REPUBLIC ACT No. 1921
AN ACT TO AMEND SECTION THIRTY-FIVE OF THE NATIONAL INTERNAL REVENUE CODE, AND FOR OTHER PURPOSE.
Section 1. Section thirty-five of Commonwealth Act Numbered Four hundred sixty-six is hereby amended to read as follows;
"Sec. 35. Determination of gain or loss from the sale or other disposition of property. The gain derived or loss sustained from the sale or other disposition of property, real, personal, or mixed, shall be determined in accordance with the following schedule:
"(a) In the case of property acquired before March first, nineteen hundred and thirteen, the fair market price or value of such property as of March first, nineteen hundred and thirteen.
"(b) In the case of property acquired on or after March first, nineteen hundred and thirteen, the cost thereof if such property was acquired by purchase or the fair market price or value as of the date of the acquisition if the same was acquired by gratuitous title.
"(c) Exchange of property
(1) General rule: Except as...
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Republic Acts
AN ACT TO AMEND SECTION THIRTY-FIVE OF THE NATIONAL INTERNAL REVENUE CODE
Republic Act No. 1921
Summary of Republic Act No. 1921
Determination of Gain or Loss from Sale or Disposition of Property (Section 1)
- Provides rules for determining gain or loss from sale or disposition of property:
• For property acquired before March 1, 1913, use fair market value as of March 1, 1913. (Section 1(a))
• For property acquired on or after March 1, 1913, use cost if purchased or fair market value if acquired gratuitously. (Section 1(b))
Exchange of Property (Section 1(c))
• General rule: Entire gain or loss is recognized upon sale or exchange of property. (Section 1(c)(1))
• Exceptions for mergers or consolidations:
• No gain or loss recognized if a corporation exchanges property solely for stock in another corporation involved in the merger/consolidation. (Section 1(c)(2)(a))
• No gain or loss recognized if a shareholder exchanges stock solely for stock of another corporation involved in the merger/consolidation. (Section 1(c)(2)(b))
• No gain or loss recognized if a security holder exchanges securities solely for stock or securities of another corporation involved in the merger/consolidation. (Section 1(c)(2)(c))
• If shareholder/security holder receives money or other property in addition to permitted stock/securities, gain (but not loss) is recognized up to the sum of money and fair market value of other property received. (Section 1(c)(3)(a))
• If transferor corporation receives money or other property in addition to permitted stock, gain (but not loss) is recognized up to the sum of money and fair market value of other property received if not distributed pursuant to the merger/consolidation plan. (Section 1(c)(3)(b))
• Assumption of liability or acquisition of property subject to liability is not treated as money or other property. (Section 1(c)(3)(c))
• Basis of stock/securities received by transferor corporation, shareholder, or security holder is the same as the basis of property, stock, or securities exchanged, adjusted for money, other property, dividends, and recognized gain. (Section 1(c)(4)(a))
• Basis of property transferred in the hands of the transferee is the same as in the hands of the transferor, increased by the gain recognized to the transferor. (Section 1(c)(4)(b))
• Definitions:
• "Securities" means bonds and debentures, but not "notes". (Section 1(c)(5)(a))
• "Merger" or "consolidation" includes ordinary merger/consolidation or acquisition of substantially all properties of another corporation solely for stock, if undertaken for a bona fide business purpose and not solely for tax avoidance. (Section 1(c)(5)(b))
• Collector of Internal Revenue is authorized to issue rules and regulations for determining "substantially all" and implementing this section. (Section 1(c)(5)(c))
Effective Date (Section 2)
• This Act shall take effect upon its approval on June 22, 1957.
Determination of Gain or Loss from Sale or Disposition of Property (Section 1)
- Provides rules for determining gain or loss from sale or disposition of property:
• For property acquired before March 1, 1913, use fair market value as of March 1, 1913. (Section 1(a))
• For property acquired on or after March 1, 1913, use cost if purchased or fair market value if acquired gratuitously. (Section 1(b))
Exchange of Property (Section 1(c))
• General rule: Entire gain or loss is recognized upon sale or exchange of property. (Section 1(c)(1))
• Exceptions for mergers or consolidations:
• No gain or loss recognized if a corporation exchanges property solely for stock in another corporation involved in the merger/consolidation. (Section 1(c)(2)(a))
• No gain or loss recognized if a shareholder exchanges stock solely for stock of another corporation involved in the merger/consolidation. (Section 1(c)(2)(b))
• No gain or loss recognized if a security holder exchanges securities solely for stock or securities of another corporation involved in the merger/consolidation. (Section 1(c)(2)(c))
• If shareholder/security holder receives money or other property in addition to permitted stock/securities, gain (but not loss) is recognized up to the sum of money and fair market value of other property received. (Section 1(c)(3)(a))
• If transferor corporation receives money or other property in addition to permitted stock, gain (but not loss) is recognized up to the sum of money and fair market value of other property received if not distributed pursuant to the merger/consolidation plan. (Section 1(c)(3)(b))
• Assumption of liability or acquisition of property subject to liability is not treated as money or other property. (Section 1(c)(3)(c))
• Basis of stock/securities received by transferor corporation, shareholder, or security holder is the same as the basis of property, stock, or securities exchanged, adjusted for money, other property, dividends, and recognized gain. (Section 1(c)(4)(a))
• Basis of property transferred in the hands of the transferee is the same as in the hands of the transferor, increased by the gain recognized to the transferor. (Section 1(c)(4)(b))
• Definitions:
• "Securities" means bonds and debentures, but not "notes". (Section 1(c)(5)(a))
• "Merger" or "consolidation" includes ordinary merger/consolidation or acquisition of substantially all properties of another corporation solely for stock, if undertaken for a bona fide business purpose and not solely for tax avoidance. (Section 1(c)(5)(b))
• Collector of Internal Revenue is authorized to issue rules and regulations for determining "substantially all" and implementing this section. (Section 1(c)(5)(c))
Effective Date (Section 2)
• This Act shall take effect upon its approval on June 22, 1957.