26 U.S.C. § 1012 — Basis of property—cost

Page 2251 TITLE 26—INTERNAL REVENUE CODE § 1012 retary or his delegate may by regulations prescribe), apply to transfers before January 1, 1970, but only with respect to payments made in taxable years ending after December 31, 1969, and beginning before January 1, 1980.’’ REPEALS Pub. L. 95–600, § 702(c)(9), cited as a credit to this sec- tion, and the amendment made thereby, were repealed by Pub. L. 96–223, title IV, § 401(a), 94 Stat. 299, resulting in the text of this section reading as it read prior to en- actment of section 702(c)(9). See Effective Date of 1980 Amendment and Revival of Prior Law note set out above. [§ 1002. Repealed. Pub. L. 94–455, title XIX, § 1901(b)(28)(B)(i), Oct. 4, 1976, 90 Stat. 1799] Section, act Aug. 16, 1954, ch. 736, 68A Stat. 295, re- lated to the recognition of the entire amount of gain or loss determined under section 1001 on the sale or ex- change of property. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF REPEAL Repeal effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as an Effective Date of 1976 Amendment note under section 2 of this title. PART II—BASIS RULES OF GENERAL APPLICATION Sec. 1011. Adjusted basis for determining gain or loss. 1012. Basis of property—cost. 1013. Basis of property included in inventory. 1014. Basis of property acquired from a decedent. 1015. Basis of property acquired by gifts and trans- fers in trust. 1016. Adjustments to basis. 1017. Discharge of indebtedness. [1018. Repealed.] 1019. Property on which lessee has made improve- ments. [1020. Repealed.] 1021. Sale of annuities. [1022. Repealed.] 1023. Cross references. [1024. Renumbered.] Editorial Notes AMENDMENTS 2010—Pub. L. 111–312, title III, § 301(a), Dec. 17, 2010, 124 Stat. 3300, amended analysis to read as if amend- ment by Pub. L. 107–16, § 542(e)(6), had never been en- acted. See 2001 Amendment note below. 2001—Pub. L. 107–16, title V, § 542(e)(6), June 7, 2001, 115 Stat. 86, added item 1022. 1980—Pub. L. 96–589, § 6(h)(2), Dec. 24, 1980, 94 Stat. 3410, struck out item 1018 ‘‘Adjustments of capital structure before September 22, 1938’’. Pub. L. 96–223, title IV, § 401(a), Apr. 2, 1980, 94 Stat. 299, repealed section 2005(e)(1) of Pub. L. 94–455 and the amendment made thereby. See 1986 Amendment note below. 1978—Pub. L. 95–600, title V, § 515(5), Nov. 6, 1978, 92 Stat. 2884, substituted ‘‘December 31, 1979’’ for ‘‘Decem- ber 31, 1976’’ in item 1023. 1976—Pub. L. 94–455, title XX, § 2005(e)(1), Oct. 4, 1976, 90 Stat. 1878, which added item 1023 and redesignated former item 1023 as 1024, was repealed by Pub. L. 96–223, § 401(a). See section 401(b), (e) of Pub. L. 96–223, set out as an Effective Date of 1980 Amendments and Revival of Prior Law note under section 1023 of this title. Pub. L. 94–455, title XIX, § 1901(b)(29)(B), (30)(C), Oct. 4, 1976, 90 Stat. 1799, struck out item 1020 ‘‘Election in respect of depreciation, etc., allowed before 1952’’, and item 1022 ‘‘Increase in basis with respect to certain for- eign personal holding company stock or securities’’. 1964—Pub. L. 88–272, title II, § 225(j)(3), Feb. 26, 1964, 78 Stat. 93, added item 1022 and redesignated former item 1022 as 1023. § 1011. Adjusted basis for determining gain or loss (a) General rule The adjusted basis for determining the gain or loss from the sale or other disposition of prop- erty, whenever acquired, shall be the basis (de- termined under section 1012 or other applicable sections of this subchapter and subchapters C (relating to corporate distributions and adjust- ments), K (relating to partners and partner- ships), and P (relating to capital gains and losses)), adjusted as provided in section 1016. (b) Bargain sale to a charitable organization If a deduction is allowable under section 170 (relating to charitable contributions) by reason of a sale, then the adjusted basis for deter- mining the gain from such sale shall be that portion of the adjusted basis which bears the same ratio to the adjusted basis as the amount realized bears to the fair market value of the property. (Aug. 16, 1954, ch. 736, 68A Stat. 296; Pub. L. 91–172, title II, § 201(f), Dec. 30, 1969, 83 Stat. 564.) Editorial Notes AMENDMENTS 1969—Pub. L. 91–172 redesignated existing provisions as subsec. (a) and added subsec. (b). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1969 AMENDMENT Amendment by Pub. L. 91–172 applicable with respect to sales made after Dec. 19, 1969, see section 201(g)(6) of Pub. L. 91–172, set out as a note under section 170 of this title. § 1012. Basis of property—cost (a) In general The basis of property shall be the cost of such property, except as otherwise provided in this subchapter and subchapters C (relating to cor- porate distributions and adjustments), K (relat- ing to partners and partnerships), and P (relat- ing to capital gains and losses). (b) Special rule for apportioned real estate taxes The cost of real property shall not include any amount in respect of real property taxes which are treated under section 164(d) as imposed on the taxpayer. (c) Determinations by account (1) In general In the case of the sale, exchange, or other disposition of a specified security on or after the applicable date, the conventions pre- scribed by regulations under this section shall be applied on an account by account basis. (2) Application to certain regulated investment companies (A) In general Except as provided in subparagraph (B), any stock for which an average basis method Page 2252 TITLE 26—INTERNAL REVENUE CODE § 1013 is permissible under this section which is ac- quired before January 1, 2012, shall be treat- ed as a separate account from any such stock acquired on or after such date. (B) Election for treatment as single account If a regulated investment company de- scribed in subparagraph (A) elects to have this subparagraph apply with respect to one or more of its stockholders— (i) subparagraph (A) shall not apply with respect to any stock in such regulated in- vestment company held by such stock- holders, and (ii) all stock in such regulated invest- ment company which is held by such stockholders shall be treated as covered securities described in section 6045(g)(3) without regard to the date of the acquisi- tion of such stock. A rule similar to the rule of the preceding sentence shall apply with respect to a broker holding such stock as a nominee. (3) Definitions For purposes of this section, the terms ‘‘specified security’’ and ‘‘applicable date’’ shall have the meaning given such terms in section 6045(g). (d) Average basis for stock acquired pursuant to a dividend reinvestment plan (1) In general In the case of any stock acquired after De- cember 31, 2011, in connection with a dividend reinvestment plan, the basis of such stock while held as part of such plan shall be deter- mined using one of the methods which may be used for determining the basis of stock in a regulated investment company. (2) Treatment after transfer In the case of the transfer to another ac- count of stock to which paragraph (1) applies, such stock shall have a cost basis in such other account equal to its basis in the divi- dend reinvestment plan immediately before such transfer (properly adjusted for any fees or other charges taken into account in connec- tion with such transfer). (3) Separate accounts; election for treatment as single account (A) In general Rules similar to the rules of subsection (c)(2) shall apply for purposes of this sub- section. (B) Average basis method Notwithstanding paragraph (1), in the case of an election under rules similar to the rules of subsection (c)(2)(B) with respect to stock held in connection with a dividend re- investment plan, the average basis method is permissible with respect to all such stock without regard to the date of the acquisition of such stock. (4) Dividend reinvestment plan For purposes of this subsection— (A) In general The term ‘‘dividend reinvestment plan’’ means any arrangement under which divi- dends on any stock are reinvested in stock identical to the stock with respect to which the dividends are paid. (B) Initial stock acquisition treated as ac- quired in connection with plan Stock shall be treated as acquired in con- nection with a dividend reinvestment plan if such stock is acquired pursuant to such plan or if the dividends paid on such stock are subject to such plan. (Aug. 16, 1954, ch. 736, 68A Stat. 296; Pub. L. 110–343, div. B, title IV, § 403(b), Oct. 3, 2008, 122 Stat. 3857; Pub. L. 113–295, div. A, title II, §§ 210(f)(1)–(3), 220(n), Dec. 19, 2014, 128 Stat. 4031, 4032, 4036.) Editorial Notes AMENDMENTS 2014—Subsec. (c)(2). Pub. L. 113–295, § 210(f)(1)(A), sub- stituted ‘‘regulated investment companies’’ for ‘‘funds’’ in heading. Subsec. (c)(2)(A). Pub. L. 113–295, § 220(n), substituted ‘‘this section’’ for ‘‘section 1012’’. Subsec. (c)(2)(B). Pub. L. 113–295, § 210(f)(1)(C), sub- stituted ‘‘regulated investment company’’ for ‘‘fund’’ wherever appearing. Pub. L. 113–295, § 210(f)(1)(B), struck out ‘‘fund’’ after ‘‘Election’’ in heading. Subsec. (d)(1). Pub. L. 113–295, § 210(f)(2), substituted ‘‘December 31, 2011’’ for ‘‘December 31, 2010’’ and ‘‘a reg- ulated investment company’’ for ‘‘an open-end fund’’. Subsec. (d)(3). Pub. L. 113–295, § 210(f)(3), amended par. (3) generally. Prior to amendment, text read as follows: ‘‘Rules similar to the rules of subsection (c)(2) shall apply for purposes of this subsection.’’ 2008—Pub. L. 110–343 designated first sentence as sub- sec. (a) and second sentence as subsec. (b), inserted headings, and added subsecs. (c) and (d). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2014 AMENDMENT Amendment by section 210(f)(1)–(3) of Pub. L. 113–295 effective as if included in the provisions of the Energy Improvement and Extension Act of 2008, Pub. L. 110–343, div. B, to which such amendment relates, see section 210(h) of Pub. L. 113–295, set out as a note under section 45 of this title. EFFECTIVE DATE OF 2008 AMENDMENT Pub. L. 110–343, div. B, title IV, § 403(e), Oct. 3, 2008, 122 Stat. 3860, provided that: ‘‘(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section [enacting sections 6045A and 6045B of this title and amending this section and sections 6045 and 6724 of this title] shall take effect on January 1, 2011. ‘‘(2) EXTENSION OF PERIOD FOR STATEMENTS SENT TO CUSTOMERS.—The amendments made by subsection (a)(3) [amending section 6045 of this title] shall apply to statements required to be furnished after December 31, 2008.’’ § 1013. Basis of property included in inventory If the property should have been included in the last inventory, the basis shall be the last in- ventory value thereof. (Aug. 16, 1954, ch. 736, 68A Stat. 296.) § 1014. Basis of property acquired from a dece- dent (a) In general Except as otherwise provided in this section, the basis of property in the hands of a person ac-