If any section
1254 property is disposed of, the lesser of—
(A)the aggregate amount of—
(i)expenditures which have been deducted by the taxpayer or any person under section
617 with respect to such property and which, but for such deduction, would have been included in the adjusted basis of such property, and
(ii)the deductions for depletion under section
611 which reduced the adjusted basis of such property, or
(B)the excess of—
(i)in the case of—
(I)a sale, exchange, or involuntary conversion, the amount realized, or
(II)in the case of any other disposition, the fair market value of such property, over
(ii)the adjusted basis of such property,
shall be treated as gain which is ordinary income. Such gain shall be recognized notwithstanding any other provision of this subtitle.
(2) Disposition of portion of property
For purposes of paragraph (1)—
(A)In the case of the disposition of a portion of section
1254 property (other than an undivided interest), the entire amount of the aggregate expenditures or deductions described in paragraph (1)(A) with respect to such property shall be treated as allocable to such portion to the extent of the amount of the gain to which paragraph (1) applies.
(B)In the case of the disposition of an undivided interest in a section
1254 property (or a portion thereof), a proportionate part of the expenditures or deductions described in paragraph (1)(A) with respect to such property shall be treated as allocable to such undivided interest to the extent of the amount of the gain to which paragraph (1) applies.
This paragraph shall not apply to any expenditures to the extent the taxpayer establishes to the satisfaction of the Secretary that such expenditures do not relate to the portion (or interest therein) disposed of.
The term “section
1254 property” means any property (within the meaning of section
(A)any expenditures described in paragraph (1)(A) are properly chargeable to such property, or
(B)the adjusted basis of such property includes adjustments for deductions for depletion under section
(4) Adjustment for amounts included in gross income under section
The amount of the expenditures referred to in paragraph (1)(A)(i) shall be properly adjusted for amounts included in gross income under section
(b) Special rules under regulations
Under regulations prescribed by the Secretary—
(1)rules similar to the rule of subsection (g) ofsection
617 and to the rules of subsections (b) and (c) ofsection
1245 shall be applied for purposes of this section; and
(2)in the case of the sale or exchange of stock in an S corporation, rules similar to the rules of section
751 shall be applied to that portion of the excess of the amount realized over the adjusted basis of the stock which is attributable to expenditures referred to in subsection (a)(1)(A) of this section.
1986—Pub. L. 99–514amended section generally, substituting “geothermal, or other mineral properties” for “or geothermal property” in section catchline, revising and restating subsec. (a), pars. (1) to (4) as pars. (1) to (3), and reenacting subsec. (b) without change except for substituting “rule of subsection (g)” for “rules of subsection (g)” in par. (1).
1982—Subsec. (b)(2). Pub. L. 97–354substituted “an S corporation” for “an electing small business corporation (as defined in section
1978—Pub. L. 95–618, § 402(c)(3), substituted “oil, gas, or geothermal” for “oil or gas” in section catchline.
Subsec. (a)(1), (2). Pub. L. 95–618, § 402(c)(1), substituted “oil, gas, or geothermal property” for “oil or gas property” wherever appearing.
Subsec. (a)(3). Pub. L. 95–618, § 402(c)(2), substituted “Oil, gas, or geothermal” for “Oil or gas” in heading and in text substituted “The term ‘oil, gas, or geothermal property’ means” for “The term ‘oil or gas property’ means”.
Effective Date of 1988 Amendment
Amendment by Pub. L. 100–647effective, 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) ofPub. L. 100–647, set out as a note under section
1 of this title.
“(1) In general.—The amendments made by this section [amending this section and section
617 of this title] shall apply to any disposition of property which is placed in service by the taxpayer after December 31, 1986.
“(2) Exception for binding contracts.—The amendments made by this section shall not apply to any disposition of property placed in service after December 31, 1986, if such property was acquired pursuant to a written contract which was entered into before September 26, 1985, and which was binding at all times thereafter.”
Effective Date of 1982 Amendment
Amendment by Pub. L. 97–354applicable to taxable years beginning after Dec. 31, 1982, see section 6(a) ofPub. L. 97–354, set out as an Effective Date note under section
1361 of this title.
Effective Date of 1978 Amendment
Amendment by Pub. L. 95–618applicable with respect to wells commenced on or after Oct. 1, 1978, in taxable years ending on or after such date, see section 402(e) ofPub. L. 95–618, set out as a note under section
263 of this title.
Pub. L. 94–455, title II, § 205(e),Oct. 4, 1976, 90 Stat. 1535, provided that: “The amendments made by this section [enacting this section and amending sections
751 of this title] shall apply with respect to taxable years ending after December 31, 1975.”
The table below lists the classification updates, since Jan. 3, 2012, for this section. Updates to a broader range of sections may be found at the update page for containing chapter, title, etc.
The most recent Classification Table update that we have noticed was Tuesday, August 13, 2013
An empty table indicates that we see no relevant changes listed in the classification tables. If you suspect that our system may be missing something, please double-check with the Office of the Law Revision Counsel.
Description of Change
Statutes at Large
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