700
73d C ONGRESS . SESS . II. CH. 277 . MAY 10, 1934. INC OME TAX . refers to subse ction (b ) (3) or (5 ), or described in subsection (d), C OPU OF NET INCOME- a foreign corporation shall not be considered as a corporation unless, Contd . prior to such exchange, it has been established to the satisfaction of the Commissioner that such exchange is not in pursuance of a plan having as one of its principal purposes the avoidance of Fed- eral income taxes . Basis oordetermn»Q gain or loss
SEC . 113. ADJUSTED BASIS FOR DETERMINING GAIN OR LOSS . . Co st value
- excep-
(a) BASIS (UNADJUSTED) OF PROPERTY .-The basis of property lions . shall be the cost of such property ; except that- Inventory value . (1) INVENTORY VALUE .-If the property should have been included in the last inventory, the basis shall be the last inventory va lue ther eof . 19 Gi fts a fter Dece mber (2) GIFTS AFTER DECEMBER 31, 1920 .-If the property was acquired by gift after December 31, 1920, the basis shall be the same as it w ould be in the h ands of the dono r or the last pre- ceding owner by whom it was not acquired by gift, except that for the purpose of determining loss the basis shall be the basis so determined or the fair market value of the property at the Determination . time of the gift, whichever is lower . If the facts necessary to determine the basis in the h ands of the dono r or the last pre- c eding owner are unknow n to the d onee, the C ommis sioner shal l, if possible, obtain such facts from such donor or last preceding own er, or any other person cognizant thereof . If the C omm is- sioner finds it impossible to obtain such facts, the basis in the Fair market value . hands of such donor or last preceding owner shall be the fair market value of such property as found by the Commissioner as of the date or approximate date at which, according to the best information that the Commissioner is able to obtain, such prop- erty was acquired by such donor or last preceding owner . quired Trust after property December
(3) TRANS FER IN TRUST ArrER DECEMBER 31 1920 .-If the pro p- IM .
erty was acquired after December 31, 1920, by a transfer in trust (other than by a transfer in trust by a bequest or devise) the basis As in bands of shall be the sam e as it would be in the hands of the grantor, grantor. increased in the amount of gain or decreased in the amount of loss recognized to the grantor upon such transfer under the law applicable to the year in which the transfer was made . Gift or transfer in trust befo re J anuar y 1,
(4) GIFT OR TRANSFER IN TRUST BEFORE JANUARY 1, 1921 .-If the 1921.
property was acquired by gift or transfer in trust on or before December 31, 1920, the basis shall be the fair market value of such Property transmitted property at the time of such acquisition . at death .
(5) PRO PER TY TRAN SMI TTE D AT DEATH .-If the pr ope rty was acquired by bequest, devise, or inheritance, or by the decedent's Transfer in trust with estate f rom the decedent , the bas is shall be the fair mar ket valu e right to revoke . Of such property at the time of such acquisition . In the case of property transferred in trust to pay the income for life to or upon the order or direction of the grantor, with the right reserved to the grantor at all times prior to his death to revoke the trust, the basis of such property in the hands of the persons entitled under the terms of the trust instrument to the property after the grantor's death shall, a fter such death, be the same as if the trust ins trument oration, without unde r gene ral to ll en
had been a will executed on the day of the grantor's death . For gen era l power of appointment . the purpose of this paragraph property passing without full and adeq uate con side rati on u nder a g ener al p ower of appo intm ent exercised by will shall be deemed to be property passing from the individual exercising such power by bequest or devise . Acquired on ex-
(6) TAx-FREE EXCHANGES GENERALLY .-If the property was change. Ante, p . 704.
acquired, after February 28, 1913, upon an exchange described in section 112(b) to (e), inclusive, the basis shall be the same as in
