Supplement B-Computation of Net Income [Supplementary to Subchapter B, Part II] SEC. 111. DETERMINATION OF AMOUNT OF, AND RECOGNITION OF, GAIN OR LOSS. (a) COMPUTATION OF GAIN on Loss. -T he gain from the sale or other disposition of property shall be the excess of the amount realized therefrom over the adjusted basis provided in section 113 (b) for determining gain, and the loss shall be the excess of the adjusted basis provided in such section for determining loss over the amount realized. (b) AMOUNT RFALIZED.-T he amount realized from the sale or other disposition of property shall be the sum of any money received plus the fair market value of the property (other than money) received. (c) RECOGNITION OF GAIN OR Loss. -In the case of a sale or ex- change, the extent to which the gain or loss determined under this section shall be recognized for the purposes of this chapter, shall be determined under the provisions of section 112. (d) INSTALLMENT SALES.- Nothing in this section shall be con- strued to prevent (in the case of property sold under contract pro- viding for payment in installments) the taxation of that portion of any installment payment representing gain or profit in the year in which such payment is received. SEC. 112. RECOGNITION OF GAIN OR LOSS. (a) GENERAL RULE. -Upon the sale or exchange of property the entire amount of the gain or loss, determined under section 111, shall be recognized, except as hereinafter provided in this section. (b) EXCHANGES SOLELY IN KIND. - (1) PROPERTY HELD FOR PRODUCTIVE USE OR INVESTMENT.--NO gain or loss shall be recognized if property held for productive use in trade or business or for investment (not including stock in trade or other property held primarily for sale, nor stocks, bonds, notes, choses in action, certificates of trust or beneficial interest, or other securities or evidences of indebtedness or interest) is exchanged solely for property of a like kind to be held either for productive use in trade or business or for investment. (2) STOCK FOR STOCK OF SAME CORPORATION.-No gain or loss shall be recognized if common stock in a corporation is exchanged solely for common stock in the same corporation, or if preferred stock in a corporation is exchanged solely for preferred stock in the same corporation. (3) STOCK FOR STOCK ON REORGANIZATION.-No gain or loss shall be recognized if stock or securities in a corporation a party to a reorganization are, in pursuance of the plan of reorganization, exchanged solely for stock or securities in such corporation or in another corporation a party to the reorganization. (4) SAME. -GAIN OF CORPORATION.-No gain or loss shall be recognized if a corporation a party to a reorganization exchanges property, in pursuance of the plan of reorganization, solely for stock or securities in another corporation a party to the reorgani- zation. (5) TRANSFER TO CORPORATION CONTROLLED BY TRANSFEROR. - N O gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock or securities in such corporation, and immediately after the exchange such person or persons are in control of the corporation; but in the case of an exchange by two or more persons this paragraph shall apply only if the amount of the stock and securities received by each is substantially in proportion to his interest in the property prior to the exchange. INCOME TAX 37
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