Page 646

TITLE 26-INTERNAL REVENUE CODE Sept. 22, 1959, Pub. L. 86-346, title II, § 201(c)- (e), 73 Stat. 624; Dec. 30, 1969, Pub. L. 91-172, title II, § 212(c)(1), 83 Stat. 571.) AMENDMENTS 1969-Subsec. (e). Pub. L. 91-172 added subsec. (e). 1959-Pub. L. 86-346 inserted references to section 1037(a) In subsecs. (b) and c) and first two sentences of subsec. d). 1958-Subsec. d). Pub. L. 85-866 Inserted in first sentence a comma between "exchanged" and "de- creased" and the words "or decreased in the amount of loss", and substituted in the second sentence "sub- section" for "paragraph." EFFECTIVE DATE OF 1969 AMENDMENT Section 212(c)(2) of Pub. L. 91-172 provided that: "The amendment made by paragraph (1) [adding subsec. (e) of this section] shall apply to taxable years to which the Internal Revenue Code of 1954 applies." EFFECTIVE DATE OF 1959 AMENDMENT Amendment by Pub. L. 86-346, § 201(C) to (e), effec- tive for taxable years ending after Sept. 22, 1959, see section 203 of Pub. L. 86-346, set out as an Effective Date note under section 1037 of this title. EFFECTIVE DATE OF 1958 AMENDMENT Amendment of subsec. Cd) by Pub. L. 85-866 applica- ble to taxable years beginning after Dec. 31, 1953, and ending after Aug. 16, 1954, see section l(c) of Pub. L. 85-866, set out as an Effective Date of 1958 Amend- ment note under section 165 of this title. CROSS REFERENCES Stock for stock of same corporation, see section 1036 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 83, 425, 454, 1037, 1245, 1250, 1251 of this title. § 1032. Exchange of stock for property (a) Nonrecognition of gain or loss No gain or loss shall be recognized to a corpo- ration on the receipt of money or other proper- ty in exchange for stock (including treasury stock) of such corporation. (b) Basis For basis of property acquired by a corporation in cer. tain exchanges for its stock, see section 362. (Aug. 16, 1954, ch. 736, 68A Scat. 303.) § 1033. Involuntary conversions (a) General rule If property (as a result of its destruction in whole or in part, theft, seizure, or requisition or condemnation or threat or imminence thereof) is compulsorily or involuntarily converted- (1) Conversion into similar property Into property similar or related in service or use to the property so converted, no gain shall be recognized. (2) Conversion in to money Into money or into property not similar or related in service or use to the converted property, the gain (if any) shall be recognized except to the extent hereinafter provided in this paragraph: (A) Nonrecognition of gain If the taxpayer during the period speci- fied in subparagraph (B), for the purpose of replacing the property so converted, pur- chases other property similar or related in service or use to the property so converted, or purchases stock in the acquisition of con- trol of a corporation owning such other property, at the election of the taxpayer the gain shall be recognized only to the extent that the amount realized upon such conversion (regardless of whether such amount is received in one or more taxable years) exceeds the cost of such other prop- erty or such stock. Such election shall be made at such time and in such manner as the Secietary may by regulations prescribe. For purposes of this paragraph- (i) no property or stock acquired before the disposition of the converted property shall be considered to have been acquired for the purpose of replacing such convert- ed property unless held by the taxpayer on the date of such disposition; and (it) the taxpayer shall be considered to have purchased property or stock only if, but for the provisions of subsection (c) of this section, the unadjusted basis of such property or stock would be its cost within the meaning of section 1012. (B) Period within which property must be re- placed The period referred to in subparagraph (A) shall be the period beginning with the date of the disposition of the converted property, or the earliest date of the threat or imminence of requisition or condemna- tion of the converted property, whichever is the earlier, and ending- (1) 2 years after the close of the first taxable year in which any part of the gain upon the conversion is realized, or (ii) subject to such terms and conditions as may be specified by the Secretary, at the close of such later date as the Secre- tary may designate on application by the taxpayer. Such application shall be made at such time and in such manner as the Secretary may by regulations prescribe. (C) Time for assessment of deficiency attribut- able to gain upon conversion If a taxpayer has made the election pro- vided in subparagraph (A), then- (I) the statutory period for the assess- ment of any deficiency, for any taxable year in which any part of the gain on such conversion is realized, attributable to such gain shall not expire prior to the ex- piration of 3 years from the date the Sec- retary is notified by the taxpayer (in such manner as the Secretary may by regula- tions prescribe) of the replacement of the converted property or of an intention not to replace, and (ii) such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of section 6212(c) or the provisions of any other law or rule of law which would oth- erwise prevent such assessment. § 1032 Page 646