26 U.S.C. § 1017
If-
then such portion shall be applied in reduction of the basis of any property held by the taxpayer at the beginning of the taxable year following the taxable year in which the discharge occurs.
The amount of reduction to be applied under subsection (a) (not in excess of the portion referred to in subsection (a)), and the particular properties the bases of which are to be reduced, shall be determined under regulations prescribed by the Secretary.
In the case of a discharge to which subparagraph (A) or (B) of section 108(a)(1) applies, the reduction in basis under subsection (a) of this section shall not exceed the excess of-
The preceding sentence shall not apply to any reduction in basis by reason of an election under section 108(b)(5).
Any amount which under subsection (b)(5) or (c)(1) of section 108 is to be applied to reduce basis shall be applied only to reduce the basis of depreciable property held by the taxpayer.
For purposes of this section, the term "depreciable property" means any property of a character subject to the allowance for depreciation, but only if a basis reduction under subsection (a) will reduce the amount of depreciation or amortization which otherwise would be allowable for the period immediately following such reduction.
For purposes of this section, any interest of a partner in a partnership shall be treated as depreciable property to the extent of such partner's proportionate interest in the depreciable property held by such partnership. The preceding sentence shall apply only if there is a corresponding reduction in the partnership's basis in depreciable property with respect to such partner.
For purposes of this section, if-
then such stock shall be treated as depreciable property to the extent that such subsidiary consents to a corresponding reduction in the basis of its depreciable property.
At the election of the taxpayer, for purposes of this section, the term "depreciable property" includes any real property which is described in section 1221(a)(1).
An election under clause (i) shall be made on the taxpayer's return for the taxable year in which the discharge occurs or at such other time as may be permitted in regulations prescribed by the Secretary. Such an election, once made, may be revoked only with the consent of the Secretary.
In the case of any amount which under section 108(c)(1) is to be applied to reduce basis-
Any amount which under subsection (b)(2)(E) of section 108 is to be applied to reduce basis and which is attributable to an amount excluded under subsection (a)(1)(C) of section 108-
For purposes of this paragraph, the term "qualified property" has the meaning given to such term by section 108(g)(3)(C).
Rules similar to the rules of subparagraphs (C), (D), and (E) of paragraph (3) shall apply for purposes of this paragraph and section 108(g).
In the case of an amount excluded from gross income under section 108(a)(1)(A), no reduction in basis shall be made under this section in the basis of property which the debtor treats as exempt property under section 522 of title 11 of the United States Code.
For purposes of this title, a reduction in basis under this section shall not be treated as a disposition.
For purposes of sections 1245 and 1250-
For purposes of section 1250(b), the determination of what would have been the depreciation adjustments under the straight line method shall be made as if there had been no reduction under this section.
26 U.S.C. § 1017
EDITORIAL NOTES
AMENDMENTS1999-Subsec. (b)(3)(E)(i). Pub. L. 106-170 substituted "1221(a)(1)" for "1221(1)".1998-Subsec. (a)(2). Pub. L. 105-206 substituted "(b)(2)(E)" for "(b)(2)(D)". 1996-Subsec. (b)(4)(A). Pub. L. 104-188 substituted "subsection (b)(2)(E)" for "subsection (b)(2)(D)". 1993-Subsec. (a)(2). Pub. L. 103-66, §13150(c)(6), substituted ", (b)(5), or (c)(1)" for "or (b)(5)". Subsec. (b)(3)(A). Pub. L. 103-66, §13150(c)(7), inserted "or (c)(1)" after "subsection (b)(5)".Subsec. (b)(3)(F). Pub. L. 103-66, §13150(c)(8), added subpar. (F). 1990-Subsec. (b)(4)(C). Pub. L. 101-508 substituted "subparagraphs" for "subparagraph".1988-Subsec. (b)(4). Pub. L. 100-647 substituted "Special rules for" for "Ordering rule in the case of" in heading, and amended text generally. Prior to amendment, text read as follows: "Any amount which is excluded from gross income under section 108(a) by reason of the discharge of qualified farm indebtedness (within the meaning of section 108(g)(2)) and which under subsection (b) of section 108 is to be applied to reduce basis shall be applied-"(A) first to reduce the tax attributes described in section 108(b)(2) (other than subparagraph (D) thereof),"(B) then to reduce basis of property other than property described in subparagraph (C), and "(C) then to reduce the basis of land used or held for use in the trade or business of farming."1986-Subsec. (a)(2). Pub. L. 99-514, §822(b)(4), substituted "or (b)(5)" for ", (b)(5), or (c)(1)(A)".Subsec. (b)(3)(A). Pub. L. 99-514, §822(b)(5), struck out "or (c)(1)(A)" after "subsection (b)(5)". Subsec. (b)(4). Pub. L. 99-514, §405(b), added par. (4).1980-Pub. L. 96-589 generally revised and expanded the section to specify the amount of reduction of basis of property under different subsections of section 108 of this title and the property to which such reduction is applicable, and provided for recapture of reductions for purposes of gains from depreciable property. 1976-Pub. L. 94-455, §§1906(b)(13)(A), 1951(c)(1), substituted "section 108" for "section 108(a)" in three places and struck out "or his delegate" after "Secretary".
STATUTORY NOTES AND RELATED SUBSIDIARIES
EFFECTIVE DATE OF 1999 AMENDMENT Amendment by Pub. L. 106-170 applicable to any instrument held, acquired, or entered into, any transaction entered into, and supplies held or acquired on or after Dec. 17, 1999, see section 532(d) of Pub. L. 106-170, set out as a note under section 170 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT Amendment by Pub. L. 104-188 effective as if included in the provision of the Revenue Reconciliation Act of 1993, Pub. L. 103-66, §§13001 -13444, to which such amendment relates, see section 1703(o) of Pub. L. 104-188, set out as a note under section 39 of this title.
EFFECTIVE DATE OF 1993 AMENDMENT Amendment by Pub. L. 103-66 applicable to discharges after Dec. 31, 1992, in taxable years ending after such date, see section 13150(d) of Pub. L. 103-66, set out as a note under section 108 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100-647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which such amendment relates, see section 1019(a) of Pub. L. 100-647, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT Amendment by section 405(b) of Pub. L. 99-514 applicable to discharges of indebtedness occurring after Apr. 9, 1986, in taxable years ending after such date, see section 405(c) of Pub. L. 99-514, set out as a note under section 108 of this title.Amendment by section 822(b)(4), (5) of Pub. L. 99-514 applicable to discharges after Dec. 31, 1986, see section 822(c) of Pub. L. 99-514, set out as a note under section 108 of this title.
EFFECTIVE DATE OF 1980 AMENDMENT Amendment by Pub. L. 96-589 applicable to transactions which occur after Dec. 31, 1980, other than transactions which occur in a proceeding in a bankruptcy case or similar judicial proceeding or in a proceeding under Title 11 commencing on or after Dec. 31, 1980, with an exception permitting the debtor to make the amendment applicable to transactions occurring after Sept. 30, 1979 in a specified manner, see section 7(a) and (f) of Pub. L. 96-589, set out as a note under section 108 of this title.
- Secretary
- The term "Secretary" means the Secretary of the Treasury or his delegate.
- corporation
- The term "corporation" includes associations, joint-stock companies, and insurance companies.
- stock
- The term "stock" includes shares in an association, joint-stock company, or insurance company.
- taxable year
- The term "taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the taxable income is computed under subtitle A. "Taxable year" means, in the case of a return made for a fractional part of a year under the provisions of subtitle A or under regulations prescribed by the Secretary, the period for which such return is made.
- taxpayer
- The term "taxpayer" means any person subject to any internal revenue tax.
- trade or business
- The term "trade or business" includes the performance of the functions of a public office.
- transaction
- The term "transaction" includes a series of transactions.