# Prop. Treas. Reg. § 1.732-1: Basis of distributed property other than money.

Proposed regulation, not in force. REG-151416-06, 79 FR 65151, published 2014-11-03 <https://www.federalregister.gov/documents/2014/11/03/2014-25487/certain-distributions-treated-as-sales-or-exchanges>. Interprets 26 U.S.C. § 732.

Par. 5. Section 1.732-1 is amended by adding paragraphs (c)(2)(iii), (iv), (v), (vi), and (vii), and revising paragraph (c)(5) to read as follows:

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(c) * * *

(2) * * *

(iii) Property subject to section 1245. Any increase in basis allocated to capital gain property pursuant to the second sentence in paragraph (c)(2)(ii) of this section is not taken into account in determining the recomputed or adjusted basis in the property for purposes of section 1245(a)(1). Notwithstanding the prior sentence, any depreciation or amortization of the increase in basis that is allowed or allowable is taken into account in computing the property's recomputed basis. In the case of property that is subject to section 617(d)(1), section 1250(a)(1), section 1252(a)(1), or section 1254(a)(1), rules similar to the rule in this paragraph (c)(2)(iii) shall apply. See Examples 2 and 3 in § 1.755-1(c)(6).

(iv) Section 1231 property. Any increase in basis allocated to capital gain property pursuant to the second sentence in paragraph (c)(2)(ii) of this section is not taken into account in determining section 1231 gain and loss, as defined in section 1231(a)(3). See Examples 2 and 3 in § 1.755-1(c)(6).

(v) Property subject to section 1248. Any increase in basis allocated to stock in a foreign corporation pursuant to the second sentence in paragraph (c)(2)(ii) of this section or any decrease in basis allocated to stock in a foreign corporation pursuant to the second sentence in paragraph (c)(2)(i) of this section is not taken into account in determining the amount of gain recognized on the sale or exchange of such stock for purposes of section 1248(a). In the case of property that is subject to section 995(c), rules similar to the rule set forth in this paragraph (c)(2)(v) shall apply. See Examples 8 and 9 in § 1.751-1(g).

(vi) Special rule. Any basis adjustment to an asset that is not taken into account under paragraph (c)(2)(iii), (iv), or (v) of this section shall, upon a taxable disposition, be treated as gain or loss, as the case may be, from the sale or exchange of a capital asset with the same holding period as the underlying asset. See Examples 2 and 3 in § 1.755-1(c)(6).

(vii) Election not to apply the provisions of paragraphs (c)(2)(iii), (iv), and (v). See § 1.755-1(c)(2)(vi) for rules regarding an election to have the provisions of paragraphs (c)(2)(iii), (iv), and (v) of this section, and § 1.755-1(c)(2)(iii), (iv), and (v) not apply. See Examples 2 and 3 in § 1.755-1(c)(6).

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(5) Effective/applicability date. This paragraph (c) applies to distributions of property from a partnership that occur on or after December 15, 1999, except that paragraphs (c)(2)(iii), (iv), (v), (vi), and (vii) of this section apply to distributions of property from a partnership that occur on or after the date of publication of a Treasury decision adopting these rules as final regulations in the Federal Register .

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