[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: 26CFR1.1082-6]

[Page 202-203]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.1082-6  Basis of property acquired under section 1081(d) in 
transactions between corporations of the same system group.

    (a) If property was acquired by a corporation which is a member of a 
system group, from a corporation which is a member of the same system 
group, upon a transfer or distribution described in section 1081 (d)(1), 
then as a general rule the basis of such property in the hands of the 
acquiring corporation is the basis which such property would have had in 
the hands of the transferor if the transfer or distribution had not been 
made. Except as otherwise indicated in this section, this rule will 
apply equally to cases in which the consideration for the property 
acquired consists of stock or securities, money, and other property, or 
any of them, but it is contemplated that an ultimate true reflection of 
income will be obtained in all cases, notwithstanding any peculiarities 
in form which the various transactions may assume. See the example in 
Sec. 1.1081-6.
    (b) An exception to the general rule is provided for in case the 
property acquired consists of stock or securities issued by the 
corporation from which such stock or securities were received. If such 
stock or securities were the sole consideration for the property 
transferred to the corporation issuing such stock or securities, then 
the basis of the stock or securities shall be (1) the same as the basis 
(adjusted to the time of the transfer) of the property transferred for 
such stock or securities, or (2) the fair market value of such stock or 
securities at the time of their receipt, whichever is the lower. If such 
stock or securities constituted only part consideration for the property 
transferred to the corporation issuing such stock or securities, then 
the basis shall be an amount which bears the same ratio to the basis of 
the property transferred as the fair market value of such stock or 
securities on their receipt bears to the total fair market value of the 
entire consideration received, except that the fair market value of such 
stock or securities at the time of their receipt shall be the basis 
therefor, if such value is lower than such amount.

[[Page 203]]

    (c) The application of paragraph (b) of this section may be 
illustrated by the following examples:

    Example 1. Suppose the A Corporation has property with an adjusted 
basis of $600,000 and, in an exchange in which section 1081 (d)(1) is 
applicable, transfers such property to the B Corporation in exchange for 
a total consideration of $1,000,000, consisting of (1) cash in the 
amount of $100,000, (2) tangible property having a fair market value of 
$400,000 and an adjusted basis in the hands of the B Corporation of 
$300,000, and (3) stock or securities issued by the B Corporation with a 
par value and a fair market value as of the date of their receipt in the 
amount of $500,000. The basis to the B Corporation of the property 
received by it is $600,000, which is the adjusted basis of such property 
in the hands of the A Corporation. The basis to the A Corporation of the 
assets (other than cash) received by it is as follows: Tangible 
property, $300,000, the adjusted basis of such property to the B 
Corporation, the former owner; stock or securities issued by the B 
Corporation, $300,000, an amount equal to 550,000/ 1,000,000ths of 
$600,000.
    Example 2. Suppose that in example (1) the property of the A 
Corporation transferred to the B Corporation had an adjusted basis of 
$1,100,000 instead of $600,000, and that all other factors in the 
example remain the same. In such case, the basis to the A Corporation of 
the stock or securities in the B Corporation is $500,000, which was the 
fair market value of such stock or securities at the time of their 
receipt by the A Corporation, because this amount is less than the 
amount established as 500,000/1,000,000ths of $1,100,000 or $550,000.