26 USC § 1016 - Adjustments to basis

# § 1016. Adjustments to basis

**(a)** **General rule** Proper adjustment in respect of the property shall in all cases be made—

**(1)** for expenditures, receipts, losses, or other items, properly chargeable to capital account, but no such adjustment shall be made—

**(A)** for—

for which deductions have been taken by the taxpayer in determining taxable income for the taxable year or prior taxable years; or

**(i)** taxes or other carrying charges described in section 266; or

**(ii)** expenditures described in section 173 (relating to circulation expenditures),

**(B)** for mortality, expense, or other reasonable charges incurred under an annuity or life insurance contract;

**(2)** in respect of any period since February 28, 1913, for exhaustion, wear and tear, obsolescence, amortization, and depletion, to the extent of the amount—

but not less than the amount allowable under this subtitle or prior income tax laws. Where no method has been adopted under section 167 (relating to depreciation deduction), the amount allowable shall be determined under the straight line method. Subparagraph (B) of this paragraph shall not apply in respect of any period since February 28, 1913, and before January 1, 1952, unless an election has been made under section 1020 (as in effect before the date of the enactment of the Tax Reform Act of 1976). Where for any taxable year before the taxable year 1932 the depletion allowance was based on discovery value or a percentage of income, then the adjustment for depletion for such year shall be based on the depletion which would have been allowable for such year if computed without reference to discovery value or a percentage of income;

**(A)** allowed as deductions in computing taxable income under this subtitle or prior income tax laws, and

**(B)** resulting (by reason of the deductions so allowed) in a reduction for any taxable year of the taxpayer’s taxes under this subtitle (other than chapter 2, relating to tax on self-employment income), or prior income, war-profits, or excess-profits tax laws,

**(3)** in respect of any period—

for exhaustion, wear and tear, obsolescence, amortization, and depletion, to the extent sustained;

**(A)** before March 1, 1913,

**(B)** since February 28, 1913, during which such property was held by a person or an organization not subject to income taxation under this chapter or prior income tax laws,

**(C)** since February 28, 1913, and before January 1, 1958, during which such property was held by a person subject to tax under part I of subchapter L (or the corresponding provisions of prior income tax laws), to the extent that paragraph (2) does not apply, and

**(D)** since February 28, 1913, during which such property was held by a person subject to tax under part II of subchapter L as in effect prior to its repeal by the Tax Reform Act of 1986 (or the corresponding provisions of prior income tax laws), to the extent that paragraph (2) does not apply,

**(4)** in the case of stock (to the extent not provided for in the foregoing paragraphs) for the amount of distributions previously made which, under the law applicable to the year in which the distribution was made, either were tax-free or were applicable in reduction of basis (not including distributions made by a corporation which was classified as a personal service corporation under the provisions of the Revenue Act of 1918 (40 Stat. 1057), or the Revenue Act of 1921 (42 Stat. 227), out of its earnings or profits which were taxable in accordance with the provisions of section 218 of the Revenue Act of 1918 or 1921);

**(5)** in the case of any bond (as defined in section 171(d)) the interest on which is wholly exempt from the tax imposed by this subtitle, to the extent of the amortizable bond premium disallowable as a deduction pursuant to section 171(a)(2), and in the case of any other bond (as defined in section 171(d)) to the extent of the deductions allowable pursuant to section 171(a)(1) (or the amount applied to reduce interest payments under section 171(e)(2)) with respect thereto;

**(6)** in the case of any municipal bond (as defined in section 75(b)), to the extent provided in section 75(a)(2);

**(7)** in the case of a residence the acquisition of which resulted, under section 1034 (as in effect on the day before the date of the enactment of the Taxpayer Relief Act of 1997), in the nonrecognition of any part of the gain realized on the sale, exchange, or involuntary conversion of another residence, to the extent provided in section 1034(e) (as so in effect);

**(8)** in the case of property pledged to the Commodity Credit Corporation, to the extent of the amount received as a loan from the Commodity Credit Corporation and treated by the taxpayer as income for the year in which received pursuant to section 77, and to the extent of any deficiency on such loan with respect to which the taxpayer has been relieved from liability;

**(9)** for amounts allowed as deductions as deferred expenses under section 616(b) (relating to certain expenditures in the development of mines) and resulting in a reduction of the taxpayer’s taxes under this subtitle, but not less than the amounts allowable under such section for the taxable year and prior years;

**[(10)** Repealed. Pub. L. 94–455, title XIX, § 1901(b)(21)(G), Oct. 4, 1976, 90 Stat. 1798]

**(11)** for deductions to the extent disallowed under section 268 (relating to sale of land with unharvested crops), notwithstanding the provisions of any other paragraph of this subsection;

**[(12)** Repealed. Pub. L. 113–295, div. A, title II, § 221(a)(75), Dec. 19, 2014, 128 Stat. 4049]

**[(13)** Repealed. Pub. L. 108–357, title IV, § 413(c)(19), Oct. 22, 2004, 118 Stat. 1509]

**(14)** for amounts allowed as deductions under section 174 or 174A(c) and resulting in a reduction of the taxpayers’ taxes under this subtitle, but not less than the amounts allowable under such section for the taxable year and prior years;

**(15)** for deductions to the extent disallowed under section 272 (relating to disposal of coal or domestic iron ore), notwithstanding the provisions of any other paragraph of this subsection;

**(16)** in the case of any evidence of indebtedness referred to in section 811(b) (relating to amortization of premium and accrual of discount in the case of life insurance companies), to the extent of the adjustments required under section 811(b) (or the corresponding provisions of prior income tax laws) for the taxable year and all prior taxable years;

**(17)** to the extent provided in section 1367 in the case of stock of, and indebtedness owed to, shareholders of an S corporation;

**(18)** to the extent provided in section 961 in the case of stock in controlled foreign corporations (or foreign corporations which were controlled foreign corporations) and of property by reason of which a person is considered as owning such stock;

**(19)** to the extent provided in section 50(c), in the case of expenditures with respect to which a credit has been allowed under section 38;

**(20)** for amounts allowed as deductions under section 59(e) (relating to optional 10-year writeoff of certain tax preferences);

**(21)** to the extent provided in section 1059 (relating to reduction in basis for extraordinary dividends);

**1** in the case of qualified replacement property the acquisition of which resulted under section 1042 in the nonrecognition of any part of the gain realized on the sale or exchange of any property, to the extent provided in section 1042(d),[^1]

So in original. The comma probably should be a semicolon.

**(23)** in the case of property the acquisition of which resulted under section 1043, 1045, or 1397B in the nonrecognition of any part of the gain realized on the sale of other property, to the extent provided in section 1043(c), 1045(b)(3), or 1397B(b)(4), as the case may be,<sup>1</sup>

**[(24)** Repealed. Pub. L. 113–295, div. A, title II, § 221(a)(34)(G), Dec. 19, 2014, 128 Stat. 4042]

**[(25)** Repealed. Pub. L. 113–295, div. A, title II, § 221(a)(2)(D), Dec. 19, 2014, 128 Stat. 4037]

**(26)** to the extent provided in sections 23(g) and 137(e),<sup>1</sup>

**[(27)** Repealed. Pub. L. 115–141, div. U, title IV, § 401(d)(4)(B)(iv), Mar. 23, 2018, 132 Stat. 1209]

**(28)** in the case of a facility with respect to which a credit was allowed under section 45F, to the extent provided in section 45F(f)(1),<sup>1</sup>

**(29)** in the case of railroad track with respect to which a credit was allowed under section 45G, to the extent provided in section 45G(e)(3),<sup>1</sup>

**(30)** to the extent provided in section 179B(c),<sup>1</sup>

**(31)** to the extent provided in section 179D(e),<sup>1</sup>

**(32)** to the extent provided in section 45L(e), in the case of amounts with respect to which a credit has been allowed under section 45L,<sup>1</sup>

**(33)** to the extent provided in section 25C(g), in the case of amounts with respect to which a credit has been allowed under section 25C,<sup>1</sup>

**(34)** to the extent provided in section 25D(f), in the case of amounts with respect to which a credit has been allowed under section 25D,<sup>1</sup>

**(35)** to the extent provided in section 30B(h)(4),<sup>1</sup>

**(36)** to the extent provided in section 30C(e)(1),<sup>1</sup>

**(37)** to the extent provided in section 30D(f)(1),<sup>1</sup> and

**(38)** to the extent provided in subsections (b)(2) and (c) of section 1400Z–2.

**(b)** **Substituted basis** Whenever it appears that the basis of property in the hands of the taxpayer is a substituted basis, then the adjustments provided in subsection (a) shall be made after first making in respect of such substituted basis proper adjustments of a similar nature in respect of the period during which the property was held by the transferor, donor, or grantor, or during which the other property was held by the person for whom the basis is to be determined. A similar rule shall be applied in the case of a series of substituted bases.

**(c)** **Increase in basis of property on which additional estate tax is imposed**

**(1)** **Tax imposed with respect to entire interest** If an additional estate tax is imposed under section 2032A(c)(1) with respect to any interest in property and the qualified heir makes an election under this subsection with respect to the imposition of such tax, the adjusted basis of such interest shall be increased by an amount equal to the excess of—

**(A)** the fair market value of such interest on the date of the decedent’s death (or the alternate valuation date under section 2032, if the executor of the decedent’s estate elected the application of such section), over

**(B)** the value of such interest determined under section 2032A(a).

**(2)** **Partial dispositions**

**(A)** **In general** In the case of any partial disposition for which an election under this subsection is made, the increase in basis under paragraph (1) shall be an amount—

**(i)** which bears the same ratio to the increase which would be determined under paragraph (1) (without regard to this paragraph) with respect to the entire interest, as

**(ii)** the amount of the tax imposed under section 2032A(c)(1) with respect to such disposition bears to the adjusted tax difference attributable to the entire interest (as determined under section 2032A(c)(2)(B)).

**(B)** **Partial disposition** For purposes of subparagraph (A), the term “partial disposition” means any disposition or cessation to which subsection (c)(2)(D), (h)(1)(B), or (i)(1)(B) of section 2032A applies.

**(3)** **Time adjustment made** Any increase in basis under this subsection shall be deemed to have occurred immediately before the disposition or cessation resulting in the imposition of the tax under section 2032A(c)(1).

**(4)** **Special rule in the case of substituted property** If the tax under section 2032A(c)(1) is imposed with respect to qualified replacement property (as defined in section 2032A(h)(3)(B)) or qualified exchange property (as defined in section 2032A(i)(3)), the increase in basis under paragraph (1) shall be made by reference to the property involuntarily converted or exchanged (as the case may be).

**(5)** **Election**

**(A)** **In general** An election under this subsection shall be made at such time and in such manner as the Secretary shall by regulations prescribe. Such an election, once made, shall be irrevocable.

**(B)** **Interest on recaptured amount** If an election is made under this subsection with respect to any additional estate tax imposed under section 2032A(c)(1), for purposes of section 6601 (relating to interest on underpayments), the last date prescribed for payment of such tax shall be deemed to be the last date prescribed for payment of the tax imposed by section 2001 with respect to the estate of the decedent (as determined for purposes of section 6601).

**(d)** **Reduction in basis of automobile on which gas guzzler tax was imposed** If—

the basis of such automobile shall be reduced by the amount of the tax imposed by section 4064 with respect to such automobile. In the case of importation, if the date of entry or withdrawal from warehouse for consumption is later than the date of the first sale for ultimate use, such later date shall be substituted for the date of such first sale in the preceding sentence.

**(1)** the taxpayer acquires any automobile with respect to which a tax was imposed by section 4064, and

**(2)** the use of such automobile by the taxpayer begins not more than 1 year after the date of the first sale for ultimate use of such automobile,

**(e)** **Cross reference** For treatment of separate mineral interests as one property, see section 614.

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**Source Credit**: (Aug. 16, 1954, ch. 736, 68A Stat. 299; June 29, 1956, ch. 464, § 4(c), 70 Stat. 407; Pub. L. 85–866, title I, §§ 2(b), 64(d)(2), Sept. 2, 1958, 72 Stat. 1607, 1656; Pub. L. 86–69, § 3(d), June 25, 1959, 73 Stat. 139; Pub. L. 87–834, §§ 2(f), 8(g)(2), 12(b)(4), Oct. 16, 1962, 76 Stat. 972, 998, 1031; Pub. L. 88–272, title II, §§ 203(a)(3)(C), 225(j)(2), 227(b)(5), Feb. 26, 1964, 78 Stat. 34, 93, 98; Pub. L. 91–172, title II, § 231(c)(3), title V, §§ 504(c)(4), 516(c)(2)(B), Dec. 30, 1969, 83 Stat. 580, 633, 648; Pub. L. 94–455, title XIX, § 1901(a)(123), (b)(1)(F)(ii), (21)(G), (29)(A), (30)(A), title XX, § 2005(a)(3), Oct. 4, 1976, 90 Stat. 1784, 1790, 1798, 1799, 1876; Pub. L. 95–472, § 4(b), Oct. 17, 1978, 92 Stat. 1335; Pub. L. 95–600, title V, § 515(2), title VI, § 601(b)(3), title VII, § 702(r)(3), Nov. 6, 1978, 92 Stat. 2884, 2896, 2938; Pub. L. 95–618, title I, § 101(b)(3), title II, § 201(b), Nov. 9, 1978, 92 Stat. 3179, 3183; Pub. L. 96–222, title I, §§ 106(a)(2), (3), 107(a)(2)(C), Apr. 1, 1980, 94 Stat. 221, 222; Pub. L. 96–223, title IV, § 401(a), (c)(1), Apr. 2, 1980, 94 Stat. 299, 300; Pub. L. 97–34, title II, § 212(d)(2)(G), title IV, § 421(g), Aug. 13, 1981, 95 Stat. 239, 310; Pub. L. 97–248, title II, §§ 201(c)(2), 205(a)(5)(B), Sept. 3, 1982, 96 Stat. 418, 429; Pub. L. 97–354, § 5(a)(33), Oct. 19, 1982, 96 Stat. 1695; Pub. L. 98–369, div. A, title I, §§ 43(a)(2), 53(d)(3), title II, § 211(b)(14), title IV, § 474(r)(23), title V, § 541(b)(2), July 18, 1984, 98 Stat. 558, 568, 756, 844, 890; Pub. L. 99–514, title II, § 241(b)(2), title VII, § 701(e)(4)(D), title XIII, § 1303(b)(3), title XVIII, § 1899A(25), Oct. 22, 1986, 100 Stat. 2181, 2343, 2658, 2959; Pub. L. 100–647, title I, §§ 1006(j)(1)(B), 1018(u)(22), Nov. 10, 1988, 102 Stat. 3411, 3591; Pub. L. 101–194, title V, § 502(b)(2), Nov. 30, 1989, 103 Stat. 1755; Pub. L. 101–508, title XI, §§ 11801(c)(1), 11812(b)(10), 11813(b)(19), Nov. 5, 1990, 104 Stat. 1388–522, 1388–535, 1388–555; Pub. L. 102–486, title XIX, § 1913(a)(3)(A), (b)(2)(B), Oct. 24, 1992, 106 Stat. 3019, 3020; Pub. L. 103–66, title XIII, §§ 13114(b), 13213(a)(2)(F), 13261(f)(3), Aug. 10, 1993, 107 Stat. 431, 474, 539; Pub. L. 104–188, title I, §§ 1704(t)(56), 1807(c)(5), Aug. 20, 1996, 110 Stat. 1890, 1902; Pub. L. 105–34, title III, §§ 312(d)(6), 313(b)(1), title VII, § 701(b)(2), Aug. 5, 1997, 111 Stat. 840, 842, 869; Pub. L. 106–554, § 1(a)(7) [title I, § 116(b)(1)], Dec. 21, 2000, 114 Stat. 2763, 2763A–603; Pub. L. 107–16, title II, § 205(b)(3), June 7, 2001, 115 Stat. 53; Pub. L. 108–357, title II, § 245(c)(2), title III, §§ 338(b)(4), 339(d), title IV, § 413(c)(19), Oct. 22, 2004, 118 Stat. 1448, 1481, 1484, 1509; Pub. L. 109–58, title XIII, §§ 1331(b)(1), 1332(c), 1333(b)(1), 1335(b)(4), 1341(b)(2), 1342(b)(2), Aug. 8, 2005, 119 Stat. 1023, 1026, 1029, 1036, 1049, 1051; Pub. L. 109–135, title IV, § 412(nn), Dec. 21, 2005, 119 Stat. 2639; Pub. L. 110–172, §§ 7(a)(1)(C), 11(a)(21), (22), Dec. 29, 2007, 121 Stat. 2481, 2486; Pub. L. 110–343, div. B, title II, § 205(d)(2), Oct. 3, 2008, 122 Stat. 3839; Pub. L. 111–5, div. B, title I, §§ 1141(b)(3), 1142(b)(6), Feb. 17, 2009, 123 Stat. 328, 331; Pub. L. 111–148, title X, § 10909(b)(2)(L), (c), Mar. 23, 2010, 124 Stat. 1023; Pub. L. 111–312, title I, § 101(b)(1), Dec. 17, 2010, 124 Stat. 3298; Pub. L. 113–295, div. A, title II, §§ 209(j)(2), 221(a)(2)(D), (34)(G), (75), Dec. 19, 2014, 128 Stat. 4030, 4037, 4042, 4049; Pub. L. 115–97, title I, §§ 13313(b), 13521(a), 13823(b), Dec. 22, 2017, 131 Stat. 2133, 2151, 2188; Pub. L. 115–141, div. U, title IV, § 401(a)(166), (d)(4)(B)(iv), Mar. 23, 2018, 132 Stat. 1192, 1209; Pub. L. 117–169, title I, § 13301(f)(3)(B), Aug. 16, 2022, 136 Stat. 1945; Pub. L. 119–21, title VII, § 70302(b)(10), July 4, 2025, 139 Stat. 192.)

## Editorial Notes

### References in Text

Section 1020, referred to in subsec. (a)(2), was repealed by , , .

The Tax Reform Act of 1976, referred to in subsec. (a)(2), is , , , which was enacted . For complete classification of this Act to the Code, see Tables.

The Tax Reform Act of 1986, referred to in subsec. (a)(3)(D), is , , . Part II of subchapter L of this chapter was repealed and part III of subchapter L of this chapter was redesignated as part II by , (2), , .

The Revenue Act of 1918 (), referred to in subsec. (a)(4), is , . For complete classification of this Act to the Code, see Tables.

The Revenue Act of 1921 (), referred to in subsec. (a)(4), is , . For complete classification of this Act to the Code, see Tables.

Section 218 of the Revenue Act of 1918 or 1921, referred to in subsec. (a)(4), was not classified to the Code.

The date of the enactment of the Taxpayer Relief Act of 1997, referred to in subsec. (a)(7), is the date of enactment of , which was approved .

### Codification

, which directed the amendment of section 1016(a)(26) without specifying the act to be amended, was executed to this section, which is section 1016 of the Internal Revenue Code of 1986, to reflect the probable intent of Congress. See 2010 Amendment note below.

### Amendments

2025—Subsec. (a)(14).  substituted “deductions under section 174 or 174A(c)” for “deductions as deferred expenses under section 174(b)(1) (relating to research and experimental expenditures)”.

2022—Subsec. (a)(33).  substituted “section 25C(g)” for “section 25C(f)”.

2018—Subsec. (a)(3)(D). , inserted “as in effect prior to its repeal by the Tax Reform Act of 1986” before “(or the corresponding provisions of prior income tax laws)”.

Subsec. (a)(27). , struck out par. (27) which read as follows: “in the case of a residence with respect to which a credit was allowed under section 1400C, to the extent provided in section 1400C(h),”.

2017—Subsec. (a)(1). , substituted subpars. (A) and (B) for former subpars. (A) and (B) and concluding provisions which read as follows:

“(A) for taxes or other carrying charges described in section 266, or

“(B) for expenditures described in section 173 (relating to circulation expenditures),

for which deductions have been taken by the taxpayer in determining taxable income for the taxable year or prior taxable years;”.

Subsec. (a)(23). , struck out “1044,” after “section 1043,” and “1044(d),” after “section 1043(c),”.

Subsec. (a)(38). , added par. (38).

2014—Subsec. (a)(12). , struck out par. (12) which read as follows: “to the extent provided in section 28(h) of the Internal Revenue Code of 1939 in the case of amounts specified in a shareholder’s consent made under section 28 of such code;”.

Subsec. (a)(24). , struck out par. (24) which read as follows: “to the extent provided in section 179A(e)(6)(A),”.

Subsec. (a)(25). , struck out par. (25) which read as follows: “to the extent provided in section 30(e)(1),”.

Subsec. (a)(37). , substituted “section 30D(f)(1)” for “section 30D(e)(4)”.

2010—Subsec. (a)(26). , (c), as amended by , temporarily substituted “36C(g)” for “23(g)”. See Codification note above and Effective and Termination Dates of 2010 Amendment note below.

2009—Subsec. (a)(25). , substituted “section 30(e)(1)” for “section 30(d)(1)”.

, which directed amendment of subsec. (a)(25) by substituting “section 30D(f)(1)” for “section 30D(e)(4)”, could not be executed because “section 30D(e)(4)” did not appear in text.

2008—Subsec. (a)(37).  added par. (37).

2007—Subsec. (a)(31), (32). , redesignated pars. (32) and (33) as (31) and (32), respectively, and struck out former par. (31) which read as follows: “in the case of a facility with respect to which a credit was allowed under section 45H, to the extent provided in section 45H(d),”.

Subsec. (a)(33). , substituted “section 25C(f)” for “section 25C(e)”.

, redesignated par. (34) as (33). Former par. (33) redesignated (32).

Subsec. (a)(34), (35). , redesignated pars. (35) and (36) as (34) and (35), respectively. Former par. (34) redesignated (33).

Subsec. (a)(36). , substituted “section 30C(e)(1)” for “section 30C(f)”.

, redesignated par. (37) as (36). Former par. (36) redesignated (35).

Subsec. (a)(37). , redesignated par. (37) as (36).

2005—Subsec. (a)(23).  substituted “1045(b)(3)” for “1045(b)(4)”.

Subsec. (a)(32). , added par. (32).

Subsec. (a)(33). , added par. (33).

Subsec. (a)(34). , added par. (34).

Subsec. (a)(35). , added par. (35).

Subsec. (a)(36). , added par. (36).

Subsec. (a)(37). , added par. (37).

2004—Subsec. (a)(13). , struck out par. (13) which read as follows: “to the extent provided in section 551(e) in the case of the stock of United States shareholders in a foreign personal holding company;”.

Subsec. (a)(29). , added par. (29).

Subsec. (a)(30). , added par. (30).

Subsec. (a)(31). , added par. (31).

2001—Subsec. (a)(28).  added par. (28).

2000—Subsec. (a)(23).  substituted “1045, or 1397B” for “or 1045” and “1045(b)(4), or 1397B(b)(4)” for “or 1045(b)(4)”.

1997—Subsec. (a)(7). , inserted “(as in effect on the day before the date of the enactment of the Taxpayer Relief Act of 1997)” after “section 1034” and “(as so in effect)” after “section 1034(e)”.

Subsec. (a)(23). , substituted “, 1044, or 1045” for “or 1044” and “, 1044(d), or 1045(b)(4)” for “or 1044(d)”.

Subsec. (a)(27). , added par. (27).

1996—Subsec. (a)(20). , provided that  shall be applied as if “Paragraph (20) of section 1016(a), as redesignated by section 11801,” appeared instead of “paragraph (21) of section 1016(a)”. See 1990 Amendment note below.

Subsec. (a)(26). , added par. (26).

1993—Subsec. (a)(19) to (23). , redesignated pars. (20) to (24) as (19) to (23), respectively, and struck out former par. (19) which read as follows: “for amounts allowed as deductions for payments made on account of transfers of franchises, trademarks, or trade names under section 1253(d)(2);”.

Subsec. (a)(24). , redesignated par. (25) as (24). Former par. (24) redesignated (23).

, substituted “section 1043 or 1044” for “section 1043” and “section 1043(c) or 1044(d), as the case may be” for “section 1043(c)”.

Subsec. (a)(25), (26). , redesignated pars. (25) and (26) as (24) and (25), respectively.

Subsec. (e). , amended heading and text of subsec. (e) generally. Prior to amendment, text read as follows:

“(1) For treatment of certain expenses incident to the purchase of a residence which were deducted as moving expenses by the taxpayer or his spouse under section 217(a), see section 217(e).

“(2) For treatment of separate mineral interests as one property, see section 614.”

1992—Subsec. (a)(25), (26).  added pars. (25) and (26).

1990—Subsec. (a)(2). , substituted “under the straight line method” for “under section 167(b)(1)” in concluding provisions.

Subsec. (a)(20). , which directed the amendment of subsec. (a)(21) by striking “section 48(q)” and inserting “section 50(c)”, was executed to subsec. (a)(20). See 1996 Amendment note above.

, redesignated par. (21) as (20) and struck out former par. (20) which read as follows: “to the extent provided in section 23(e), in the case of property with respect to which a credit has been allowed under section 23;”.

Subsec. (a)(21) to (25). , redesignated pars. (21) to (25) as (20) to (24), respectively.

1989—Subsec. (a)(25).  added par. (25).

1988—Subsec. (a)(5). , inserted “(or the amount applied to reduce interest payments under section 171(e)(2))” after “allowable pursuant to section 171(a)(1)”.

Subsec. (a)(21) to (26). , added pars. (21) to (24) and struck out former pars. (23) to (26) which read as follows:

“(23) to the extent provided in section 48(q) in the case of expenditures with respect to which a credit has been allowed under section 38;

“(24) for amounts allowed as deductions under section 59(d) (relating to optional 10-year writeoff of certain tax preferences);

“(25) to the extent provided in section 1059 (relating to reduction in basis for extraordinary dividends); and

“(26) in the case of qualified replacement property, the acquisition of which resulted under section 1042 in the nonrecognition of any part of the gain realized on the sale or exchange of any property, to the extent provided in section 1042(c).”

Former pars. (21) and (22) had been struck out previously.

1986—Subsec. (a). , which directed the amendment of pars. (23) to (26) by substituting a semicolon for a comma at the end thereof was executed to pars. (24) to (26) in view of the prior repeal of par. (23).

, which directed the amendment of subsec. (a) by striking out par. (22) and redesignating pars. (23) to (27) as (22) to (26), respectively, was executed by striking out par. (21) to reflect the probable intent of Congress in view of the amendment by . Prior to the amendment, par. (21) read as follows: “to the extent provided in section 1395 in the case of stock of shareholders of a general stock ownership corporation (as defined in section 1391) which makes the election provided by section 1392;”.

, redesignated pars. (17) to (27) as (16) to (26), respectively, and struck out former par. (16) which read as follows: “for amounts allowed as deductions for expenditures treated as deferred expenses under section 177 (relating to trademark and trade name expenditures) and resulting in a reduction of the taxpayer’s taxes under this subtitle, but not less than the amounts allowable under such section for the taxable year and prior years;”.

Subsec. (a)(24). , substituted “section 59(d)” for “section 58(i)”.

1984—Subsec. (a)(17). , substituted “section 811(b)” for “section 818(b)” in two places.

Subsec. (a)(21). , substituted “section 23(e)” for “section 44C(e)” and “section 23” for “section 44C”.

Subsec. (a)(26). , added par. (26).

Subsec. (a)(27). , added par. (27).

Subsec. (b). , struck out “The term ‘substituted basis’ as used in this section means a basis determined under any provision of this subchapter and subchapters C (relating to corporate distributions and adjustments), K (relating to partners and partnerships), and P (relating to capital gains and losses), or under any corresponding provision of a prior income tax law, providing that the basis shall be determined (1) by reference to the basis in the hands of a transferor, donor, or grantor, or (2) by reference to other property held at any time by the person for whom the basis is to be determined.” See .

1982—Subsec. (a)(18).  substituted “section 1367” for “section 1376”, “indebtedness owed to” for “indebtedness owing”, and “an S corporation” for “an electing small business corporation (as defined in section 1371(b))”.

Subsec. (a)(24). , substituted “to the extent provided in section 48(q)” for “to the extent provided in section 48(g)(5)”.

Subsec. (a)(25). , added par. (25).

1981—Subsec. (a)(24). , added par. (24).

Subsec. (c). , substituted provisions respecting increase in basis of property on which additional estate tax is imposed for provisions for increase in basis in the case of certain involuntary conversions, if such compulsory or involuntary conversions are within the meaning of section 1033, and an additional estate tax is imposed under section 2032A, and provisions respecting time adjustment made.

1980—Subsec. (a)(22). , redesignated par. (21), relating to the extent provided in section 1395 in the case of stock of shareholders of a general stock ownership corporation, as (22).

Subsec. (a)(23). , repealed the amendments made by , and . See 1976 and 1978 Amendment notes below.

Subsec. (c). , struck out provision relating to the net appreciation of in value of certain property and struck out references to .

1978—Subsec. (a)(21). , added par. (21) relating to an adjustment to the extent provided in section 44C.

, as amended by , added par. (21) relating to an adjustment to the extent provided in section 1395.

Subsec. (a)(23). , which redesignated par. (23) as (21), was repealed by , and . See Repeals note below.

, substituted “” for “”.

Subsec. (c).  added subsec. (c). Former subsec. (c) redesignated (d).

Subsec. (d). , added subsec. (d). Former subsec. (d) redesignated (e).

redesignated former subsec. (c) as (d).

Subsec. (e). , redesignated former subsec. (d) as (e).

1976—Subsec. (a)(2). , inserted “(as in effect before the date of the enactment of the Tax Reform Act of 1976)” after “under section 1020”.

Subsec. (a)(10). , struck out par. (10) which related to adjustment for the amounts allowed as deductions as deferred expenses under .

Subsec. (a)(13). , substituted “section 551(e)” for “section 551(f)”.

Subsec. (a)(19). , (b)(30)(A), redesignated par. (20) as (19). Former par. (19), which related to adjustment of section 38 property to the extent provided in sections 48(g) and 203 of this title, was struck out.

Subsec. (a)(20). , redesignated par. (22) as (20). Former par. (20) redesignated (19).

Subsec. (a)(21). , struck out par. (21) which related to property adjustment to the extent provided in .

Subsec. (a)(22). , redesignated par. (22) as (20).

Subsec. (a)(23). , added par. (23). See Repeals note below.

1969—Subsec. (a)(22). , added par. (22).

Subsec. (a)(10). , limited exploration expenditures referred to in this par. to pre-1970 exploration expenditures.

Subsec. (c). , redesignated existing provisions as par. (2) and added par. (1).

1964—Subsec. (a)(15). , inserted “or domestic iron ore”.

Subsec. (a)(19). , inserted “and in section 203(a)(2) of the Revenue Act of 1964”.

Subsec. (a)(21). , added par. (21).

1962—Subsec. (a)(3)(D). , added subpar. (D).

Subsec. (a)(19). , added par. (19).

Subsec. (a)(20). , added par. (20).

1959—Subsec. (a)(3)(C). , added subpar. (C).

Subsec. (a)(17). , added par. (17).

1958—Subsec. (a)(6). , struck out “short-term” before “municipal bond”.

Subsec. (a)(18). , added par. (18).

1956—Subsec. (a)(16). Act , added par. (16).

## Statutory Notes and Related Subsidiaries

### Effective Date of 2025 Amendment

Amendment by  applicable to amounts paid or incurred in taxable years beginning after , subject to election for retroactive application by certain small businesses and election to deduct certain unamortized amounts paid or incurred in taxable years beginning before , see section 70302(e), (f) of , set out as an Effective Date note under .

### Effective Date of 2022 Amendment

Amendment by  applicable to property placed in service after , see , set out in a note under .

### Effective Date of 2017 Amendment

> “The amendments made by this section [amending this section and repealing
> 
> ] shall apply to sales after
> 
> .”

, , , provided that:

> “The amendment made by this section [amending this section] shall apply to transactions entered into after
> 
> .”

, , , provided that:

> “The amendments made by this section [enacting subchapter Z of this chapter and amending this section] shall take effect on the date of the enactment of this Act [
> 
> ].”

, , , provided that:

### Effective Date of 2014 Amendment

Amendment by  effective as if included in the provisions of the American Recovery and Reinvestment Tax Act of 2009, , to which such amendment relates, see , set out as a note under .

Amendment by section 221(a)(2)(D), (34)(G), (75) of  effective , subject to a savings provision, see , set out as a note under .

### Effective and Termination Dates of 2010 Amendment

Amendment by  terminated applicable to taxable years beginning after , and section is amended to read as if such amendment had never been enacted, see , set out as a note under .

Amendment by  applicable to taxable years beginning after , see , set out as a note under .

### Effective Date of 2009 Amendment

Amendment by  applicable to vehicles acquired after , see , set out as a note under .

Amendment by  applicable to vehicles acquired after , see , set out as an Effective and Termination Dates of 2009 Amendment note under .

### Effective Date of 2008 Amendment

Amendment by  applicable to taxable years beginning after , see , set out as an Effective and Termination Dates of 2008 Amendment note under .

### Effective Date of 2007 Amendment

Amendment by  effective as if included in the provision of the American Jobs Creation Act of 2004, , to which such amendment relates, see , set out as a note under .

### Effective Date of 2005 Amendment

Amendment by  applicable to property placed in service after , see , set out as an Effective Date note under .

Amendment by  applicable to qualified new energy efficient homes acquired after , in taxable years ending after such date, see , set out as a note under .

Amendment by  applicable to property placed in service after , see , set out as an Effective Date note under .

Amendment by  applicable to property placed in service after , in taxable years ending after such date, see , set out as a note under .

Amendment by  applicable to property placed in service after , in taxable years ending after such date, see , set out as an Effective Date note under .

Amendment by  applicable to property placed in service after , in taxable years ending after such date, see , set out as an Effective Date note under .

### Effective Date of 2004 Amendment

Amendment by  applicable to taxable years beginning after , see , set out as a note under .

Amendment by  applicable to expenses paid or incurred after , in taxable years ending after such date, see , set out as an Effective Date note under .

Amendment by  applicable to expenses paid or incurred after , in taxable years ending after such date, see , set out as a note under .

Amendment by  applicable to taxable years of foreign corporations beginning after , and to taxable years of United States shareholders with or within which such taxable years of foreign corporations end, see , set out as an Effective and Termination Dates of 2004 Amendments note under .

### Effective Date of 2001 Amendment

Amendment by  applicable to taxable years beginning after , see , set out as a note under .

### Effective Date of 2000 Amendment

> “The amendments made by this section [enacting subpart C of part III of subchapter U of this chapter, amending this section and sections 1223, 1394, 1400, and 1400B of this title, redesignating subpart C of part III of subchapter U of this chapter as subpart D of part III of subchapter U of this chapter, and renumbering sections 1397B and 1397C of this title as 1397C and 1397D, respectively, of this title] shall apply to qualified empowerment zone assets acquired after the date of the enactment of this Act [
> 
> ].”

, , , 2763A–604, provided that:

### Effective Date of 1997 Amendment

Amendment by  applicable to sales and exchanges after , with certain exceptions, see , set out as a note under .

> “The amendments made by this section [enacting
> 
> and amending this section and
> 
> ] shall apply to sales after the date of enactment of this Act [
> 
> ].”

, , , provided that:

Amendment by  effective , see , set out as a note under .

### Effective Date of 1996 Amendment

Amendment by  applicable to taxable years beginning after , see , set out as an Effective Date note under .

### Effective Date of 1993 Amendment

> “The amendments made by this section [enacting
> 
> and amending this section] shall apply to sales on and after the date of the enactment of this Act [
> 
> ], in taxable years ending on and after such date.”

, , , provided that:

Amendment by  applicable to expenses incurred after , see  set out as a note under .

Amendment by  applicable, except as otherwise provided, with respect to property acquired after , see , set out as an Effective Date note under .

### Effective Date of 1992 Amendment

Amendment by  applicable to property placed in service after , see , set out as a note under .

### Effective Date of 1990 Amendment

Amendment by  applicable to property placed in service after , but not applicable to any property to which  does not apply by reason of subsec. (f)(5) of section 168, and not applicable to rehabilitation expenditures described in , see , set out as a note under .

Amendment by  applicable to property placed in service after , but not applicable to any transition property (as defined in ), any property with respect to which qualified progress expenditures were previously taken into account under , and any property described in , as such sections were in effect on , see , set out as a note under .

### Effective Date of 1989 Amendment

> “The amendments made by this section [enacting
> 
> and amending this section and
> 
> ] shall apply to sales after the date of the enactment of this Act [
> 
> ].”

, , , provided that:

### Effective Date of 1988 Amendment

Amendment by  applicable in the case of obligations acquired after , with exception allowing taxpayer to elect to have amendment apply to obligations acquired after , see , set out as a note under .

Amendment by  effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, , to which such amendment relates, see , set out as a note under .

### Effective Date of 1986 Amendment

Amendment by  applicable to expenditures paid or incurred after , except as otherwise provided, see , set out as an Effective Date of Repeal note under former .

Amendment by  applicable to taxable years beginning after , with certain exceptions and qualifications, see , set out as an Effective Date note under .

Amendment by  effective , see , as amended, set out as an Effective Date; Transitional Rules note under .

### Effective Date of 1984 Amendment

Amendment by  applicable to taxable years ending after , see , set out as an Effective Date note under .

Amendment by  applicable to distribution after , in taxable years ending after such date, see , set out as an Effective Date note under .

Amendment by  applicable to taxable years beginning after , see , set out as an Effective Date note under .

Amendment by  applicable to taxable years beginning after , and to carrybacks from such years, see , set out as a note under .

Amendment by  applicable to sales of securities in taxable years beginning after , see , set out as an Effective Date note under .

### Effective Date of 1982 Amendment

Amendment by  applicable to taxable years beginning after , see , set out as an Effective Date note under .

Amendment by  applicable to taxable years beginning after , see , set out as a note under .

Amendment by  applicable to periods after , under rules similar to the rules of , with certain qualifications, see , set out as an Effective Date note under .

### Effective Date of 1981 Amendment

Amendment by  applicable to expenditures incurred after , in taxable years ending after that date, see , set out as a note under .

Amendment by  applicable with respect to the estates of decedents dying after , see , set out as a note under .

### Effective Date of 1980 Amendment and Revival of Prior Law

Amendment by  (repealing  and  and the amendments made thereby, which had amended this section) applicable in respect of decedents dying after , and except for certain elections, this title to be applied as if those repealed provisions had not been enacted, see section 401(b), (e) of , set out as a note under .

Amendment by  effective, except as otherwise provided, as if it had been included in the provisions of the Revenue Act of 1978, , to which such amendment relates, see , set out as an Effective Date of 1980 Amendment note under .

### Effective Date of 1978 Amendment

> “The amendments made by this section [enacting
> 
> and amending this section and sections 56 and 6096 of this title] shall apply to taxable years ending on or after
> 
> .”

, , , provided that:

Amendment by  applicable with respect to 1980 and later model year automobiles, see , set out as an Effective Date note under .

Amendment by  effective with respect to corporations chartered after , and before , see , set out as a note under .

Amendment by  applicable to estates of decedents dying after , see , set out as a note under .

> “The amendments made by this section [amending this section and
> 
> ] shall apply to involuntary conversions after
> 
> .”

, , , provided that:

### Effective Date of 1976 Amendment

Amendment by section 1901(a)(123), (b)(1)(F)(ii), (21)(G), (29)(A) of  applicable with respect to taxable years beginning after , see , set out as a note under .

> “The amendment made by subparagraph (A)(i) [amending this section] shall apply with respect to stock or securities acquired from a decedent dying after the date of the enactment of this Act [
> 
> ].”

, , , provided that:

Amendment by  applicable in respect of decedents dying after , see  set out as an Effective Date note under .

### Effective Date of 1969 Amendment

Amendment by  applicable to taxable years beginning after , see , set out as a note under .

Amendment by  applicable with respect to exploration expenditures paid or incurred after , see , set out as a note under .

Amendment by  applicable to transfers after , see , set out as an Effective Date note under .

### Effective Date of 1964 Amendment

Amendment by  applicable in case of property placed in service after , with respect to taxable years ending after such date, and in case of property placed in service before , with respect to taxable years beginning after , see , set out as a note under .

Amendment by  applicable in respect of decedents dying after , see section 225() of , set out as a note under .

Amendment by  applicable with respect to amounts received or accrued in taxable years beginning after , attributable to iron ore mined in such years, see , set out as a note under .

### Effective Date of 1962 Amendment

Amendment by  applicable with respect to taxable years ending after , see , set out as an Effective Date note under .

Amendment by  applicable with respect to taxable years beginning after , see , set out as a note under .

Amendment by  applicable with respect to taxable years of foreign corporations beginning after , and to taxable years of United States shareholders within which or with which such taxable years of such foreign corporations end, see , set out as an Effective Date note under .

### Effective Date of 1959 Amendment

Amendment by  applicable only with respect to taxable years beginning after , see , set out as a note under .

### Effective Date of 1958 Amendment

Amendment by  applicable with respect to taxable years ending after , but only with respect to obligations acquired after such date, see , set out as a note under .

Amendment by  applicable only with respect to taxable years beginning after , see , set out as a note under .

### Repeals

and , cited as credits to this section, and the amendments made by those sections, were repealed by , , resulting in the text of this section reading as it read prior to enactment of sections 2005(a)(3) and 702(r)(3). See Effective Date of 1980 Amendments and Revival of Prior Law note above.

### Savings Provision

Amendment by  not applicable to certain obligations issued, DC Zone assets acquired, or principal residences acquired before , see , set out as a note under former .

For provisions that nothing in amendment by  be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to , for purposes of determining liability for tax for periods ending after , see , set out as a note under .

For provisions that nothing in amendment by  be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to , for purposes of determining liability for tax for periods ending after , see , set out as a note under .

### Applicability of Certain Amendments by Pub. L. 99–514 in Relation to Treaty Obligations of United States

For applicability of amendment by  notwithstanding any treaty obligation of the United States in effect on , with provision that for such purposes any amendment by title I of  be treated as if it had been included in the provision of  to which such amendment relates, see section 1012(aa)(2), (4) of , set out as a note under .

### Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of  require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after , see , as amended, set out as a note under .

### Change From Retirement to Straight Line Method of Computing Depreciation in Certain Cases

> **“(a)** **Short Title.—** This section may be cited as the ‘Retirement-Straight Line Adjustment Act of 1958’.
> 
> **“(b)** **Making of Election.—** Any taxpayer who held retirement-straight line property on his 1956 adjustment date may elect to have this section apply. Such an election shall be made at such time and in such manner as the Secretary shall prescribe. Any election under this section shall be irrevocable and shall apply to all retirement-straight line property as hereinafter provided in this section (including such property for periods when held by predecessors of the taxpayer).
> 
> **“(c)** **Retirement-Straight Line Property Defined.—** For purposes of this section, the term ‘retirement-straight line property’ means any property of a kind or class with respect to which the taxpayer or a predecessor (under the terms and conditions prescribed for him by the Commissioner) for any taxable year beginning after December 31, 1940, and before January 1, 1956, changed from the retirement to the straight line method of computing the allowance of deductions for depreciation.
> 
> **“(d)** **Basis Adjustments as of 1956 Adjustment Date.—** If the taxpayer has made an election under this section, then in determining the adjusted basis on his 1956 adjustment date of all retirement-straight line property held by the taxpayer, in lieu of the adjustments for depreciation provided in section 1016(a)(2) and (3) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], the following adjustments shall be made (effective as of his 1956 adjustment date) in respect of all periods before the 1956 adjustment date:
> 
> This subsection shall apply only with respect to taxable years beginning after December 31, 1955.
> 
> **“(1)** **Depreciation sustained before march 1, 1913.—** For depreciation sustained before March 1, 1913, on retirement-straight line property held by the taxpayer or a predecessor on such date for which cost was or is claimed as basis and which either—
> 
> The adjustment determined under this paragraph shall be allocated (in the manner prescribed by the Secretary) among all retirement-straight line property held by the taxpayer on his 1956 adjustment date.
> 
> **“(A)** **Retired before changeover.—** Was retired by the taxpayer or a predecessor before the changeover date, but only if (i) a deduction was allowed in computing net income by reason of such retirement, and (ii) such deduction was computed on the basis of cost without adjustment for depreciation sustained before March 1, 1913. In the case of any such property retired during any taxable year beginning after December 31, 1929, the adjustment under this subparagraph shall not exceed that portion of the amount attributable to depreciation sustained before March 1, 1913, which resulted (by reason of the deduction so allowed) in a reduction in taxes under the Internal Revenue Code of 1986 or prior income, war-profits, or excess-profits tax laws.
> 
> **“(B)** **Held on changeover date.—** Was held by the taxpayer or a predecessor on the changeover date. This subparagraph shall not apply to property to which paragraph (2) applies.
> 
> **“(2)** **Property disposed of after changeover and before 1956 adjustment date.—** For that portion of the reserve prescribed by the Commissioner in connection with the changeover which was applicable to property—
> 
> if such sale occurred in, or such deduction was allowed for, a period on or after the changeover date and before the taxpayer’s 1956 adjustment date.
> 
> **“(A)** sold, or
> 
> **“(B)** with respect to which a deduction was allowed for Federal income tax purposes by reason of casualty or ‘abnormal’ retirement in the nature of special obsolescence,
> 
> **“(3)** **Depreciation allowable from changeover to 1956 adjustment date.—** For depreciation allowable, under the terms and conditions prescribed by the Commissioner in connection with the changeover, for all periods on and after the changeover date and before the taxpayer’s 1956 adjustment date.
> 
> **“(e)** **Effect on Period From Changeover to 1956 Adjustment Date.—** If the taxpayer has made an election under this section, then in determining the adjusted basis of any retirement-straight line property as of any time on or after the changeover date and before the taxpayer’s 1956 adjustment date, in lieu of the adjustments for depreciation provided in section 1016(a)(2) and (3) of the Internal Revenue Code of 1986 and the corresponding provisions of prior revenue laws, the following adjustments shall be made:
> 
> This subsection shall not apply in determining adjusted basis for purposes of section 437(c) of the Internal Revenue Code of 1939. This subsection shall apply only with respect to taxable years beginning on or after the changeover date and before the taxpayer’s 1956 adjustment date.
> 
> **“(1)** **For prescribed reserve.—** For the amount of the reserve prescribed by the Commissioner in connection with the changeover.
> 
> **“(2)** **For allowable depreciation.—** For the depreciation allowable under the terms and conditions prescribed by the Commissioner in connection with the changeover.
> 
> **“(f)** **Equity Invested Capital, etc.—** If an election is made under this section, then (not withstanding the terms and conditions prescribed by the Commissioner in connection with the changeover)—
> 
> **“(1)** **Equity invested capital.—** In determining equity invested capital under sections 458 and 718 of the Internal Revenue Code of 1939, accumulated earnings and profits as of the changeover date, and as of the beginning of each taxable year thereafter, shall be reduced by the depreciation sustained before March 1, 1913, as computed under subsection (d)(1)(B); and
> 
> **“(2)** **Definition of equity capital.—** In determining the adjusted basis of assets for the purpose of section 437(c) of the Internal Revenue Code of 1939 (and in addition to any other adjustments required by such Code), the basis shall be reduced by depreciation sustained before March 1, 1913 (as computed under subsection (d)), together with any depreciation allowable under subsection (e)(2) for any period before the year for which the excess profits credit is being computed.
> 
> **“(g)** **Definitions.—** For purposes of this section—
> 
> **“(1)** **Depreciation.—** The term ‘depreciation’ means exhaustion, wear and tear, and obsolescence.
> 
> **“(2)** **Changeover.—** The term ‘changeover’ means a change from the retirement to the straight line method of computing the allowance of deductions for depreciation.
> 
> **“(3)** **Changeover date.—** The term ‘changeover date’ means the first day of the first taxable year for which the changeover was effective.
> 
> **“(4)** **1956 adjustment date.—** The term ‘1956 adjustment date’ means, in the case of any taxpayer, the first day of his first taxable year beginning after December 31, 1955.
> 
> **“(5)** **Predecessor.—** The term ‘predecessor’ means any person from whom property of a kind or class to which this section refers was acquired, if the basis of such property is determined by reference to its basis in the hands of such person. Where a series of transfers of property has occurred and where in each instance the basis of the property was determined by reference to its basis in the hands of the prior holder, the term includes each such prior holder.
> 
> **“(6)** The term ‘Secretary’ means the Secretary of the Treasury or his delegate.
> 
> **“(7)** The term ‘Commissioner’ means the Commissioner of Internal Revenue.”

, , , as amended by , , , provided that: