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TITLE 26-INTERNAL REVENUE CODE (A) the sum of- (I) the aggregate amount which may be offered under the plan, plus (ii) the aggregate amount of money and other property (taken into account in an amount, as of the time received by the corporation, equal to the adjusted basis to the corporation of such property for de- termining gain, reduced by any liabilities to which the property was subject or which were assumed by the corporation at such time) received by the corporation after June 30, 1958, for stock, as a contri- bution to capital, and as paid-in surplus, does not exceed $500,000; and (B) the sum of- (i) the aggregate amount which may be offered under the plan, plus (ii) the equity capital of the corporation (determined on the date of the adoption of the plan), does not exceed $1,000,000. For purposes of subparagraph (B), the equity capital of a corporation is the sum of its money and other property (in an amount equal to the adjusted basis of such property for determining gain), less the amount of its indebtedness (other than indebtedness to shareholders). (d) Special rules (1) Limitations on amount of ordinary loss (A) Contributions of property having basis in excess of value If- (i) section 1244 stock was issued in ex- change for property, (ii) the basis of such stock in the hands of the taxpayer is determined by refer- ence to the basis in his hands of such property, and (fit) the adjusted basis (for determining loss) of such property immediately before the exchange exceeded its fair market value at such time, then in computing the amount of the loss on such stock for purposes of this section the basis of such stock shall be reduced by an amount equal to the excess described in clause (iii). (B) Increases in basis In computing the amount of the loss on stock for purposes of this section, any in- crease in the basis of such stock (through contributions to the capital of the corpora- tion, or otherwise) shall be treated as allo- cable to stock which is not section 1244 stock. (2) Recapitalizations, changes in name, etc. To the extent provided in regulations pre- scribed by the Secretary common stock in a corporation, the basis of which (in the hands of a taxpayer) is determined in whole or in part by reference to the basis in his hands of stock in such corporation which meets the re- quirements of subsection (c)(1) (other than subparagraph (E) thereof), or which is re- ceived in a reorganization described in section 368(a)(1)(F) in exchange for stock which meets such requirements, shall be treated as meeting such requirements. For purposes of paragraphs (1)(E) and (2)(A) of subsection (c), a successor corporation in a reorganiza- tion described in section 368(a)(1)(F) shall be treated as the same corporation as its prede- cessor. (3) Relationship to net operating loss deduction For purposes of section 172 (relating to the net operating loss deduction), any amount of loss treated by reason of this section as an or- dinary loss shall be treated as attributable to a trade or business of the taxpayer. (4) Individual defined For purposes of this section, the term "indi- vidual" does not include a trust or estate. (e) Regulations The Secretary shall prescribe such regula- tions as may be necessary to carry out the pur- poses of this section. (Added Pub. L. 85-866, title II, § 202(b), Sept. 2, 1958, 72 Stat. 1676, and amended Pub. L. 94- 455, title XIX, §§ 1901(b)(1)(W), (3)(G), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1792, 1793, 1834.) AMENDMENTS 1976-Subsecs. (a), (b). Pub. L. 94-455, § 1901(b)(3)(G), substituted "an ordinary loss" for "a loss from the sale or exchange of an asset which is not a capital asset". Subsec. (c)(1)(E). Pub. L. 94-455, § 1901(b)(1)(W), struck out reference to section 242 of this title. Subsec. (d)(3). Pub. L. 94-455, § 1901(b)(3)(G), substi- tuted "an ordinary loss" for "a loss from the sale or exchange of an asset which is not a capital asset". EFFECTIVE DATE OF 1976 AMENDMENT Amendment of subsecs. (a), (b), (c)(1)(E), (d)(3) by section 1901(b)(1)(W), (3)(G) of Pub. L. 94-455 effec- tive for taxable years beginning after Dec. 31, 1976, s~e section 1901(d) of Pub. L. 94-455, set out as an Effec- tive Date of 1976 Amendment note under section 2 of this title. CROSS REFERENCES Section as part of the Small Business Tax Revision Act of 1958, see section 201 of Pub. L. 85-866, set out as a note under section 165 of this title. § 1245. Gain from dispositions of certain depreciable property (a) General rule (1) Ordinary income Except as otherwise provided in this sec- tion, if section 1245 property is disposed of during a taxable year beginning after Decem- ber 31, 1962, the amount by which the lower of- (A) the recomputed basis of the property, or (B)(i) in the case of a sale, exchange, or involuntary conversion, the amount real- ized, or (ii) in the case of any other disposition, the fair market value of such property, exceeds the adjusted basis of such property shall be treated as ordinary income. Such gain shall be recognized notwithstanding any other provision of this subtitle. Page 695 § 1245