii)(II)(II) FTCNew Law Analysis any other corporation if such exchange is part of a transaction or series of transactions in which such corporation is to become a corporation described in subclause (I) .
351(g)(3)(3) FTCDefinitions.
For purposes of this subsection—
351(g)(3)(A)(A) FTCNew Law Analysis Preferred stock. The term “preferred stock” means stock which is limited and preferred as to dividends and does not participate in corporate growth to any significant extent. Stock shall not be treated as participating in corporate growth to any significant extent unless there is a real and meaningful likelihood of the shareholder actually participating in the earnings and growth of the corporation. If there is not a real and meaningful likelihood that dividends beyond any limitation or preference will actually be paid, the possibility of such payments will be disregarded in determining whether stock is limited and preferred as to dividends.
351(g)(3)(B)(B) FTCNew Law Analysis Related person. A person shall be treated as related to another person if they bear a relationship to such other person described in section 267(b) or 707(b) .
351(g)(4)(4) FTCNew Law AnalysisRegulations.
The Secretary may prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection and sections 354(a)(2)(C) ,355(a)(3)(D) , and356(e) . The Secretary may also prescribe regulations, consistent with the treatment under this subsection and such sections, for the treatment of nonqualified preferred stock under other provisions of this title.
351(h)(h) FTCCross references.
351(h)(1)(1) For special rule where another party to the exchange assumes a liability, see section 357.
351(h)(2)(2) For the basis of stock or property received in an exchange to which this section applies, see sections 358 and 362 .
351(h)(3)(3) For special rule in the case of an exchange described in this section but which results in a gift, see section 2501 and following.
351(h)(4)(4) For special rule in the case of an exchange described in this section but which has the effect of the payment of compensation by the corporation or by a transferor, see section 61(a)(1) .
351(h)(5)(5) For coordination of this section with section 304 , see section 304(b)(3) .
§ 358 Basis to distributees.
(a) FTCGeneral rule.
In the case of an exchange to which section 351 , 354 , 355 , 356 , or 361 applies—
358(a)(1)(1) FTCNonrecognition property.
The basis of the property permitted to be received under such section without the recognition of gain or loss shall be the same as that of the property exchanged—
358(a)(1)(A)(A) decreased by—
358(a)(1)(A)(i)(i) FTC the fair market value of any other property (except money) received by the taxpayer,
358(a)(1)(A)(ii)(ii) FTC the amount of any money received by the taxpayer, and
358(a)(1)(A)(iii)(iii) FTC the amount of loss to the taxpayer which was recognized on such exchange, and
358(a)(1)(B)(B) increased by—
358(a)(1)(B)(i)(i) FTC the amount which was treated as a dividend, and
358(a)(1)(B)(ii)(ii) FTC the amount of gain to the taxpayer which was recognized on such exchange (not including any portion of such gain which was treated as a dividend).
358(a)(2)(2) FTCOther property.
The basis of any other property (except money) received by the taxpayer shall be its fair market value.
358(b)(b) Allocation of basis.
358(b)(1)(1) In general.
Under regulations prescribed by the Secretary, the basis determined under subsection (a)(1) shall be allocated among the properties permitted to be received without the recognition of gain or loss.
358(b)(2)(2) FTCSpecial rule for section 355 .
In the case of an exchange to which section 355 (or so much of section 356 as relates to section 355 ) applies, then in making the allocation under paragraph (1) of this subsection , there shall be taken into account not only the property so permitted to be received without the recognition of gain or loss, but also the stock or securities (if any) of the distributing corporation which are retained, and the allocation of basis shall be made among all such properties.
358(c)(c) FTCSection 355 transactions which are not exchanges.
For purposes of this section, a distribution to which section 355 (or so much of section 356 as relates to section 355 ) applies shall be treated as an exchange, and for such purposes the stock and securities of the distributing corporation which are retained shall be treated as surrendered, and received back, in the exchange.
358(d)(d) FTCAssumption of liability.
358(d)(1)(1) FTCIn general.
Where, as part of the consideration to the taxpayer, another party to the exchange assumed a liability of the taxpayer, such assumption shall, for purposes of this section , be treated as money received by the taxpayer on the exchange.
358(d)(2)(2) FTCException.
Paragraph (1) shall not apply to the amount of any liability excluded under section 357(c)(3) .
358(e)(e) FTCException.
This section shall not apply to property acquired by a corporation by the exchange of its stock or securities (or the stock or securities of a corporation which is in control of the acquiring corporation) as consideration in whole or in part for the transfer of the property to it.
358(f)(f) FTCDefinition of nonrecognition property in case of section 361 exchange.
For purposes of this section, the property permitted to be received under section 361 without the recognition of gain or loss shall be treated as consisting only of stock or securities in another corporation a party to the reorganization.
358(g)(g) FTCNew Law AnalysisAdjustments in intragroup transactions involving section 355 .
In the case of a distribution to which section 355 (or so much of section 356 as relates to section 355 ) applies and which involves the distribution of stock from 1 member of an affiliated group (as defined in section 1504(a) without regard to subsection (b) thereof) to another member of such group, the Secretary may, notwithstanding any other provision of this section, provide adjustments to the adjusted basis of any stock which—
358(g)(1)(1) is in a corporation which is a member of such group, and
358(g)(2)(2) is held by another member of such group,
to appropriately reflect the proper treatment of such distribution.
358(h)(h) FTCSpecial rules for assumption of liabilities to which subsection (d) does not apply.
358(h)(1)(1) FTCNew Law AnalysisIn general.
If, after application of the other provisions of this section to an exchange or series of exchanges, the basis of property to which subsection (a)(1) applies exceeds the fair market value of such property, then such basis shall be reduced (but not below such fair market value) by the amount (determined as of the date of the exchange) of any liability—
358(h)(1)(A)(A) FTCNew Law Analysis which is assumed by another person as part of the exchange, and
358(h)(1)(B)(B) FTCNew Law Analysis with respect to which subsection (d)(1) does not apply to the assumption.
358(h)(2)(2) Exceptions.
Except as provided by the Secretary, paragraph (1) shall not apply to any liability if—
358(h)(2)(A)(A) FTCNew Law Analysis the trade or business with which the liability is associated is transferred to the person assuming the liability as part of the exchange, or
358(h)(2)(B)(B) FTCNew Law Analysis substantially all of the assets with which the liability is associated are transferred to the person assuming the liability as part of the exchange.
358(h)(3)(3) FTCNew Law AnalysisLiability.
For purposes of this subsection, the term “liability” shall include any fixed or contingent obligation to make payment, without regard to whether the obligation is otherwise taken into account for purposes of this title.
§ 362 Basis to corporations.
362(a) Property acquired by issuance of stock or as paid-in surplus.
If property was acquired, by a corporation—
362(a)(1)(1) FTC in connection with a transaction to whichsection 351 (relating to transfer of property to corporation controlled by transferor) applies, or
362(a)(2)(2) FTC as paid-in surplus or as a contribution to capital,
then the basis shall be the same as it would be in the hands of the transferor, increased in the amount of gain recognized to the transferor on such transfer.
§ 362 Basis to corporations.
362(c) Special rule for certain contributions to capital.
362(c)(1)(1) FTCProperty other than money.
Notwithstandingsubsection (a)(2) , if property other than money—
362(c)(1)(A)(A) is acquired by a corporation as a contribution to capital, and
362(c)(1)(B)(B) is not contributed by a shareholder as such, then the basis of such property shall be zero.
§ 1012 Basis of property—cost.
(a) FTCIn general.
The basis of property shall be the cost of such property, except as otherwise provided in this subchapter and subchapters C (relating to corporate distributions and adjustments), K (relating to partners and partnerships), and P (relating to capital gains and losses).
1012(b)(b) FTCSpecial rule for apportioned real estate taxes.
The cost of real property shall not include any amount in respect of real property taxes which are treated under section 164(d) as imposed on the taxpayer.
1012(c)(c) Determinations by account.
1012(c)(1)(1) FTCNew Law AnalysisIn general.
In the case of the sale, exchange, or other disposition of a specified security on or after the applicable date, the conventions prescribed by regulations under this section shall be applied on an account by account basis.
1012(c)(2)(2) FTCNew Law AnalysisApplication to certain regulated investment companies.
1012(c)(2)(A)(A) FTCNew Law Analysis In general. Except as provided in subparagraph (B), any stock for which an average basis method is permissible under this section which is acquired before January 1, 2012, shall be treated as a separate account from any such stock acquired on or after such date.
1012(c)(2)(B)(B) FTCNew Law Analysis Election for treatment as single account. If a regulated investment company described in subparagraph (A) elects to have this subparagraph apply with respect to one or more of its stock holders—
1012(c)(2)(B)(i)(i) FTCNew Law Analysis subparagraph (A) shall not apply with respect to any stock in such regulated investment company held by such stockholders, and
1012(c)(2)(B)(ii)(ii) FTCNew Law Analysis all stock in such regulated investment company which is held by such stockholders shall be treated as covered securities described in section 6045(g)(3) without regard to the date of the acquisition of such stock.
A rule similar to the rule of the preceding sentence shall apply with respect to a broker holding such stock as a nominee.
1012(c)(3)(3) FTCNew Law AnalysisDefinitions.
For purposes of this section, the terms “specified security” and “applicable date” shall have the meaning given such terms in section 6045(g).
1012(d)(d) Average basis for stock acquired pursuant to a dividend reinvestment plan.
1012(d)(1)(1) FTCNew Law AnalysisIn general.
In the case of any stock acquired after December 31, 2011, in connection with a dividend reinvestment plan, the basis of such stock while held as part of such plan shall be determined using one of the methods which may be used for determining the basis of stock in a regulated investment company.
1012(d)(2)(2) FTCNew Law AnalysisTreatment after transfer.
In the case of the transfer to another account of stock to which paragraph (1) applies, such stock shall have a cost basis in such other account equal to its basis in the dividend reinvestment plan immediately before such transfer (properly adjusted for any fees or other charges taken into account in connection with such transfer).
1012(d)(3)(3) New Law AnalysisSeparate accounts; election for treatment as single account.
1012(d)(3)(A)(A) FTC In general. Rules similar to the rules of subsection (c)(2) shall apply for purposes of this subsection .
1012(d)(3)(B)(B) FTCNew Law Analysis Average basis method. Notwithstanding paragraph (1) , in the case of an election under rules similar to the rules of subsection (c)(2)(B) with respect to stock held in connection with a dividend reinvestment plan, the average basis method is permissible with respect to all such stock without regard to the date of the acquisition of such stock.
§ 1016 Adjustments to basis.
1016(a)(1) Proper adjustment in respect of the property shall in all cases be made—
(a) FTCNew Law AnalysisGeneral rule.
Proper adjustment in respect of the property shall in all cases be made—
1016(a)(1)(1) FTC for expenditures, receipts, losses, or other items, properly chargeable to capital account, but no such adjustment shall be made—
1016(a)(1)(A)(A) for taxes or other carrying charges described in section 266, or
1016(a)(1)(B)(B) for expenditures described in section 173 (relating to circulation expenditures),
for which deductions have been taken by the taxpayer in determining taxable income for the taxable year or prior taxable years;
§ 1221 Capital asset defined.
(a) FTCIn general.
For purposes of this subtitle, the term “capital asset” means property held by the taxpayer (whether or not connected with his trade or business), but does not include—
1221(a)(1)(1) FTC stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business;
1221(a)(2)(2) FTC property, used in his trade or business, of a character which is subject to the allowance for depreciation provided in section 167, or real property used in his trade or business;
1221(a)(3)(3) FTC a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property, held by—
1221(a)(3)(A)(A) FTC a taxpayer whose personal efforts created such property,
1221(a)(3)(B)(B) FTC in the case of a letter, memorandum, or similar property, a taxpayer for whom such property was prepared or produced, or
1221(a)(3)(C)(C) FTCNew Law Analysis a taxpayer in whose hands the basis of such property is determined, for purposes of determining gain from a sale or exchange, in whole or part by reference to the basis of such property in the hands of a taxpayer described in subparagraph (A) or (B) ;
1221(a)(4)(4) FTC accounts or notes receivable acquired in the ordinary course of trade or business for services rendered or from the sale of property described in paragraph (1) ;
1221(a)(5)(5) FTC a publication of the United States Government (including the Congressional Record) which is received from the United States Government or any agency thereof, other than by purchase at the price at which it is offered for sale to the public, and which is held by—
1221(a)(5)(A)(A) a taxpayer who so received such publication, or
1221(a)(5)(B)(B) a taxpayer in whose hands the basis of such publication is determined, for purposes of determining gain from a sale or exchange, in whole or in part by reference to the basis of such publication in the hands of a taxpayer described in subparagraph (A) ;
1221(a)(6)(6) FTC any commodities derivative financial instrument held by a commodities derivatives dealer, unless—
1221(a)(6)(A)(A) FTC it is established to the satisfaction of the Secretary that such instrument has no connection to the activities of such dealer as a dealer, and
1221(a)(6)(B)(B) FTC such instrument is clearly identified in such dealer’s records as being described in subparagraph (A) before the close of the day on which it was acquired, originated, or entered into (or such other time as the Secretary may by regulations prescribe);
1221(a)(7)(7) FTC any hedging transaction which is clearly identified as such before the close of the day on which it was acquired, originated, or entered into (or such other time as the Secretary may by regulations prescribe); or
1221(a)(8)(8) FTC supplies of a type regularly used or consumed by the taxpayer in the ordinary course of a trade or business of the taxpayer.
§ 1222 Other terms relating to capital gains and losses.
(3) Long-term capital gain.
(3) FTCLong-term capital gain.
The term “long-term capital gain” means gain from the sale or exchange of a capital asset held for more than 1 year, if and to the extent such gain is taken into account in computing gross income.
§ 1223 Holding period of property.
1
(1) FTC In determining the period for which the taxpayer has held property received in an exchange, there shall be included the period for which he held the property exchanged if, under this chapter, the property has, for the purpose of determining gain or loss from a sale or exchange, the same basis in whole or in part in his hands as the property exchanged, and, in the case of such exchanges the property exchanged at the time of such exchange was a capital asset as defined insection 1221 or property described in section 1231. For purposes of this paragraph—
1223(1)(A)(A) an involuntary conversion described insection 1033 shall be considered an exchange of the property converted for the property acquired, and
1223(1)(B)(B) a distribution to whichsection 355 (or so much ofsection 356 as relates tosection 355 ) applies shall be treated as an exchange.
§ 1223 Holding period of property.
2
(2) FTC In determining the period for which the taxpayer has held property however acquired there shall be included the period for which such property was held by any other person, if under this chapter such property has, for the purpose of determining gain or loss from a sale or exchange, the same basis in whole or in part in his hands as it would have in the hands of such other person.
§ 7701 Definitions.
(a)
(42) Substituted Basis
(43) Transferred Basis
(44) Exchanged Basis
7701(a)(42)(42) FTCSubstituted basis property.
The term “substituted basis property” means property which is—
7701(a)(42)(A)(A) FTC transferred basis property, or
7701(a)(42)(B)(B) FTC exchanged basis property.
7701(a)(43)(43) FTCTransferred basis property.
The term “transferred basis property” means property having a basis determined under any provision of subtitle A (or under any corresponding provision of prior income tax law) providing that the basis shall be determined in whole or in part by reference to the basis in the hands of the donor, grantor, or other transferor.
7701(a)(44)(44) FTCExchanged basis property.
The term “exchanged basis property” means property having a basis determined under any provision of subtitle A (or under any corresponding provision of prior income tax law) providing that the basis shall be determined in whole or in part by reference to other property held at any time by the person for whom the basis is to be determined.
§ 351 Transfer to corporation controlled by transferor.
(g) Nonqualified preferred stock not treated as stock.
(g) FTCNonqualified preferred stock not treated as stock.
351(g)(1)(1) FTCNew Law AnalysisIn general.
In the case of a person who transfers property to a corporation and receives nonqualified preferred stock—
351(g)(1)(A)(A) FTC subsection (a) shall not apply to such transferor, and
351(g)(1)(B)(B) FTC if (and only if) the transferor receives stock other than nonqualified preferred stock—
351(g)(1)(B)(i)(i) New Law Analysis subsection (b) shall apply to such transferor; and
351(g)(1)(B)(ii)(ii) New Law Analysis such nonqualified preferred stock shall be treated as other property for purposes of applying subsection (b) .
§ 453 Installment method.
(a) General rule
(b) Installment sale defined
(c) Installment method defined
(a) FTCNew Law AnalysisGeneral rule.
Except as otherwise provided in this section, income from an installment sale shall be taken into account for purposes of this title under the installment method.
453(b)(b) FTCInstallment sale defined.
For purposes of this section—
453(b)(1)(1) FTCIn general.
The term “installment sale” means a disposition of property where at least 1 payment is to be received after the close of the taxable year in which the disposition occurs.
453(b)(2)(2) FTCExceptions.
The term “installment sale” does not include—
453(b)(2)(A)(A) FTC Dealer dispositions. Any dealer disposition (as defined in subsection (l)).
453(b)(2)(B)(B) FTC Inventories of personal property. A disposition of personal property of a kind which is required to be included in the inventory of the taxpayer if on hand at the close of the taxable year.
453(c)(c) FTCInstallment method defined.
For purposes of this section, the term “installment method” means a method under which the income recognized for any taxable year from a disposition is that proportion of the payments received in that year which the gross profit (realized or to be realized when payment is completed) bears to the total contract price.
