Year of disposition
(5) Year of disposition is the taxable year that includes the time of disposition. (6) Year of replacement is the taxable year that includes the time of replacement. (7) Exchanged basis is determined after the depreciation deductions for the year of disposition are determined under paragraph (c)(5)(i) of this section and is the lesser of (i) The basis in the replacement MACRS property, as determined under section 1031(d) and the regulations under section 1031(d) or section 1033(b) and the regulations under section 1033(b); or (ii) The adjusted depreciable basis (as defined in 1.168(b)-1(a)(4)) of the relinquished MACRS property. (8) Excess basis is any excess of the basis in the replacement MACRS property, as determined under section 1031(d) and the regulations under section 1031(d) or section 1033(b) and the regulations under section 1033(b), over the exchanged basis as determined under paragraph (b)(7) of this section. (9) Depreciable exchanged basis is the exchanged basis as determined under paragraph (b)(7) of this section reduced by (i) The percentage of such basis attributable to the taxpayer's use of property for the taxable year other than in the taxpayer's trade or business (or for the production of income); and (ii) Any adjustments to basis provided by other provisions of the Internal Revenue Code (Code) and the regulations under the Code (including section 1016(a)(2) and (3), for example, depreciation deductions in the year of replacement allowable under section 168(k) or 1400L(b)). (10) Depreciable excess basis is the excess basis as determined under paragraph (b)(8) of this section reduced by (i) The percentage of such basis attributable to the taxpayer's use of property for the taxable year other than in the taxpayer's trade or business (or for the production of income); (ii) Any portion of the basis the taxpayer properly elects to treat as an expense under section 179; and (iii) Any adjustments to basis provided by other provisions of the Code and the regulations under the Code (including section 1016(a)(2) and (3), for example, depreciation deductions in the year of replacement allowable under section 168(k) or 1400L(b)). (11) Like-kind exchange is an exchange of property in a transaction to which section 1031(a)(1), (b), or (c) applies. (12) Involuntary conversion is a transaction described in section 1033(a)(1) or (2) that resulted in the nonrecognition of any part of the gain realized as the result of the conversion.