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INCOME TAX PROJECT 1 (TENTATIVE DECISIONS ON NON-RECOGNITION OF GAIN OR LOSS, February 10-11, 1949)

handle is hein.ali/aliftp0440 and id is 1 raw text is: April 20, 1949

The American Law Institue
Income Tax Project
TENTATIVE DECISIONS ON NONRECOGNITION OF GAIN OR LOSS
REACHED AT EETING OF ADVISORY GROUP ON FEBRUARY 10 AND 11) 1949
0
I. VOLUNTARY TRANSACTIONS
A. Exchange of Property Not InvolviRS Corporate Formation or Readjust-...
ments
1. Section 112(b)(l)
a. Require that property exchanged be similar or related in
service or use [language of §112(f)].
b. Continue requirement that property be held for productive use
in trade or business; change for investment to for the
production of income.
c. No other changes at present; assumption of liabilities to con-
tinue to result in gain; consideration to be given to ultimate
elimination of section.
d. Exchange of personal residences to be permitted, but placed
under involuntary conversions.
Unanswered: Should we try to define trade or business 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)?
2. Section 112(b)(2)
a. Provide that exchange of certificates representing a certain
number of shares of stock for a different number of certifi-
cates representing the same total number of shares is not a
taxable disposition of property.
b. Otherwise try to absorb this section into the recapitaliza-
tion provisions.
B. Transactions of a Corporate Nature
1, Formation of or transfers to a corporation   Relevant present
sections:- 17b(5),- (c)-k'...        .
a. Eliminate the proportionate interest test. Invite comment as
to any necessity for its continuance6
b. Eliminate authorization for receipt of securities for property;
permit securities to be received in exchange for cashf

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