Example: Using the facts given in the example set forth in § 1.1071-2(c) , except that the taxpayer elects to reduce the basis of depreciable property in accordance with paragraph (a)(1)(iii) of § 1.1071-2 , the computation may be illustrated as follows:
Sale price of X Corporation stock | $100,000 |
Basis for gain or loss | 75,000 |
Realized gain (recognized except for the election under § 1.1071-1 ) | $25,000 |
Adjusted basis of other depreciable property in hands of A immediately after sale: | |
Building | 80,000 |
Transmitter | 16,000 |
Fixtures | 4,000 |
Total | 100,000 |
Computation of reduction: | |
Building (80,000/100,000) * $25,000 (gain) | 20,000 |
Transmitter (16,000/100,000) * $25,000 | 4,000 |
Fixtures (4,000/100,000) * $25,000 | 1,000 |
Total reduction | 25,000 |
New basis of assets: | |
Building ($80,000 minus $20,000) | 60,000 |
Transmitter ($16,000 minus $4,000) | 12,000 |
Fixtures ($4,000 minus $1,000) | 3,000 |
Total adjusted basis after reduction under section 1071 | 75,000 |
Realized gain upon sale of X Corporation stock | 25,000 |
Less: Amount applied as a reduction to basis of depreciable property | 25,000 |
Recognized gain for tax purposes | None |
26 C.F.R. §1.1071-3