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Page:United States Statutes at Large Volume 61 Part 1.djvu/375

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61 STAT.] 80TH CONG. , IST SESS.--CH. 258-JULY 16, 1947 SEC. 3. EXCHANGE IN REORGANIZATIONS. - When in connection with the reorganization of a corporation, a taxpayer receives, in place of stock or securities owned by him, any stock or securities of the reor- ganized 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. For the purposes of this section, the word "reorganization" means (1) a statutory merger or consolidation; or (2) the acquisition by one corporation, in exchange 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 corporation; or (3) the acquisition by one corporation, in exchange solely for all or a part of its voting stock, of substantially all the properties of another corporation, but in determining whether the exchange is solely for voting stock the assumption by the acquiring corporation of a liability of the other or the fact that property acquired is subject to a liability, shall be dis- regarded; or (4) 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 corporation to which the assets are transferred; or (5) a recapitalization; or (6) a mere change in identity, form, or place of organization, however effected. SEC. 4. BASIS FOR DIVIDENDS PAID IN PROPERTY.- Where any prop- erty other than money is paid by a corporation as a dividend, the base to the recipient thereof shall be the market value of such property at the time of its distribution by such corporation. SEC. 5. The provisions of sections 1 through 3 of this title shall not apply to the sale or exchange of any property defined as a capital asset by section 4 (1) of title I of this article. SEC. 6. DEPRECIATION.- The bases used in determining the amount allowable as a deduction from gross income under the provisions of section 3 (a) (7) of title III of this article shall be- (a) where the property was acquired after December 31, 1938, by purchase, the basis shall be the cost thereof to the taxpayer; (b) where the property was received in exchange for other property after December 31, 1938, the basis shall be the market value thereof at the time of such exchange; (c) where the property was inherited or acquired by gift after December 31, 1938, the basis shall be that defined in subsection 1 (b) (3) of this title; (d) if the property was acquired prior to January 1 1939, the appropriate basis set forth in subsection (a), (b), or (c) of this section shall be used: Provided,however, That the taxpayer may, at his option, use as the basis the market value of such property as of January 1, 1939; (e) the taxpayer may deduct in each taxable year only such amount of depreciation as was actually sustained during that year and such annual deduction shall be based upon the useful life of the property remaining after the date used by the taxpayer in establishing the valuation: Provided, however, That the allow- ance for depreciation actually sustained during any taxable year may not be increased by any depreciation of the property which was allowable as a deduction in any earlier taxable year: And pro- vided further, That any basis so established may not be changed in a subsequent taxable year, unless written approval of the Assessor has been first obtained. 351 "Reorganization." Ante, p. 332. Ante, p. 337 . Ante, p. 360. Amount of deprecia- tion deductible. Change of basia