56 STAT.] 77TH CONG., 2 D SESS.-CH. 619-OCT. 21 , 1942 be, when the last property (described in the applicable paragraph) to which the interest relates would be deemed destroyed or seized under the applicable paragraph. This paragraph shall apply only if the interest would have become worthless if the property had been destroyed. For the purposes of this paragraph, an interest shall be deemed to have become worthless notwithstanding the fact that such interest has a value if such value is attributable solely to the possibility of recovery of the property, compensation (other than insurance or similar indemnity) on account of its destruction or seizure, or both. Section 23 (g) (2) and (k) (2) shall not apply to any interest which under this paragraph is considered to have been destroyed or seized. Under regulations prescribed by the Commissioner with the approval of the Secretary2 a taxpayer which owns 100 per centum (excluding qualifying shares) of each class of stock of a corporation may elect to deter- mine the worthlessness of its interest, described in this para- graph, in or with respect to the property of the corporation, without regard to the amount of the property of such corpora- tion which would be excluded under subsection (e) (2) (A) in determining the adjusted basis of all the assets of the corpora- tion for the purposes of subsection (e), but such amount shall be treated under subsection (b) (1) as a recovery by the taxpayer in the taxable year with respect to such interest. "(4) CHOICE OF DATE.- The taxpayer's choice of a date under paragraph (1) or (3) shall be effective only if made within such time and in such manner as may be prescribed by regulations prescribed by the Commissioner with the approval of the Secretary. "(b) AMOUNT OF LosS ON DESTROYED OR SEIZED PROPERT.-In the case of any property or interest in or with respect to property deemed to be destroyed or seized under subsection (a)- "(1) The amount of the loss on account of such property or interest shall be determined with regard to any recoveries with respect thereto in the taxable year but without regard to any possibility of recovering such property or interest, or of receiving any compensation (other than insurance or similar indemnity) on account of such property or interest in the taxable year or in any future taxable year. "(2) The taxpayer may choose to decrease the amount of the loss by all obligations or liabilities of the taxpayer with respect to such property or interest discharged or satisfied out of the property or interest upon its destruction or seizure, if the Com- missioner is satisfied that such obligations or liabilities are so discharged or satisfied in a subsequent taxable year, or that the taxpayer is unable to determine whether or not such obligations or liabilities are in fact discharged or satisfied. No loss shall be deemed to have been sustained upon the destruction or seizure of such property or interest to the extent that it is compensated for by the discharge or satisfaction of obligations and liabilities of the taxpayer out of such property or interest in the taxable year in which such destruction or seizure is deemed to have occurred. The taxpayer's choice under this subsection shall be effective only if made within such time and in such manner as may be prescribed by regula- tions prescribed by the Commissioner with the approval of the Secretary. "(c) RECOVERIES INCLUDED IN GROSS INCOME. - "(1) GENERAL RULE.- Upon the recovery in the taxable year of any money or property in respect of property considered under subsection (a) as destroyed or seized in any prior taxable year, 853 63 Stat. 13 . 26U.S.C. 23(g) (2). Ante, p. 821.
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