PUBLIC LAWS-CH. 258 -JULY 16, 1947 Exceptions. Addition of expend- itures. 53 Stat. 1085. D. C. Code §§ 47- 1501 to 47-1543 . Ante, p. 331. Deductions for wear and tear, etc. Supra. Property acquired by gift, etc. Time of acquisition. Acquisition prior to Jan. 1 , 1939. Adjustment. TrLE XI-BASES SEC. 1 . BASIS FOR DETERMINING GAIN OR Loss.-The basis for deter- mining the gain or loss from the sale, exchange, or other disposition of property shall be the cost of such property, except that- (a) If the property is of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, the basis shall be the last inventory value thereof. (b) In respect of any real or tangible property acquired after December 31, 1938, the cost thereof shall be adjusted as follows: (1) By adding to its original cost to the taxpayer the amount of all expenditures connected therewith, including real-estate taxes upon the property, which were properly chargeable to capital account and were not deducted in any income-tax return which the taxpayer was required to file under the provisions of this article or the District of Columbia Income Tax Act of 1939, as amended; but such additions as are herein provided for shall include only those expenditures made by the taxpayer between the time the property was acquired by him and the date of sale or other disposition of the property. (2) By deducting from such cost the full loss sustained since acqui- sition for exhaustion, wear and tear, obsolescence, amortization, and depletion to the extent allowed or allowable (whichever amount is the greater) on such property in all returns required to be filed by the taxpayer under the provisions of this article or of the District of Columbia Income Tax Act of 1939, as amended. (3) In the case of property (including intangible personal prop- erty) acquired by gift or inheritance, where the transfer thereof to the taxpayer was subject to tax by the United States or by any jurisdiction in which the property had a taxable situs at that time, the basis of the property so acquired shall be the highest valuation then placed upon such transfer by the United States or by any authorized taxing State or Territory thereof. If such transfer of the property was not subject to the aforesaid transfer tax, the base shall be the fair market value of such property at the time acquired. For the purpose of this subsection, the time such inherited property was acquired shall be the date of death of the decedent. The basis herein provided for shall be subject to the appropriate adjustment or adjust- ments defined in section 1 (b) of this title. (c) If the property was acquired before January 1, 1939, the basis shall be the fair market value as of that date or, at the option of the taxpayer, the cost of such property, and in the case of real or tangible property such cost shall be diminished by exhaustion, wear and tear, obsolescence, and depletion actually sustained before such date: Pro- vided, however, That the preceding valuation so determined shall be adjusted by the appropriate additions and deductions provided for in section 1 (b) of this title to cover the period from January 1, 1939, to the date of sale or other disposition of the property. SEC. 2 . (a) CoMPUrATIoN OF GAIN OR Loss. -The gain or loss, as the case may be, from the sale or other disposition of property shall be the difference between (a) the amount realized from such sale or other disposition of the property and (b) the basis as defined in section 1 of this title. (b) AMOUNT RE-AIZED. -T he amount realized from the sale or exchange of property shall be its selling price, and such price shall include cash payments received or to be received subsequently therefor, plus the sum of any mortgage and other encumbrances thereon at the time of such sale or exchange. The amount realized shall also include at its then market value any property received in part or in full settle- ment of the property sold or exchanged, adjusted to include the then existing encumbrances on such property received in exchange. 350 [61 STAT.