[Code of Federal Regulations]
[Title 26, Volume 6]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.475(a)-3]

[Page 554-555]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.475(a)-3  Acquisition by a dealer of a security with a substituted 
basis.

    (a) Scope. This section applies if--
    (1) A dealer in securities acquires a security that is subject to 
section 475(a) and the dealer's basis in the security is determined, in 
whole or in part, by reference to the basis of that security in the 
hands of the person from whom the security was acquired; or
    (2) A dealer in securities acquires a security that is subject to 
section 475(a) and the dealer's basis in the security is determined, in 
whole or in part, by reference to other property held at any time by the 
dealer.
    (b) Rules. If this section applies to a security--
    (1) Section 475(a) applies only to changes in value of the security 
occurring after the acquisition; and
    (2) Any built-in gain or loss with respect to the security (based on 
the difference between the fair market value of the security on the date 
the dealer acquired it and its basis to the dealer on that date) is 
taken into account at

[[Page 555]]

the time, and has the character, provided by the sections of the 
Internal Revenue Code that would apply to the built-in gain or loss if 
section 475(a) did not apply to the security.

[T.D. 8700, 61 FR 67720, Dec. 24, 1996]