Treasury Regulations (26 C.F.R.)
26 CFR § 1.1245-5
Adjustments to basis.
In order to reflect gain recognized under section 1245(a)(1), the following adjustments to the basis of property shall be made:
# (a) Property acquired in like kind exchange or involuntary conversion.
(1) If property is acquired in a transaction to which section 1245(b)(4) applies, its basis shall be determined under the rules of section 1031(d) or 1033(c).
(2) The provisions of this paragraph may be illustrated by the following example:
Example:
Jones exchanges property A, which is section 1245 property with an adjusted basis of $10,000, for property B, which has a fair market value of $9,000, and property C, which has a fair market value of $3,500, in a like kind exchange as to which no gain would be recognized under section 1031(a). Upon the exchange $2,500 gain is recognized under section 1245(a)(1), since property C is not section 1245 property. See section 1245(b)(4). Under the rules of section 1031(d), the basis of the properties received in the exchange is $12,500 (i.e., the basis of property transferred, $10,000, plus the amount of gain recognized, $2,500), of which the amount allocated to property C is $3,500 (the fair market value thereof), and the residue, $9,000, is allocated to property B.
# (b) Sections 1071 and 1081 transactions.
(1) If property is acquired in a transaction to which section 1071 and paragraph (e)(1) of § 1.1245-4 (relating to limitation for section 1071 transactions, etc.) apply, its basis shall be determined in accordance with the principles of paragraph (a) of this section.
(2) If the basis of property, other than section 1245 property, is reduced pursuant to either an election under section 1071 or the application of section 1082(a)(2), then the basis of the property shall be increased to the extent of the gain recognized under section 1245(a)(1) by reason of the application of paragraph (e)(1)(iii) of § 1.1245-4.
[T.D. 6832, 30 FR 8584, July 7, 1965]
Source: view the official text
In this part (40 sections)
- 1.1238-1 · Amortization in excess of depreciation.
- 1.1239-1 · Gain from sale or exchange of depreciable property between…
- 1.1239-2 · Gain from sale or exchange of depreciable property between…
- 1.1240-1 · Capital gains treatment of certain termination payments.
- 1.1241-1 · Cancellation of lease or distributor's agreement.
- 1.1242-1 · Losses on small business investment company stock.
- 1.1243-1 · Loss of small business investment company.
- 1.1244(a)-1 · (a)-1 Loss on small business stock treated as ordinary…
- 1.1244(b)-1 · (b)-1 Annual limitation.
- 1.1244(c)-1 · (c)-1 Section 1244 stock defined.
- 1.1244(c)-2 · (c)-2 Small business corporation defined.
- 1.1244(d)-1 · (d)-1 Contributions of property having basis in excess of…
- 1.1244(d)-2 · (d)-2 Increases in basis of section 1244 stock.
- 1.1244(d)-3 · (d)-3 Stock dividend, recapitalizations, changes in name,…
- 1.1244(d)-4 · (d)-4 Net operating loss deduction.
- 1.1244(e)-1 · (e)-1 Records to be kept.
- 1.1245-1 · General rule for treatment of gain from dispositions of…
- 1.1245-2 · Definition of recomputed basis.
- 1.1245-3 · Definition of section 1245 property.
- 1.1245-4 · Exceptions and limitations.
- 1.1245-5 · Adjustments to basis.
- 1.1245-6 · Relation of section 1245 to other sections.
- 1.1248-1 · Treatment of gain from certain sales or exchanges of stock…
- 1.1248-2 · Earnings and profits attributable to a block of stock in…
- 1.1248-3 · Earnings and profits attributable to stock in complex cases.
- 1.1248-4 · Limitation on tax applicable to individuals.
- 1.1248-5 · Stock ownership requirements for less developed country…
- 1.1248-6 · Sale or exchange of stock in certain domestic corporations.
- 1.1248-7 · Taxpayer to establish earnings and profits and foreign taxes.
- 1.1248-8 · Earnings and profits attributable to stock following certain…
- 1.1248(f)-1 · (f)-1 Certain nonrecognition distributions.
- 1.1248(f)-2 · (f)-2 Exceptions for certain distributions and…
- 1.1248(f)-3 · (f)-3 Reasonable cause and effective/applicability dates.
- 1.1249-1 · Gain from certain sales or exchanges of patents, etc., to…
- 1.1250-1 · Gain from dispositions of certain depreciable realty.
- 1.1250-2 · Additional depreciation defined.
- 1.1250-3 · Exceptions and limitations.
- 1.1250-4 · Holding period.
- 1.1250-5 · Property with two or more elements.
- 1.1251-1 · General rule for treatment of gain from disposition of…