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INCOME TAX PROJECT 1 (MATERIALS FOR MEETING OF ADVISORY BOARD, February 10-11, 1949)

handle is hein.ali/aliftp0439 and id is 1 raw text is: AMERICAN LAW INSTITUTE
INCOME TAX PROJECT
Materials for Meeting of Advisory Board
February 10 and 11, 1949
AGe&DA: NON-RCON1TION OF GAIN OR LOSS
I. VOLUNTARY TRANSACTIONS
A. Exchange of Property Not Involving Corporate Formation or Readjustments
i. Section l12(b) (I)
a. Should the section be limited to the following?
(1)  Exchange of property (not including sTock in trade) for
property similar or related in service or use i l12(f)
test], provided the property exchanged did not exceed
*__ in valuo (said dollar amount to be relatively
snail).
(a)   The present over-all limitations requiring the ex--
change of property held either for productive use
in trade or business or for investment (not in-
cluding stock in trade and securities) would con-
tinue.
(b)   Presumably this would exclude the exchange cf unim-
proved realty for improved realty, the exchange of
one type of real property used in business for
another type of real property used in business, etc.
(2)  Exchange of residences.
b. If the present section is retained, should we try to define
trade or business as used therein in light of cases, such
as Leland Hazard, 7 T.C. 372 (1946) acq. 1946-2 C.B. 3, and
N. Stuart Campbell, 5 T.C. 272 (1945)?
c. Should Section 112(k) extend to Sectiun 112(b)(1) or is the
present treatment of liabilities under 112(b)(1) correct?
2. Section 112(b)(2). Does this section have any necessary function
with respect to exchanges between shareholders, as in divorce
settlements in community property states (or elsewhere where the
property is held jointly), or as in such dealings by brokerage
firms as the exchange of odd lots for higher denomination
certifica tes?
B. Transuctions of a Corporate Nature
I. Formation of a Corporation L[elevant Present Sections: 112(b)(5),
(c), (k))
-1-

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