690 



§ 1245. Gain from dispositions of certain depreciable 



property, 

 (a) General rule. 



(1) Ordinary income. 



Except as otherwise provided in this section, if 

 section 1245 property is disposed of during a taxa- 

 ble year beginning after December 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 in- 

 voluntary conversion, the amount realized, or 



(U) 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 gain from the sale or exchange of 

 property which is neither a capital asset nor prop- 

 erty described in section 1231. Such gain shall be 

 recognized notwithstanding any other provision 

 of this subtitle. 



(2) Recomputed basis. 



For purposes of this section, the term "recom- 

 puted basis" means — 



(A) with respect to any property referred to 

 in paragraph (3) (A) or (B), its adjusted basis 

 recomputed by adding thereto all adjustments, 

 attributable to periods after December 31, 1961, 



(B) with respect to any property referred to 

 in paragraph (3) (O, its adjusted basis recom- 

 puted by adding thereto all adjustments, attrib- 

 utable to periods after June 30, 1963, 



(C) with respect to livestock, its adjusted 

 basis recomputed by adding thereto all adjust- 

 ments attributable to periods after December 31, 

 1969, or 



(D) with respect to any property referred to 

 in paragraph (3XD), its adjusted basis recom- 

 puted by adding thereto all adjustments attrib- 

 utable to periods beginning with the first month 

 for which a deduction for amortization is al- 

 lowed under section 169, 185, 190, or 191, 



reflected m such adjusted basis on account of 

 deductions (whether in respect of the same or 

 other property! allowed or allowable to the tax- 

 payer or to any other person for depreciation, or 

 for amortization imder section 168, 169. 184, 185, 

 187, 188 190, or 191. For purposes of the preceding 

 sentence, if the taxpayer can establish by adequate 

 records or other sufBcient evidence that the amount 

 allowed for depreciation, or for amortization under 

 section 168, 169, 184, 185, 187, 188, 190, or 191, for 

 any period was less than the amount allowable, the 

 amount added for such period shall be the amount 

 allowed. For purposes of this section, any deduction 

 allowable under section 190 shall be treated as if it 

 were a deduction allowable for amortization. 



(3) Section 1245 property. 



For purposes of this section, the term "section 

 1245 property" means any property which is or 

 has been property of a character subject to the 

 allowance for depreciation provided in section 167 

 (or subject to the allowance of amortization pro- 

 vided in section 185 i and is either — 



(A) personal property, 



(B) other property inot including a building 

 or its structural components i but only if such 

 other property is tangible and has an adjusted 

 basis in which there are reflected adjustments 

 described in paragraph 1 2) for a period in which 

 such property (or other property) — 



(i) was used as an integral part of manu- 

 facturing, production, or extraction or of fur- 

 nishing transportation, communications, elec- 

 trical energy, gas, water, or sewage disposal 

 services, 



(ii) constituted a research facility used in 

 connection with any of the activities referred 

 to in clause (i) , or 



(iii) constituted a facility used in connec- 

 tion with any of the activities referred to in 

 clause (i) for the bulk storage of fungible 

 commodities (including commodities in a 

 liquid or gaseous state") , 



(C) an elevator or an escalator, or 



(D) so much of any real property (other than 

 any property described in subparagraph (B) > 

 which has an adjusted basis in which there are 

 reflected adjustments for amortization under 

 section 169, 185, 188, 190, or 191. 



(c) Adjustments to basis. 



The Secretary or his delegate shall prescribe such 

 regulations as he may deem necessary to provide for 

 adjustments to the basis of property to reflect gain 

 recognized under subsection (a) . 



(d) .\pplication of section. 



This section shall apply notwithstanding any 

 other provision of this subtitle. (Added Pub. L. 

 87-834, § 13(aMl), Oct. 16, 1962. 76 Stat. 1032, and 

 amended Pub. L. 88-272, title II, § 203 Cd), Feb. 26, 

 1964, 78 Stat. 35; Pub. 1. 91-172, title II, § 212(ai (1), 

 (2), title Vn, § 704(b) (4), Dec. 30, 1969, 83 Stat. 571, 

 670.) 



(As amended Pub. L. 92-178, title I, U04(a)(2), 

 title in, § 303(c) (1), (2), 85 Stat. 501, 522; 

 amended Pub. L. 94-455, §§2122(3) and 2124(2), 

 Oct. 4, 1976, 90 Stat. 1915. 1917.) 



Amendments 



1971— Subsec. (a)(2). Pub. L. 92-178, §303(c)(l), in- 

 cluded reference to section 188 in two instances following 

 subpar. (D) text, 



Subsec. (a)(3)(B) (ii). Illl). Pub. L. 92-178. §104 

 (a)(2), substituted "research facility" for "research or 

 storage facility" in cl. (ii) and added cl. (iii). 



Subsec. (a) (3) (D). Pub. L. 92-178, § 303(c) (2). included 

 reference to section 188. 



1969— Subsec. (a)(2). Pub. L. 91-172. §§212(a)(l), 

 704(b) (4) (A) , (B). added subpar, (C) and Inserted refer- 

 ences to sections 169, 185, and 187, and added subpar. (D) . 



Subsec. (a)(3). Pub. L, 91-172, §§ 212(a) (2) , 704(b) (4) 

 (C)-(F), struck out "(other than livestock)" following 

 "means any property" and substituted "section 167 (or 

 subject to the allowance of amortization provided in sec- 

 tion 185)" for "section 167" and added subpar, (D). 



1964— Subsec, (a)(2), (3)(C). Pub. L. 88-272 re- 

 defined "recomputed basis" with respect to elevators or 

 escalators in par. (2) . and Inserted subpar, (C) In par. (3). 



