[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: 26CFR1.1331-1]

[Page 649]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.1331-1  Recoveries in respect of war losses.

    (a)(1) The amount of any recovery in respect of war loss property 
must be included in gross income to the extent provided in section 1332 
unless, pursuant to the taxpayer's election under section 1335, the 
provisions of section 1333 are applicable to such recovery. For the 
treatment of war loss recoveries under section 1333 and the manner of 
making the election under section 1335, see Sec. Sec. 1.1333-1 and 
1.1335-1.
    (2) As used in this part, the term war loss property means property 
considered under section 127(a) of the Internal Revenue Code of 1939 as 
destroyed or seized, including any interest described in section 
127(a)(3) of the Internal Revenue Code of 1939.
    (3) For regulations governing the treatment of war losses under the 
Internal Revenue Code of 1939, see 26 CFR (1939) 29.127(a)-1 to 
29.127(a)-4, inclusive, 29.127(b)-1, and 29.127(e)-1 (Regulations 111) 
and 26 CFR (1939) 39.127(a)-1 (Regulations 118).
    (b) The recoveries in respect of any war loss property include the 
recovery of the same war loss property and the recovery of any money or 
property in lieu of such property or on account of the destruction or 
seizure of such property. For example, there is a recovery upon the 
return to the taxpayer after the termination of the war of his property 
which was treated as war loss property because it was located in a 
country at war with the United States. An award by a government on 
account of the seizure of the taxpayer's property by an enemy country is 
a recovery under this section. The amount obtained upon the sale or 
other transfer by the taxpayer of his right to any war loss property is 
also a recovery for the purpose of this section. Similarly, if a 
taxpayer who sustained a war loss upon the liquidation of a corporation 
has received the rights to any property of the corporation which was 
treated as war loss property, any recovery by the taxpayer with respect 
to such rights is a recovery by him for the purposes of this section.
    (c) For the purpose of this section, the recoveries considered are 
only those with respect to war losses sustained in prior taxable years. 
Similarly, the only deductions considered are those allowable for prior 
taxable years, and any allowable deductions for the year of the recovery 
are ignored for the purposes of applying such section to the recovery.
    (d) If a deduction was claimed under section 127(a) of the Internal 
Revenue Code of 1939 by a taxpayer in computing his tax for any taxable 
year and if such deduction was disallowed in whole or in part, any 
recovery in respect of the portion disallowed shall not be subject to 
the provisions of part IV (section 1331 and following), subchapter Q, 
chapter 1 of the Code.

[T.D. 6500, 25 FR 12042, Nov. 26, 1960]