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TITLE 26-INTERNAL REVENUE CODE ration. In the case of a chain of corporations connected by the 5-percent ownership re- quirements of this paragraph, rules similar to the rules of the two preceding sentences shall be applied. (7) Adjustments to basis The Secretary shall prescribe such regula- tions as he may deem necessary to provide for adjustments to the basis of property to re- flect gain recognized under paragraph (2). (Aug. 16, 1954, ch. 736, 68A Stat. 107; Sept. 2, 1958, Pub. L. 85-866, title I, § 20(a), 72 Stat. 1615; Oct. 16, 1962, Pub. L. 87-834, § 13(f)(4), 76 Stat. 1035; Feb. 26, 1964, Pub. L. 88-272, title II, § 231(b)(4), 78 Stat. 105; Aug. 22, 1964, Pub. L. 88-484, § 1(a), 78 Stat. 596; Sept. 12, 1966, Pub. L. 89-570, § 1(b)(4), 80 Stat. 762; Dec. 30, 1969, Pub. L. 91-172, title II, § 211(b)(4), title V, § 514(b)(l), 83 Stat. 570, 643; Oct. 4, 1976, Pub. L. 94-465, title II, § 205(c)(2), title XIV, § 1402(b)(1)(B), title XIX, §§ 1901(b)(3)(A), (I), 1906(b)(13)(A), 90 Stat. 1535, 1731, 1732, 1792, 1793, 1834.) TAXABLE YEARs AFTER 1977 Subsec. (a) of this section amended by Pub. L. 94-455, title XIV, § 1402(b)(2), Oct. 4, 1976, 90 Stat. 1732, effective for taxable years beginning after Dec. 31, 1977, by sub- stituting "1 year"for "9 months'" AMENDMENTS 1976-Subsec. (a). Pub. L. 94-455, §§ 1402(b)(1)(B), 1901(b)(3)(I), in provisions following par. (3), provided that "6 months" would be changed to "9 months" for taxable years beginning in 1977 and substituted "ordi- nary income" for "gain from the sale or exchange of property which is not a capital asset". Subsec. (e)(1)(C). Pub. L. 94-455, § 1901(b)(3)(A), substituted "ordinary income" for "gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231(b)". Subsec. (e)(5)(A). Pub. L. 94-455, § 1901(b)(3)(A), substituted "ordinary income" for "gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231(b)" wher- ever appearing. Subsec. (e)(6)(D). Pub. L. 94-455, § 1901(b)(3)(A), substituted "ordinary income" for "gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231(b)". Subsec. (e)(12). Pub. L. 94-455, §§ 205(c)(2), 1901(b)(3)(A), substituted "ordinary income" for "gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231(b)" and "1252(a), and 1254(a)" for "and 1252(a)". Subsecs. (f)(1), (3), (7). Pub. L. 94-455, § 1906(b)(13)CA), struck out "or his delegate" following "Secretary". 1969-ubsec. (e)(5)(A1iv). Pub. L. 91-172, § 514(b)(1), added reference to a letter or memoran- dum. Subsec. (e)(12). Pub. L. 91-172, § 211(b)(4), substitut- ed "1250(a), 1251(c), and 1252(a)" for "and 1250(a)". 1966-Subsec. (e)(12). Pub. L. 89-570 included refer- ence to section 617(d)(1). 1964-Subsec. (a). Pub. L. 88-484 substituted "except as otherwise provided in this section" for "except as provided in subsection (d)". Subsec. (e)(12). Pub. L. 88-272 inserted the reference to section 1250(a). Subsec. (f). Pub. L. 88-484 added subsection (f). 1962-Subsec. (e)(12). Pub. L. 87-834 added subsec. (e)(12). 1958-Subsec. (e). Pub. L. 85-866 added subsec. (e). EFFECTIVE DATE OF 1976 AMENDMENT Section 1402(b)(1) of Pub. L. 94-455 provided in part that the substitution of "9 months" for "6 months" in subsec. (a) of this section by section 1402(b)(1)(B) of Pub. L. 94-455 is effective with respect to taxable years beginning in 1977. Amendment of subsecs. (a) and (e) by section 1901(b)(3) of Pub. L. 94-455 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. Amendment of subsec. (e)(12) by section 205(c)(2) of Pub. L. 94-455 effective for taxable years ending after Dec. 31, 1975, see section 205(e) of Pub. L. 94-455, set out as an Effective Date note under section 1254 of this title. EFFECTIVE DATE OF 1969 AMENDMENT Amendment of subsec. (e)(5)(A)(iv) by section 514(b)(1) of Pub. L. 91-172 applicable to sales and other dispositions occurring after July 25, 1969, see section 514(c) of Pub. L. 91-172, set out as an Effective Date of 1969 Amendment note under section 1221 of this title. Amendment of subsec. (e)(12) by section 211(b)(4) of Pub. L. 91-172 applicable to taxable years beginning after Dec. 31, 1969, see section 211(c) of Pub. L. 91-172, set out as an Effective Date note under section 1251 of this title. EFFECTIVE DATE OF 1966 AMENDMENT Amendmei.t by Pub. L. 89- 570 applicable to taxable years ending after Sept. 12, 1966, but only in respect of expenditures paid or incurred after such date, see section 3 of Pub. L. 89-570, set out as an Effective Date note under section 617 of this title. EFFECTIVE DATE OF 1964 AMENDMENT Section 2 of Pub. L. 88-484 provided that: "The amendments made by the first section of this Act [to sections 301, 312, 341, and 453 of this title] shall apply with respect to transactions after the date of the en- actment of this Act (Aug. 22, 1964] in taxable years ending after such date." Amendment of section by Pub. L. 88-272 applicable to dispositions after Dec. 31, 1963, in taxable years ending after such date, see section 231(c) of Pub. L. 88-272, set out as an Effective Date note under section 1250 of this title. EFFEcTIvE DATE OF 1962 AMENDMENT Subsec. (e)(12) of this section applicable to taxable years beginning after Dec. 31, 1962, see section 13(g) of Pub. L. 87-834, set out as an Effective Date note under section 1245 of this title EFFECTIVE DATE OF 1958 AMENDMENT Section 20(b) of Pub. L. 85-866 provided that: "The amendment made by subsection (a) (which added subsec. (e) of this section] shall apply with respect to taxable sears beginning after December 51, 1957, but onl' with respect to sales, exchanges, and distribu- tions after the date of the enactment of this Act [S,.pt. 2. 1958]." CRoss REFERENCES Election as to recognition of gain in liquidations other than distributions of property of a collapsible corporation to which subsection (a) of this section ap- plies, see section 333 of this title. Gain or loss on sales or exchanges In connettion with liquidations, section as not applicable to any sale or exchange made by a collapsible corporation, see sec- tion 337 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 301, 312, 333, 337, 453 of this title. Page 258 § 341