2005 California Revenue and Taxation Code Sections 24911-24919 Article 2. Basis for Computation of Gain or Loss

24911.  (a) The adjusted basis for determining the gain or loss from
the sale or other disposition of property, whenever acquired, shall
be the basis (determined under Section 24912) or other applicable
sections of Chapter 15 (relating to gain or loss on disposition of
property) and Chapter 8 (relating to corporate distributions and
adjustments), adjusted as provided in Sections 24916 and 24917.
   (b) If a deduction is allowable under Section 24357 (relating to
charitable contributions) by reason of a sale, then the adjusted
basis for determining the gain from such sale shall be that portion
of the adjusted basis which bears the same ratio to the adjusted
basis as the amount realized bears to the fair market value of the
property.
24912.  The basis of property shall be the cost of the property,
except as otherwise provided in Chapter 8 (commencing with Section
24451), relating to corporate distributions and adjustments, and this
chapter.  The cost of real property shall not include any amount in
respect of real property taxes which are treated under Section 24346
as imposed on a corporation.
24913.  If the property should have been included in the last
inventory, the basis shall be the last inventory value thereof.
24914.  (a) If the property was acquired by gift after December 31,
1920, the basis shall be the same as it would be in the hands of the
donor or the last preceding owner by whom it was not acquired by
gift, except that if such basis (adjusted for the period before the
date of the gift as provided in Sections 24916 and 24917) is greater
than the fair market value of the property at the time of the gift,
then for the purpose of determining loss the basis shall be such fair
market value.  If the facts necessary to determine the basis in the
hands of the donor or the last preceding owner are unknown to the
donee, the Franchise Tax Board shall, if possible, obtain such facts
from such donor or last preceding owner, or any other person
cognizant thereof.  If the Franchise Tax Board finds it impossible to
obtain such facts, the basis in the hands of such donor or last
preceding owner shall be the fair market value of such property as
found by the Franchise Tax Board as of the date or approximate date
at which, according to the best information that the Franchise Tax
Board is able to obtain, such property was acquired by such donor or
last preceding owner.
   (b) If the property was acquired after December 31, 1920, by a
transfer in trust (other than by a transfer in trust by a gift,
bequest, or devise), the basis shall be the same as it would be in
the hands of the grantor increased in the amount of gain or decreased
in the amount of loss recognized to the grantor on such transfer
under the law applicable to the year in which the transfer was made.
24915.  (a) If--
   (1) The property is acquired by gift on or after the date of the
enactment of this section, the basis shall be the basis determined
under Section 24914, increased (but not above the fair market value
of the property at the time of the gift) by the amount of federal
gift tax paid with respect to such gift, or
   (2) The property was acquired by gift before the date of the
enactment of this section and has not been sold, exchanged, or
otherwise disposed of before such date, the basis of the property
shall be increased on such date by the amount of federal gift tax
paid with respect to such gift, but such increase shall not exceed an
amount equal to the amount by which the fair market value of the
property at the time of the gift exceeded the basis of the property
in the hands of the donor at the time of the gift.
   (b) For purposes of subsection (a), the amount of federal gift tax
paid with respect to any gift is an amount which bears the same
ratio to the amount of gift tax paid under Chapter 12 of Subtitle B
of the Internal Revenue Code of 1954 with respect to all gifts made
by the donor for the calendar year in which such gift is made as the
amount of such gift bears to the taxable gifts (as defined in Section
2503(a) of the Internal Revenue Code of 1954 but computed without
the deduction allowed by Section 2521 of the Internal Revenue Code of
1954) made by the donor during such calendar year.  For purposes of
the preceding sentence, the amount of any gift shall be the amount
included with respect to such gift in determining (for the purposes
of Section 2503(a) of the Internal Revenue Code of 1954) the total
amount of gifts made during the calendar year, reduced by the amount
of any deduction allowed with respect to such gift under Section 2522
of the Internal Revenue Code of 1954 (relating to charitable
deduction) or under Section 2523 of the Internal Revenue Code of 1954
(relating to marital deduction).
   (c) For purposes of subsection (a), where the donor and his spouse
elected, under Section 2513 of the Internal Revenue Code of 1954 to
have the gift considered as made one-half by each, the amount of gift
tax paid with respect to such gift under Chapter 12 of Subtitle B of
the Internal Revenue Code of 1954 shall be the  sum of the amounts
of tax paid with respect to each half of such gift (computed in the
manner provided in subsection (b)).
   (d) For purposes of Section 24917, an increase in basis under
subsection (a) shall be treated as an adjustment under Section 24916.
   (e) With respect to any property acquired by gift before 1955,
references in this section to any provision of this part shall be
deemed to refer to the corresponding provision of the Federal
Internal Revenue Code of 1939 or prior revenue laws which was
effective for the year in which such gift was made.
24916.  Proper adjustment  with regard to the property shall in all
cases be made as follows:
   (a) For expenditures, receipts, losses, or other items properly
chargeable to capital account.  However, no adjustment shall be made
for any of the following:
   (1) Sales or use tax paid or incurred in connection with the
acquisition of property for which a tax credit is claimed pursuant to
Section 23612.2.
   (2) Taxes or other carrying charges described in Section 24426, or
for expenditures described in Sections 24364 and 24369 for which
deductions have been taken in determining net income for the taxable
year or any prior taxable year.
   (b) For exhaustion, wear and tear, obsolescence, amortization, and
depletion:
   (1) In the case of corporations subject to the tax imposed by
Chapter 2 (commencing with Section 23101), to the extent sustained
prior to January 1, 1928, and to the extent allowed (but not less
than the amount allowable) under this part, except that no deduction
shall be made for amounts in excess of the amount which would have
been allowable had depreciation not been computed on the basis of
January 1, 1928, value and amounts in excess of the adjustments
required by Section 113(b)(1)(B) of the Federal Revenue Act of 1938
for depletion prior to January 1, 1932.
   (2) In the case of a taxpayer subject to the tax imposed by
Chapter 3 (commencing with Section 23501), to the extent sustained
prior to January 1, 1937, and for periods thereafter to the extent
allowed (but not less than the amount allowable) under the provisions
of this part.
   (3) If a taxpayer has not claimed an amortization deduction for an
emergency facility, the adjustment under paragraph (1) shall be made
only to the extent ordinarily provided under Sections 24349 and
24372.
   (c) In the case of stock (to the extent not provided for in the
foregoing subdivisions) for the amount of distributions previously
made which, under the law applicable to the year in which the
distribution was made, either were tax free or were applicable in
reduction of basis (not including distributions made by a
corporation, which was classified as a personal service corporation
under the provisions of the Federal Revenue Act of 1918 or 1921, out
of its earnings or profits which were taxable in accordance with the
provisions of Section 218 of the Federal Revenue Act of 1918 or
1921).
   (d) (1) In the case of corporations subject to the tax imposed by
Chapter 2 (commencing with Section 23101), in the case of any bond,
as defined in Section 24363, to the extent of the deductions
allowable pursuant to Section 24360 with respect thereto.
   (2) In the case of taxpayers subject to the tax imposed by Chapter
3 (commencing with Section 23501), in the case of any bond, as
defined in Section 24363, the interest on which is wholly exempt from
the tax imposed by this part, to the extent of the amortizable bond
premium disallowable as a deduction pursuant to subdivision (b) of
Section 24360, and in the case of any other bond, as defined in
Section 24363, to the extent of the deductions allowable pursuant to
subdivision (a) of Section 24360 (or the amount applied to reduce
interest payments under paragraph (2) of subdivision (a) of Section
24363.5) with respect thereto.
   (3) In the case of property pledged to the Commodity Credit
Corporation, to the extent of the amount received as a loan from the
Commodity Credit Corporation  and treated by the taxpayer as income
for the year in which received pursuant to Section 24273, and to the
extent of any deficiency on that loan with respect to which the
taxpayer has been relieved from liability.
   (e) For amounts allowed as deductions as deferred expenses under
Section 616(b) of the Internal Revenue Code, relating to certain
expenditures in the development of mines, and resulting in a
reduction of the taxpayer's tax, but not less than the amounts
allowable under that section for the taxable year and prior years.
   (f) For amounts allowable as deductions as deferred expenses under
Section 617(a) of the Internal Revenue Code, relating to certain
exploration expenditures, and resulting in a reduction of the
taxpayer's tax, but not less than the amounts allowable under that
section for the taxable year and prior years.
   (g) For amounts allowed as deductions as deferred expenses under
subdivision (a) of Section 24366, relating to research and
experimental expenditures, and resulting in a reduction of the
corporation's taxes under this part, but not less than the amounts
allowable under that section for the taxable year and prior years.
   (h) For amounts allowed as deductions under Sections 24356.2,
24356.3, and 24356.4.
   (i) (1) To the extent provided in Section 179A(e)(6)(A) of the
Internal Revenue Code, relating to basis reduction for clean-fuel
vehicles and certain refueling property.
   (2) This subdivision shall apply to property placed in service
after June 30, 1993, without regard to taxable year.
   (j) In the case of property the acquisition of which resulted
under Section 1044 of the Internal Revenue Code, relating to rollover
of publicly traded securities gain into specialized small business
investment companies, in the nonrecognition of any part of the gain
realized on the sale of other property, to the extent provided in
Section 1044(d) of the Internal Revenue Code, relating to basis
adjustments.
24916.2.  Notwithstanding the provisions of Section 24916 no
adjustment shall be made for (a) abandonment fees paid in respect of
property on which the open-space easement is terminated under Section
51061 or 51093 of the Government Code or (b) tax recoupment fees
paid under Section 51142 of the Government Code.
24917.  Whenever it appears that the basis of property in the hands
of the corporation is a substituted basis, then the adjustments
provided in Section 24916 shall be made after first making in respect
of that substituted basis proper adjustments of a similar nature in
respect of the period during which the property was held by the
transferor, donor, or grantor, or during which the other property was
held by the person for whom the basis is to be determined.  A
similar rule shall be applied in the case of a series of substituted
bases.
24918.  (a) Section 1017 of the Internal Revenue Code, relating to
discharge of indebtedness, shall apply, except as otherwise provided.
  References to affiliated groups which file a consolidated return
under Section 1501 of the Internal Revenue Code shall be treated as
meaning members of the same unitary group which file a combined
report under Article 1 (commencing with Section 25101) of Chapter 17.
   (b) The amendments to Section 1017 of the Internal Revenue Code
made by Section 13150 of the Revenue and Reconciliation Act of 1993
(Public Law 103-66), relating to modifications of discharge of
indebtedness provisions, shall apply to discharges occurring on or
after January 1, 1996, in taxable years beginning on or after January
1, 1996.
24919.  Neither the basis nor the adjusted basis of any portion of
real property shall, in the case of the lessor of such property, be
increased or diminished on account of income derived by the lessor in
respect of such property and excludable from gross income under
Section 24309 (relating to improvements by lessee on lessor's
property).  If an amount representing any part of the value of real
property attributable to buildings erected or other improvements made
by a lessee in respect of such property was included in gross income
of the lessor for any taxable year beginning before January 1, 1942,
the basis of each portion of such property shall be properly
adjusted for the amount so included in gross income.