[Code of Federal Regulations]
[Title 26, Volume 11]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.1016-4]

[Page 69-70]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.1016-4  Exhaustion, wear and tear, obsolescence, amortization, 
and depletion; periods during which income was not subject to tax.

    (a) Adjustments to basis must be made for exhaustion, wear and tear, 
obsolescence, amortization, and depletion to the extent actually 
sustained in respect of:
    (1) Any period before March 1, 1913,
    (2) Any period since February 28, 1913, during which the property 
was held by a person or organization not subject to income taxation 
under chapter 1 of the Code or prior income tax laws,
    (3) Any period since February 28, 1913, and before January 1, 1958, 
during which the property was held by a person subject to tax under part 
I, subchapter L, chapter 1 of the Code, or prior income tax law, to the 
extent that section 1016(a)(2) does not apply, and
    (4) Any period since February 28, 1913, during which such property 
was held

[[Page 70]]

by a person subject to tax under part II of subchapter L, chapter 1 of 
the Code, or prior income tax law, to the extent that section 1016(a)(2) 
does not apply.
    (b) The amount of the adjustments described in paragraph (a) of this 
section actually sustained is that amount charged off on the books of 
the taxpayer where such amount is considered by the Commissioner to be 
reasonable. Otherwise, the amount actually sustained will be the amount 
that would have been allowable as a deduction:
    (1) During the period described in paragraph (a) (1) or (2) of this 
section, had the taxpayer been subject to income tax during those 
periods, or
    (2) During the period described in paragraph (a) (3) or (4) of this 
section, with respect to property held by a taxpayer described in that 
paragraph, to the extent that section 1016(a)(2) was inapplicable to 
such property during that period.

In the case of a taxpayer subject to the adjustment required by 
subparagraph (1) or (2) of this paragraph, depreciation shall be 
determined by using the straight line method.

[T.D. 6681, 28 FR 11131, Oct. 17, 1963]