40 CODIFICATION OF INTERNAL REVENUE LAWS nized. If any part of the money is not so expended, the gain, if any, shall be recognized, but in an amount not in excess of the money which is not so expended. (g) DEFINITION OF REORGANIZATION.- As used in this section and section 113- (1) The term "reorganization" means (A) a statutory merger or consolidation, or (B) the acquisition by one corporation in ex- change solely for all or a part of its voting stock: of at least 80 per centum of the voting stock and at least 80 per centum of the total number of shares of all other classes of stock of another cor- poration; or of substantially all the properties of another corpora- tion, or (C) a transfer by a corporation of all or a part of its assets to another corporation if immediately after the transfer the transferor or its shareholders or both are in control of the corpo- ration to which the assets are transferred, or (D) a recapitaliza- tion, or (E) a mere change in identity, form, or place of organi- zation, however effected. (2) The term "a party to a reorganization" includes a corpora- tion resulting from a reorganization and includes both corporations in the case of a reorganization resulting from the acquisition by one corporation of stock or properties of another. (h) DEFINITION OF CONTROL.-As used in this section the term "control" means the ownership of stock possessing at least 80 per centum of the total combined voting power of all classes of stock entitled to vote and at least 80 per centum of the total number of shares of all other classes of stock of the corporation. (i) FoREIGN CORPORATIONS. - In determining the extent to which gain shall be recognized in the case of any of the exchanges described in subsection (b) (3), (4), (5), or (6), or described in so much of subsection (c) as refers to subsection (b) (3) or (5), or described in subsection (d), a foreign corporation shall not be considered as a corporation unless, 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 avoid- ance of Federal income taxes. (j) INSTALLMENT OBLIGATIONS. - For nonrecognition of gain or loss in the case of installment obliga- tions, see section 41 (d). SEC. 113. ADJUSTED BASIS FOR DETERMINING GAIN OR LOSS. (a) BASIS (UNADJUSTED) OF PROPERTY.- Tle basis of property shall be the cost of such property; except that- (1) INVENTORY VALUE. - If the property should have been included in the last inventory, the basis shall be the last inventory value thereof. (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 would be in the hands of the donor or the last preceding owner by whom it was not acquired by gift, except that for the purpose of determining loss the basis shall be the basis so deter- mined or the fair market value of the property at the time of the gift, whichever is lower. If the facts necessary to determine the asis in the hands of the donor or the last preceding owner are unknown to the donee, the Commissioner shall, if possible, obtain such facts from such donor or last preceding owner, or any other person cognizant thereof. If the Commissioner finds it impossible to obtain such facts, the basis in the 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 property was acquired by such donor or last preceding owner.
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