26Title 26The US tax code, read & explained

26 U.S.C. § 1255

§ 1255. Gain from disposition of section 126 property

320 words · amended 6 times · cited by 1 other sections

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No plain-English explainer yet. Below is the official text. Explainers are being added section by section.

History

Added in 1978 by the Revenue Act of 1978. Last changed March 23, 2018 by the Consolidated Appropriations Act, 2018.

Every change, newest first (7)
  1. March 23, 2018Consolidated Appropriations Act, 2018
  2. May 28, 2003Jobs and Growth Tax Relief Reconciliation Act of 2003
  3. November 10, 1988Technical and Miscellaneous Revenue Act of 1988
  4. October 22, 1986Tax Reform Act of 1986
  5. October 19, 1980Public Law 96-471
  6. April 1, 1980Public Law 96-222
  7. November 6, 1978Revenue Act of 1978 · added this section

The law as written

Current through Public Law 119-102. Amendment notes omitted.

Structure

  1. (a) General rule
  2. (b) Special rules
(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.