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TITLE 26-INTERNAL REVENUE CODE or process of law, any property which was secu- rity for the payment of any indebtedness. (b) Character of property For purposes of sections 166 and 1221, any property acquired in a transaction with respect to which gain or loss to an organization was not recognized by reason of subsection (a) shall be considered as property having the same charac- teristics as the indebtedness for which such property was security. Any amount realized by such organization with respect to such property shall be treated for purposes of this chapter as a payment on account of such indebtedness, and any loss with respect thereto shall be treat- ed as a bad debt to which the provisions of sec- tion 166 (relating to allowance of a deduction for bad debts) apply. (c) Basis The basis of any property to which subsec- tion (a) applies shall be the basis of the indebt- edness for which such property was security (determined as of the date of the acquisition of such property), properly increased for costs of acquisition. (d) Regulatory authority The Secretary shall prescribe such regula- tions as he may deem necessary to carry out the purposes of this section. (Added Pub. L. 87-834, § 6(b), Oct. 16, 1962, 76 Stat. 982, and amended Pub. L. 94-455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.) AMENDMENTS 1976-Subsec. (d). Pub. L. 94-455 struck out "or his delegate" following "Secretary". EnrEcTrvE DATE Section 6(g)(2) of Pub. L. 87-834 provided that: "The amendment made by :ubsection (b) [adding this sec- tion] shall apply to transactions described in section 595(a) of the Internal Revenue Code of 1954 [subsec. (a) of this section] occurring after December 31, 1962, in taxable years ending after such date." § 596. Limitation on dividends received deduction In the case of an organization to which sec- tion 593 applies and which computes additions to the reserve for losses on loans for the tax- able year under section 593(b)(2), the total amount allowed under sections 243, 244, and 245 (determined without regard to this section) for the taxable year as a deduction with respect to dividends received shall be reduced by an amount equal to the applicable percentage for such year (determined under subparagraphs (A) and (B) of section 593(b)(2)) of such total amount. (Added Pub. L. 91-172, title IV, § 434(a), Dec. 30, 1969, 83 Stat. 624.) EFFECTIvE DATE Section 434(c) of Pub. L. 91-172 provided that: "The amendments made by this section [enacting this sec- tion and adding subsec. (d) to section 246 of this title] shall apply to taxable years beginning after July 11, 1969." SECTION REFERD TO IN OTHER SECTIONS This section is referred to in section 593 of this title. [§ 601. Repealed. Pub. L. 94-455, title XIX, § 1901(a)(85), Oct. 4, 1976, 90 Stat. 1778] Section, act Aug. 16, 1954, ch. 736, 68A Stat. 206, re- lated to a special deduction for bank affiliates. E 'vEVE DATE OF REPEAL Repeal of section effective for taxable years begin. ning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as an Effective Date of 1976 Amend- ment note under section 2 of this title. Subchapter I-Natural Resources Part I. Deductions. II. Exclusions from gross income. III. Sales and exchanges. IV. Mineral production payments. V. Continental shelf areas. PART I-DEDUCTIONS Sec. 611. 612. 613. 613A. 614. (615. 616. 617. Allowance of deduction for depletion. Basis for cost depletion. Percentage depletion. Limitations on percentage depletion in case of oil and gas wells. ' Definition of property. Repealed.] Development expenditures. Deduction and recapture of certain mining exploration expenditui es. AMENDMENTS 1976-Pub. L. 94-455, title XIX, § 1901(b)(21)(H), Oct. 4, 1976. 90 Stat. 1798, struck out item 615 "Explo- ration expenditures". 1969-Pub. L. 91-172, title V, §§ 503(b), 505(c), Dec. 30, 1969, 83 Stat. 631, 634, added "Part IV. Mineral production payments" and "Part V. Continental shelf areas." Pub. L. 91-172, title V, § 504(c)(5), Dec. 30, 1969, 83 Stat. 633, substituted "Pre-1970 exploration expendi- tures" for "Exploration expenditures" in item 615 and substituted "Deduction and recapture of certain mining exploration expenditures" for "Additional ex- ploration expenditures in the case of domestic mining" in item 617. 1966-Pub. L. 89-570, § 1(d), Sept. 12, 1966, 80 Stat. 762. added item 617. § 611. Allowance of deduction for depletion (a) General rule In the case of mines, oil and gas wells, other natural deposits, and timber, there shall be al- lowed as a deduction in computing taxable income a reasonable allowance for depletion and for depreciation of improvements, accord- ing to the peculiar conditions in each case; such reasonable allowance in all cases to be made under regulations prescribed by the Secretary. For purposes of this part, thn term "mines" in- cludes deposits of waste or residue, the extrac- tion of ores or minerals from which is treated as mining under section 613(c). In any case in which it is ascertafned as a result of operations or of development work that the recoverable units are greater or less than the prior estimate thereof, then such prior estimate (but not the basis for depletion) shall be revised and the allowance under this section for subsequent 'Item 613A has been editorially inserted. Section 613A was added by Pub. L. 94-12, title V, § 501(a), Mar. 29, 1975, 89 Stat. 47, without the addition of a corre- sponding item in the analysis of sections. Page 439 §611