53 STAT.] 76TH CONG., 1ST SESS.-CH. 367-JULY 26, 1939 (b) ALLOCATION OF DEDUCTIONS.- In the case of a taxpayer, other than an individual, the deductions allowed in this section shall be allowed only for and to the extent that they are connected with income arising from sources within the District and taxable under this title to a nonresident taxpayer; and the proper apportionment and alloca- tion of the deductions with respect to sources of income within and without the District shall be determined by processes or formulas of general apportionment under rules and regulations to be prescribed by the Commissioners. The so-called charitable contribution deduc- tion allowed by subparagraph (10) of paragraph (a) of this section shall be allowed whether or not connected with income from sources within the District. (c) CORPORATIONS TO FILE RETURN OF TOTAL INCOME.--A corpora- tion shall receive the benefits of the deductions allowed to it under this title only by filing or causing to be filed with the assessor a true and accurate return of its total income received from all sources, whether within or without the District. GAINS OR LOSSES FROM SAL. OF ASSETS SEC. 6 . (a) GAIN OR LOSS IN CAPITAL ASSETS NOT RECOGNIZED.--NO gain or loss from the sale or exchange of a capital asset shall be recognized in the computation of net income under this title. For the purposes of this title, "capital assets" means property held by the taxpayer for more than two years (whether or not connected with his trade or business) but does not include stock in trade of the tax- payer or other property of a kind which would properly be included in the inventory of a taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to custom- ers in the ordinary course of his trade or business. (b) GAIN OR LOSS IN ASSETS OTHR THAN cAPITAL.-Gains or losses from the sale or exchange of property other than a capital asset shall be treated in the same manner as other income or deductible losses, and the basis for computing such gain or loss shall be the cost of such property or, if acquired by some means other than purchase, the fair market value thereof at the date of acquisition. EXCHANGES SEC. 7. Where property is exchanged for other property, the prop- erty received in exchange for the purpose of determining the gain or loss shall be treated as the equivalent of cash to the amount of its fair market value: but when in connection with the reorganization, merger, or consolidation of a corporation a taxpayer receives, in place of stock or securities owned by him, new stock or securities of the reorganized, merged, or consolidated corporation, no gain or loss shall be deemed to occur from the exchange until the new stock or securities are sold or realized upon and the gain or loss is definitely ascertained, until which time the new stock or securities received shall be treated as taking the place of the stock and securities exchanged; provided such reorganization, merger, or consolidation is a "reor- ganization" within the meaning of the term "reorganization" as defined in section 112 (g) of the Federal Revenue Act of 1936. DEDUCTIONS NOT ALLOWED SEC. 8. (a) GENERAL RULE.- In computing net income no deductions shall be allowed in any case in respect to- (1) personal, living, or family expenses; (2) any amount paid out for new buildings or for permanent improvements or betterments, made to increase the value of any property or estate; Allocation of deduc- tions. Charitable contribu. tions. Corporations to file return of total in- come. Items not recog- nized. " Capital assets" de- fined. Assets other than capital. Treatment of prop- erty received in ex- change. Conditional upon being a "reorganiza- tion." 49 Stat. IG81. 26 U. S. C., Supp. IV, § 112 (g). Items not deducti- ble. Personal, etc., ex- penses. Property improve- ments.
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