[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: 26CFR1.1239-2]

[Page 331-332]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.1239-2  Gain from sale or exchange of depreciable property between 
certain related taxpayers on or before October 4, 1976.

    Section 1239 provides in general that any gain from the sale or 
exchange of depreciable property between a husband and wife or between 
an individual and a controlled corporation on or before October 4, 1976 
(and in the case of a sale or exchange occurring after that date if made 
under a binding contract entered into on or before that date), shall be 
treated as ordinary income. Thus, any gain recognized to the transferor 
from a sale or exchange after May 3, 1951, and on or before October 4, 
1976 (or thereafter if pursuant to a binding contract entered into on or 
before that date), directly or indirectly, between a husband and wife or 
between an individual and a controlled corporation, of property which, 
in the hands of the transferee, is property of a character subject to an 
allowance for depreciation provided in section 167 (including such 
property on which a deduction for amortization is allowable under 
sections 168 and 169) shall be considered as gain from the sale or 
exchange of property which is neither a capital asset nor property 
described in section 1231. For the purpose of section 1239, a 
corporation is controlled when more than 80 percent in value of all 
outstanding stock of the corporation is beneficially owned by the 
taxpayer, his spouse, and his minor children and minor grandchildren. 
For the purpose of this section, the terms children and grandchildren 
include legally adopted children and their children. The provisions of 
section 1239(a)(2) are applicable whether property is transferred from a

[[Page 332]]

corporation to a shareholder or from a shareholder to a corporation.

[T.D. 6500, 25 FR 12021, Nov. 26, 1960, as amended by T.D. 7569, 43 FR 
51388, Nov. 3, 1978]