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26 U.S.C. § 1239 — Gain from sale of depreciable property between certain related taxpayers
Federal law — U.S. Code and appendices · legal_authorities
**(a) Treatment of gain as ordinary income** In the case of a sale or exchange of property, directly or indirectly, between related persons, any gain recognized to the transferor shall be treated as ordinary income if such property is, in the hands of the transferee, of a character which is subject to the allowance for depreciation provided in section 167.
**(b) Related persons** For purposes of subsection (a), the term “related persons” means—
(1) a person and all entities which are controlled entities with respect to such person,
(2) a taxpayer and any trust in which such taxpayer (or his spouse) is a beneficiary, unless such beneficiary’s interest in the trust is a remote contingent interest (within the meaning of section 318(a)(3)(B)(i)), and
(3) except in the case of a sale or exchange in satisfaction of a pecuniary bequest, an executor of an estate and a beneficiary of such estate.
**(c) Controlled entity defined**
(1) **General rule** — For purposes of this section, the term “controlled entity” means, with respect to any person—
(A) a corporation more than 50 percent of the value of the outstanding stock of which is owned (directly or indirectly) by or for such person,
(B) a partnership more than 50 percent of the capital interest or profits interest in which is owned (directly or indirectly) by or for such person, and
(C) any entity which is a related person to such person under paragraph (3), (10), (11), or (12) of section 267(b).
(2) **Constructive ownership** — For purposes of this section, ownership shall be determined in accordance with rules similar to the rules under section 267(c) (other than paragraph (3) thereof).
**(d) Employer and related employee association** For purposes of subsection (a), the term “related person” also includes—
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Source file: Laws/federal/codes/united-states-code/title-26/section-1239-gain-from-sale-of-depreciable-property-between-certain-related-taxpayers--cc2057e302.md
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Source location: Title 26, Chapter 1, § 1239; chapter-001-normal-taxes-and-surtaxes.md
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**(a) Treatment of gain as ordinary income** In the case of a sale or exchange of property, directly or indirectly, between related persons, any gain recognized to the transferor shall be treated as ordinary income if such property is, in the hands of the transferee, of a character which is subject to the allowance for depreciation provided in section 167.
**(b) Related persons** For purposes of subsection (a), the term “related persons” means—
(1) a person and all entities which are controlled entities with respect to such person,
(2) a taxpayer and any trust in which such taxpayer (or his spouse) is a beneficiary, unless such beneficiary’s interest in the trust is a remote contingent interest (within the meaning of section 318(a)(3)(B)(i)), and
(3) except in the case of a sale or exchange in satisfaction of a pecuniary bequest, an executor of an estate and a beneficiary of such estate.
**(c) Controlled entity defined**
(1) **General rule** — For purposes of this section, the term “controlled entity” means, with respect to any person—
(A) a corporation more than 50 percent of the value of the outstanding stock of which is owned (directly or indirectly) by or for such person,
(B) a partnership more than 50 percent of the capital interest or profits interest in which is owned (directly or indirectly) by or for such person, and
(C) any entity which is a related person to such person under paragraph (3), (10), (11), or (12) of section 267(b).
(2) **Constructive ownership** — For purposes of this section, ownership shall be determined in accordance with rules similar to the rules under section 267(c) (other than paragraph (3) thereof).
**(d) Employer and related employee association** For purposes of subsection (a), the term “related person” also includes—
(1) an employer and any person related to the employer (within the meaning of subsection (b)), and
(2) a welfare benefit fund (within the meaning of section 419(e)) which is controlled directly or indirectly by persons referred to in paragraph (1).
**(e) Patent applications treated as depreciable property** For purposes of this section, a patent application shall be treated as property which, in the hands of the transferee, is of a character which is subject to the allowance for depreciation provided in section 167.
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** No gain or loss shall be recognized on a transfer of property from an individual to (or in trust for the benefit of)—
(1) a spouse, or
(2) a former spouse, but only if the transfer is incident to the divorce.
**(b) Transfer treated as gift; transferee has transferor’s basis** In the case of any transfer of property described in subsection (a)—
(1) for purposes of this subtitle, the property shall be treated as acquired by the transferee by gift, and
(2) the basis of the transferee in the property shall be the adjusted basis of the transferor.
**(c) Incident to divorce** For purposes of subsection (a)(2), a transfer of property is incident to the divorce if such transfer—
(1) occurs within 1 year after the date on which the marriage ceases, or
(2) is related to the cessation of the marriage.
**(d) Special rule where spouse is nonresident alien** Subsection (a) shall not apply if the spouse (or former spouse) of the individual making the transfer is a nonresident alien.
**(e) Transfers in trust where liability exceeds basis** Subsection (a) shall not apply to the transfer of property in trust to the extent that—
(1) the sum of the amount of the liabilities assumed, plus the amount of the liabilities to which the property is subject, exceeds
(2) the total of the adjusted basis of the property transferred.
Proper adjustment shall be made under subsection (b) in the basis of the transferee in such property to take into account gain recognized by reason of the preceding sentence.
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 1041
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** Except as otherwise provided in this section, income from an installment sale shall be taken into account for purposes of this title under the installment method.
**(b) Installment sale defined** For purposes of this section—
(1) **In general** — The term “installment sale” means a disposition of property where at least 1 payment is to be received after the close of the taxable year in which the disposition occurs.
(2) **Exceptions** — The term “installment sale” does not include—
(A) *Dealer dispositions* — Any dealer disposition (as defined in subsection (l)).
(B) *Inventories of personal property* — A disposition of personal property of a kind which is required to be included in the inventory of the taxpayer if on hand at the close of the taxable year.
**(c) Installment method defined** For purposes of this section, the term “installment method” means a method under which the income recognized for any taxable year from a disposition is that proportion of the payments received in that year which the gross profit (realized or to be realized when payment is completed) bears to the total contract price.
**(d) Election out**
(1) **In general** — Subsection (a) shall not apply to any disposition if the taxpayer elects to have subsection (a) not apply to such disposition.
(2) **Time and manner for making election** — Except as otherwise provided by regulations, an election under paragraph (1) with respect to a disposition may be made only on or before the due date prescribed by law (including extensions) for filing the taxpayer’s return of the tax imposed by this chapter for the taxable year in which the disposition occurs. Such an election shall be made in the manner prescribed by regulations.
(3) **Election revocable only with consent**
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Federal law — U.S. Code and appendices · legal_authorities
**(a) In general**
(1) **Deduction for losses disallowed** — No deduction shall be allowed in respect of any loss from the sale or exchange of property, directly or indirectly, between persons specified in any of the paragraphs of subsection (b). The preceding sentence shall not apply to any loss of the distributing corporation (or the distributee) in the case of a distribution in complete liquidation.
(2) **Matching of deduction and payee income item in the case of expenses and interest** — If—
(A) by reason of the method of accounting of the person to whom the payment is to be made, the amount thereof is not (unless paid) includible in the gross income of such person, and
(B) at the close of the taxable year of the taxpayer for which (but for this paragraph) the amount would be deductible under this chapter, both the taxpayer and the person to whom the payment is to be made are persons specified in any of the paragraphs of subsection (b),
then any deduction allowable under this chapter in respect of such amount shall be allowable as of the day as of which such amount is includible in the gross income of the person to whom the payment is made (or, if later, as of the day on which it would be so allowable but for this paragraph). For purposes of this paragraph, in the case of a personal service corporation (within the meaning of section 441(i)(2)), such corporation and any employee-owner (within the meaning of section 269A(b)(2), as modified by section 441(i)(2)) shall be treated as persons specified in subsection (b).
(3) **Payments to foreign persons**
(A) *In general* — The Secretary shall by regulations apply the matching principle of paragraph (2) in cases in which the person to whom the payment is to be made is not a United States person.
(B) *Spe
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Partner not acting in capacity as partner**
(1) **In general** — If a partner engages in a transaction with a partnership other than in his capacity as a member of such partnership, the transaction shall, except as otherwise provided in this section, be considered as occurring between the partnership and one who is not a partner.
(2) **Treatment of payments to partners for property or services** — Except as provided by the Secretary—
(A) *Treatment of certain services and transfers of property* — If—
(i) a partner performs services for a partnership or transfers property to a partnership,
(ii) there is a related direct or indirect allocation and distribution to such partner, and
(iii) the performance of such services (or such transfer) and the allocation and distribution, when viewed together, are properly characterized as a transaction occurring between the partnership and a partner acting other than in his capacity as a member of the partnership,
such allocation and distribution shall be treated as a transaction described in paragraph (1).
(B) *Treatment of certain property transfers* — If—
(i) there is a direct or indirect transfer of money or other property by a partner to a partnership,
(ii) there is a related direct or indirect transfer of money or other property by the partnership to such partner (or another partner), and
(iii) the transfers described in clauses (i) and (ii), when viewed together, are properly characterized as a sale or exchange of property,
such transfers shall be treated either as a transaction described in paragraph (1) or as a transaction between 2 or more partners acting other than in their capacity as members of the partnership.
**(b) Certain sales or exchanges of property with respect to
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Federal law — U.S. Code and appendices · legal_authorities
Page 2342
TITLE 26—INTERNAL REVENUE CODE
§ 1239
transactions occurring, property acquired, or items of
income, loss, deduction, or credit taken into account
prior to Nov. 5, 1990, for purposes of determining liabil-
ity for tax for periods ending after Nov. 5, 1990, see sec-
tion 11821(b) of Pub. L. 101–508, set out as a note under
section 45K of this title.
§ 1239. Gain from sale of depreciable property be-
tween certain related taxpayers
(a) Treatment of gain as ordinary income
In the case of a sale or exchange of property,
directly or indirectly, between related persons,
any gain recognized to the transferor shall be
treated as ordinary income if such property is,
in the hands of the transferee, of a character
which is subject to the allowance for deprecia-
tion provided in section 167.
(b) Related persons
For purposes of subsection (a), the term ‘‘re-
lated persons’’ means—
(1) a person and all entities which are con-
trolled entities with respect to such person,
(2) a taxpayer and any trust in which such
taxpayer (or his spouse) is a beneficiary, un-
less such beneficiary’s interest in the trust is
a remote contingent interest (within the
meaning of section 318(a)(3)(B)(i)), and
(3) except in the case of a sale or exchange
in satisfaction of a pecuniary bequest, an ex-
ecutor of an estate and a beneficiary of such
estate.
(c) Controlled entity defined
(1) General rule
For purposes of this section, the term ‘‘con-
trolled entity’’ means, with respect to any per-
son—
(A) a corporation more than 50 percent of
the value of the outstanding stock of which
is owned (directly or indirectly) by or for
such person,
(B) a partnership more than 50 percent of
the capital interest or profits interest in
which is owned (directly or indirectly) by or
Source: Supplied 2024 U.S. Code historical extraction · 26 U.S.C. § 1239
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