Treasury Regulations (26 C.F.R.)
26 CFR § 1.1033(b)-1
Basis of property acquired as a result of an involuntary conversion.
# (a)
The provisions of the first sentence of section 1033(b) may be illustrated by the following example:
Example:
A's vessel which has an adjusted basis of $100,000 is destroyed in 1950 and A receives in 1951 insurance in the amount of $200,000. If A invests $150,000 in a new vessel, taxable gain to the extent of $50,000 would be recognized. The basis of the new vessel is $100,000; that is, the adjusted basis of the old vessel ($100,000) minus the money received by the taxpayer which was not expended in the acquisition of the new vessel ($50,000) plus the amount of gain recognized upon the conversion ($50,000). If any amount in excess of the proceeds of the conversion is expended in the acquisition of the new property, such amount may be added to the basis otherwise determined.
# (b)
The provisions of the last sentence of section 1033(b) may be illustrated by the following example:
Example:
A taxpayer realizes $22,000 from the involuntary conversion of his barn in 1955; the adjusted basis of the barn to him was $10,000, and he spent in the same year $20,000 for a new barn which resulted in the nonrecognition of $10,000 of the $12,000 gain on the conversion. The basis of the new barn to the taxpayer would be $10,000—the cost of the new barn ($20,000) less the amount of the gain not recognized on the conversion ($10,000). The basis of the new barn would not be a substituted basis in the hands of the taxpayer within the meaning of section 1016(b)(2). If the replacement of the converted barn had been made by the purchase of two smaller barns which, together, were similar or related in service or use to the converted barn and which cost $8,000 and $12,000, respectively, then the basis of the two barns would be $4,000 and $6,000, respectively, the total basis of the purchased property ($10,000) allocated in proportion to their respective costs (8,000/ 20,000 of $10,000 or $4,000; and 12,000/20,000 of $10,000, or $6,000).
[T.D. 6500, 25 FR 11910, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960. Redesignated and amended by T.D. 7625, 44 FR 31013, May 30, 1979]
Source: view the official text
In this part (40 sections)
- 1.1021-1 · Sale of annuities.
- 1.1031-0 · Table of contents.
- 1.1031(a)-1 · Property held for productive use in trade or business or…
- 1.1031(a)-2 · Additional rules for exchanges of personal property.
- 1.1031(a)-3 · Definition of real property.
- 1.1031(b)-1 · Receipt of other property or money in tax-free exchange.
- 1.1031(b)-2 · Safe harbor for qualified intermediaries.
- 1.1031(c)-1 · Nonrecognition of loss.
- 1.1031(d)-1 · Property acquired upon a tax-free exchange.
- 1.1031(d)-1T · Coordination of section 1060 with section 1031…
- 1.1031(d)-2 · Treatment of assumption of liabilities.
- 1.1031(e)-1 · Exchange of livestock of different sexes.
- 1.1031(j)-1 · Exchanges of multiple properties.
- 1.1031(k)-1 · Treatment of deferred exchanges.
- 1.1032-1 · Disposition by a corporation of its own capital stock.
- 1.1032-2 · Disposition by a corporation of stock of a controlling…
- 1.1032-3 · Disposition of stock or stock options in certain…
- 1.1033(a)-1 · Involuntary conversions; nonrecognition of gain.
- 1.1033(a)-2 · Involuntary conversion into similar property, into money…
- 1.1033(a)-3 · Involuntary conversion of principal residence.
- 1.1033(b)-1 · Basis of property acquired as a result of an involuntary…
- 1.1033(c)-1 · Disposition of excess property within irrigation project…
- 1.1033(d)-1 · Destruction or disposition of livestock because of…
- 1.1033(e)-1 · Sale or exchange of livestock solely on account of…
- 1.1033(g)-1 · Condemnation of real property held for productive use in…
- 1.1033(h)-1 · Effective date.
- 1.1035-1 · Certain exchanges of insurance policies.
- 1.1036-1 · Stock for stock of the same corporation.
- 1.1037-1 · Certain exchanges of United States obligations.
- 1.1038-1 · Reacquisitions of real property in satisfaction of…
- 1.1038-2 · Reacquisition and resale of property used as a principal…
- 1.1038-3 · Election to have section 1038 apply for taxable years…
- 1.1039-1 · Certain sales of low-income housing projects.
- 1.1041-1T · Treatment of transfer of property between spouses or…
- 1.1041-2 · Redemptions of stock.
- 1.1042-1T · Questions and answers relating to the sales of stock to…
- 1.1044(a)-1 · Time and manner for making election under the Omnibus…
- 1.1045-1 · Application to partnerships.
- 1.1051-1 · Basis of property acquired during affiliation.
- 1.1052-1 · Basis of property established by Revenue Act of 1932.