Par. 12. Section 1.1245-4 is amended by revising paragraphs (f)(2)(ii) and (f)(3) and Example 2 to read as follows:
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(f) * * *
(2) * * *
(ii) The portion of such potential section 1245 income which is recognized as ordinary income under paragraphs (b)(3)(i) and (b)(4)(i) of § 1.751-1.
(3) * * *
Example 2.
Assume the same facts as in Example 1 of this paragraph (f) except that the machine had been purchased by the partnership. Assume further that upon the distribution, $4,000 of gain is recognized as ordinary income under section 751(b). Under section 1245(b)(3), gain to be taken into account under section 1245(a)(1) by the partnership is limited to $4,000. Immediately after the distribution, the amount of adjustments reflected in the adjusted basis of the property is $2,000 (that is, potential section 1245 income of the partnership, $6,000, minus gain recognized under section 751(b), $4,000). Thus, if the adjusted basis of the machine in the hands of C were $10,000, the recomputed basis of the machine would be $12,000 ($10,000 plus $2,000).
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