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TITLE 26-INTERNAL REVENUE CODE For purposes of this paragraph, the price at which real property is sold is the gross sales price reduced by the selling commissions, legal fees, and other expenses incident to the sale of such property which are properly taken into account in determining gain or loss on such sale. (3) Gain recognized Except as provided in this section, the gain determined under this subsection resulting from a reacquisition to which subsection (a) applies shall be recognized, notwithstanding any other provision of this subtitle. (c) Basis of reacquired real property If subsection (a) applies to the reacquisition of any real property, the basis of such property upon such reacquisition shall be the adjusted basis of the indebtedness to the seller secured by such property (determined as of the date of reacquisition), increased by the sum of- (1) the amount of the gain determined under subsection (b) resulting from such reac- quisition, and (2) the amount described In subsection (b)(2)(B). If any indebtedness to the seller secured by such property is not discharged upon the reac- quisition of such property, the basis of such in- debtedness shall be zero. (d) Indebtedness treated as worthless prior to reac- quisition If, prior to a reacquisition of real property to which subsection (a) applies, the seller has treated indebtedness secured by such property as having become worthless or partially worth- less- (1) such seller shall be considered as receiv- ing, upon the reacquisition of such property, an amount equal to the amount of such in- debtedness treated by him as having become worthless, and (2) the adjusted basis of such indebtedness shall be increased (as of the date of reacquisi- tion) by an amount equal to the amount so considered as received by such seller, (e) Principal residences If- (1) subsection (a) applies to a reacquisition of real property with respect to the sale of which- (A) an election under section 121 (relating to gain from sale or exchange of residence of an individual who has attained age 65) is in effect, or (B) gain was not recognized under section 1034 (relating to sale or exchange of resi- dence); and (2) within one year after the date of the reacquisition of such property by the seller, such property is resold by him, then, under regulations prescribed by the Sec- retary, subsections (b), (c), and (d) of this sec- tion shall not apply to the reacquisition of such property and, for purposes of applying sections 121 and 1034, the resale of such property shall be treated as a part of the transaction consti- tuting the original sale of such property. (f) Reacquisitions by domestic building and loan as. sociations This section shall not apply to a reacquisition of real property by an organization described in section 593(a) (relating to domestic building and loan associations, etc.). (Added Pub. L. 88-570, § 2(a), Sept. 2, 1964, 78 Stat. 854, and amended Pub. L. 94-455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.) AMENDMENTS 1976-Subsec. (e). Pub. L. 94-455 struck out "or his delegate" following "Secretary". EFF crxv. DATE; ELECTION TO APPLY TO TAxABLE YEARs BEGINNING AFTER DEC. 31, 1957 Section 2(c) of Pub. L. 88-570 provided that: "(1) The amendments made by this section [adding this section] shall apply to taxable years beginning after the date of the enactment of this Act [Sept. 2, 19643. "(2) If the taxpayer makes an election under this paragraph, the amendments made by this section [adding this section] shall also apply to taxable years beginning after December 31, 1957, except that such amendments shall not apply with respect to any reac- quisition of real property in a taxable year for which the assessment of a deficiency, or the credit or refund of an overpayment, is prevented on the date of the en- actment of this Act [Sept. 2, 1964] by the operation of any law or rule of law. An election under this para- graph shall be made within one year after the date of the enactment of this Act [Sept. 2, 19641 and shall be made in such form and manner as the Secretary of the Treasury or his delegate shall prescribe by regula. tions. "(3) If an election is made by the taxpayer under paragraph (2), and if the assessment of a deficiency, or the credit or refund of an overpayment, for any tax- able year to which such election applies is not prevent. ed on the date of the enactment of this Act [Sept. 2, 1964] by the operation of any law or rule of law- "(A) the period within which a deficiency for such taxable year may be assessed (to the extent such de- ficiency is attributable to the application of the amendments made by this section) shall not expire prior to one year after the date of such election; and "(B) the period within which a claim for credit or refund of an overpayment for such taxable year may be filed (to the extent such overpayment is attribut- able to the application of such amendments) shall not expire prior to one year after the date of such election. No interest shall be payable with respect to any defi- ciency attributable to the application of such amend- ments, and no interest shall be allowed with respect to any credit or refund of any overpayment attributable to the application of such amendments, for any period prior to the date of the enactment of this Act (Sept. 2, 1964]. An election by a taxpayer under paragraph (2) shall be deemed a consent to the application of this paragraph." § 1039. Certain sales of low-income housing projects (a) Nonrecognition of gain If- (1) a qualified housing project is rxild or dis- posed of by the taxpayer in an approved dis- position, and (2) within the reinvestment period the tax- payer constructs, reconstructs, or acquires an- other qualified housing project, then, at the election of the taxpayer, gain from such approved disposition shall be recognized only to the extent that the net amount realized Page 653 § 1039