26 U.S.C. § 1255 | Gain from disposition of section 126 property

(a)

General rule

(1)

Ordinary income

Except as otherwise provided in this section, if section 126 property is disposed of, the lower of—

(A)

the applicable percentage of the aggregate payments, with respect to such property, excluded from gross income under section 126, or

(B)

the excess of—

(i)

the amount realized (in the case of a sale, exchange, or involuntary conversion), or the fair market value of such section 126 property (in the case of any other disposition), over

(ii)

the adjusted basis of such property,

shall be treated as ordinary income. Such gain shall be recognized notwithstanding any other provision of this subtitle, except that this section shall not apply to the extent such gain is recognized as ordinary income under any other provision of this part.

(2)

Section 126 property

For purposes of this section, “section 126 property” means any property acquired, improved, or otherwise modified by the application of payments excluded from gross income under section 126.

(3)

Applicable percentage

For purposes of this section, if section 126 property is disposed of less than 10 years after the date of receipt of payments excluded from gross income under section 126, the applicable percentage is 100 percent. If section 126 property is disposed of more than 10 years after such date, the applicable percentage is 100 percent reduced (but not below zero) by 10 percent for each year or part thereof in excess of 10 years such property was held after the date of receipt of the payments.

(b)

Special rules

Under regulations prescribed by the Secretary—

(1)

rules similar to the rules applicable under section 1245 shall be applied for purposes of this section, and

(2)

for purposes of sections 170(e) and 751(c), amounts treated as ordinary income under this section shall be treated in the same manner as amounts treated as ordinary income under section 1245.

Pub. L. 95–600, title V, § 543(c)(1)Nov. 6, 197892 Stat. 2890 Pub. L. 96–222, title I, § 105(a)(7)(B)Apr. 1, 198094 Stat. 221 Pub. L. 96–471, § 2(b)(6)Oct. 19, 198094 Stat. 2254 Pub. L. 99–514, title V, § 511(d)(2)(A)Oct. 22, 1986100 Stat. 2248 Pub. L. 100–647, title I, § 1005(c)(10)Nov. 10, 1988102 Stat. 3392 Pub. L. 108–27, title III, § 302(e)(4)(B)(ii)May 28, 2003117 Stat. 764 Pub. L. 115–141, div. U, title IV, § 401(a)(175)Mar. 23, 2018132 Stat. 1192(Added , , ; amended , (D), , ; , , ; , title VI, § 631(e)(14), , , 2275; , , ; , , ; , , .)

Editorial Notes

Amendments

Pub. L. 115–1412018—Subsec. (b)(2). substituted “170(e)” for “170(e),”.

Pub. L. 108–272003—Subsec. (b)(2). struck out “, 341(e)(12),” after “170(e)”.

Pub. L. 100–647 Pub. L. 99–514, § 511(d)(2)(A)1988—Subsec. (b)(2). amended , see 1986 Amendment note below.

Pub. L. 99–514, § 511(d)(2)(A)Pub. L. 100–6471986—Subsec. (b)(2). , as amended by , struck out “163(d),” after “sections”.

Pub. L. 99–514, § 631(e)(14), struck out “453B(d)(2)” after “341(e)(12),”.

Pub. L. 96–222, § 105(a)(7)(B)1980—Subsec. (a)(1)(B). , inserted following cl. (ii) provisions requiring that such gain be recognized notwithstanding any other provision of this subtitle, except that this section shall not apply to the extent such gain is recognized as ordinary income under any other provision of this part.

Pub. L. 96–471Subsec. (b)(2). substituted “453B(d)(2)” for “453(d)(4)(B)”.

Pub. L. 96–222, § 105(a)(7)(D), inserted “for purposes of sections 163(d), 170(e), 341(e)(12), 453(d)(4)(B), and 751(c)” before “amounts treated as”.

Statutory Notes and Related Subsidiaries

Effective Date of 2003 Amendment

Pub. L. 108–27Dec. 31, 2002section 302(f) of Pub. L. 108–27 section 1 of this titleAmendment by applicable, except as otherwise provided, to taxable years beginning after , see , set out as an Effective and Termination Dates of 2003 Amendment note under .

Effective Date of 1988 Amendment

Pub. L. 100–647 Pub. L. 99–514 section 1019(a) of Pub. L. 100–647 section 1 of this titleAmendment by effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, , to which such amendment relates, see , set out as a note under .

Effective Date of 1986 Amendment

section 511(d)(2)(A) of Pub. L. 99–514Dec. 31, 1986section 511(e) of Pub. L. 99–514 section 163 of this titleAmendment by applicable to taxable years beginning after , see , set out as a note under .

section 631(e)(14) of Pub. L. 99–514July 31, 1986Jan. 1, 1987section 338 of this titleDec. 31, 1986Dec. 31, 1986section 633 of Pub. L. 99–514 section 336 of this titleAmendment by applicable to any distribution in complete liquidation, and any sale or exchange, made by a corporation after , unless such corporation is completely liquidated before , any transaction described in for which the acquisition date occurs after , and any distribution, not in complete liquidation, made after , with exceptions and special and transitional rules, see , set out as an Effective Date note under .

Effective Date of 1980 Amendments

Pub. L. 96–471 section 6(a)(1) of Pub. L. 96–471 section 453 of this titleFor effective date of amendment by , see , set out as an Effective Date note under .

Pub. L. 96–222 Pub. L. 95–600 section 201 of Pub. L. 96–222 section 32 of this titleAmendment by effective, except as otherwise provided, as if it had been included in the provisions of the Revenue Act of 1978, , to which such amendment relates, see , set out as a note under .

Effective Date

Sept. 30, 1979section 543(d) of Pub. L. 95–600 section 126 of this titleSection effective with respect to grants made under the programs after , see , set out as a note under .