Section

[Code of Federal Regulations]
[Title 26, Volume 7]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.614-6]

[Page 495-503]

TITLE 26--INTERNAL REVENUE

CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY
(CONTINUED)

PART 1_INCOME TAXES--Table of Contents

Sec. 1.614-6 Rules applicable to basis, holding period, and abandonment
losses where mineral interests have been aggregated or combined.

(a) Basis of property resulting from aggregation or combination--(1)
General rule. (i) When a taxpayer has aggregated as one property two or
more interests under section 614(b) (prior to its amendment by section
226(a) of the Revenue Act of 1964), (c), or (e), the unadjusted basis of
such aggregated property shall be the sum of the unadjusted bases of the
various mineral interests aggregated. The adjusted basis of the
aggregated property on the effective date of the aggregation shall

[[Page 496]]

be the unadjusted basis of the aggregated property, adjusted by the
total of all adjustments to the bases of the several mineral interests
aggregated as required by section 1016 to the effective date of
aggregation. Thereafter, the adjustments to basis required by section
1016 shall apply to the total adjusted basis of the aggregated property
for all purposes of subtitle A of the Code.
(ii) When a taxpayer has combined as one property two or more
interests under section 614(b) (as amended by section 226(a) of the
Revenue Act of 1964), the adjusted basis of such combined property shall
be the sum of:
(a) The unadjusted bases of all such interests which have never been
included in an aggregation; and
(b) The adjusted bases of all such interests which at some time have
been included in an aggregation, as of the date on which they ceased to
participate in an aggregation;

adjusted by the total of all adjustments to the bases of the several
mineral interests combined, as required by section 1016,
(c) In the case of interests described in (a), for the entire period
of the taxpayer's ownership of such interest; and
(d) In the case of interests described in (b), for the period, if
any, between the time of deaggregation and the time of combination.

Thereafter, the adjustments to basis required by section 1016 shall
apply to the total adjusted basis of the combined property for all
purposes of subtitle A of the Code.
(2) Bases upon disposition of part of, or termination of, or change
in, an aggregated or combined property--(i) In general. (a) When a
taxpayer has aggregated or combined two or more separate mineral
interests as one property under section 614(b) (either before or after
its amendment by section 226(a) of the Revenue Act of 1964), (c), or (e)
and thereafter sells, exchanges, or otherwise disposes of part of such
property, the total adjusted basis of the property as of the date of
sale, exchange, or other disposition shall be apportioned to determine
the adjusted basis of the part disposed of and the part retained for
purposes of computing gain or loss, depletion and for all other purposes
of subtitle A of the Code. Such adjusted basis shall be determined by
apportioning the total adjusted basis of the property between the part
of the property disposed of and the part retained in the same proportion
as the fair market value of each part (as of the date of sale, exchange,
or other disposition) bears to the total fair market value of the
property as of such date. For determining gain or loss on the sale or
exchange of any part of the aggregated or combined property, the
adjusted basis of the aggregated or combined property (from which the
adjusted basis of the part is determined) shall not be reduced below
zero.
(b) If, for any taxable year after the first taxable year for which
an aggregation under section 614(b) (prior to its amendment by section
226(a) of the Revenue Act of 1964), (c), or (e) is effective:
(1) Any such aggregation is terminated for any reason other than the
expiration of an aggregation by reason of section 614(b) as amended by
section 226(a) of the Revenue Act of 1964 (see subdivision (ii) of this
subparagraph), or
(2) The treatment of any mineral interests in any such aggregation
is changed after obtaining the consent of the Commissioner,

then the adjusted basis of the aggregated property as of the first day
of the first taxable year for which such termination or change is
effective shall be apportioned to determine the adjusted bases of the
resultant separate mineral interests, as of such first day, for purposes
of computing gain or loss, depletion, and for all other purposes of
subtitle A of the Code. The adjusted bases of such separate mineral
interests shall be determined by apportioning the adjusted basis of the
aggregated property (as of the first day of the first taxable year for
which such termination or change is effective) between or among such
interests in the same proportion as the fair market value of each such
interest (as of such first day) bears to the total fair market value of
the aggregated property as of such first day. For the purpose of
determining the adjusted bases of the separate mineral interests, the
adjusted basis of the aggregated property (from which the adjusted basis
of each separate mineral

[[Page 497]]

interest is determined) shall not be reduced below zero.
(ii) Allocation of basis of aggregation of operating mineral
interests in oil and gas wells as of the first day of the first taxable
year beginning after December 31, 1963--(a) Fair market value method.
Unless the taxpayer elects to use the allocation of adjustments method
of determining basis provided in (b) of this subdivision (ii), the
adjusted basis as of the first day of the first taxable year beginning
after December 31, 1963, of each interest which was participating in an
aggregation of operating mineral interests on the day preceding such
first day shall be determined by multiplying the adjusted basis of the
aggregation by a fraction the numerator of which is the fair market
value of such interest and the denominator of which is the fair market
value of such aggregation. For purposes of this subdivision (a), the
adjusted basis and the fair market value of the aggregation, and the
fair market value of such interest, shall be determined as of the day
preceding the first day of the first taxable year which begins after
December 31, 1963. Unless the taxpayer elects to use the allocation of
adjustments method, he shall obtain accurate and reliable information,
and keep records with respect thereto, establishing all facts necessary
for making the computation prescribed in this subdivision (a). See
example 5 of subparagraph (3) of this paragraph.
(b) Allocation of adjustments method. (i) The taxpayer may elect to
determine basis by an allocation of adjustments in lieu of the fair
market value method prescribed in (a) of this subdivision (ii). In such
a case, the adjusted basis (as of the first day of the first taxable
year beginning after December 31, 1963) of each interest which was
participating in an aggregation of operating mineral interests on the
day preceding such first day is the unadjusted basis of such interest
immediately after its acquisition by the taxpayer, adjusted by the total
of all adjustments to its basis as required by section 1016 to the
effective date of aggregation, and by that portion of those section 1016
adjustments to the basis of the aggregation which is reasonably
attributable to such interest. For this purpose, two or more interests
which are being combined upon deaggregation shall be treated as one
interest. An adjustment to the basis of the aggregation is reasonably
attributable to such interest to the extent that the adjustment thereto
resulted from inclusion of the interest in the aggregation, even though
such interest would not have been entitled to the adjustment to the same
extent if such interest had been treated separately because of the 50
percent of taxable income limitation or for any other reason. In a case
in which the amount of a percentage depletion deduction which was
allowed with respect to an aggregation was limited by the 50 percent of
taxable income limitation of section 613(a), the portion of such amount
which is attributable to each of the interests in the aggregation shall
be determined by multiplying such amount by a fraction, the numerator of
which is the gross income from such interest and the denominator of
which is the gross income from the aggregation. The determination as to
which property a particular adjustment is attributable may be based upon
records of production or any other facts which establish the
reasonableness of the determination. See example 6 of subparagraph (3)
of this paragraph.
(ii) If, under the adjustment described in (i) of this subdivision
(b), the total of the adjusted bases of the interests which were
included in the aggregation exceeds the adjusted basis of the
aggregation, the adjusted bases of the interests shall be further
adjusted so that the total of the adjusted bases of the interests equals
the adjusted basis of the aggregation. This further adjustment shall be
made by reducing the basis of each interest (other than an interest
having a basis of zero) by an amount which is determined by multiplying
such excess by a fraction, the numerator of which is the adjusted basis
of such interest after making the adjustment described in (i) of this
subdivision (b) and the denominator of which is the total of the
adjusted bases of all such interests after making the adjustment
described in (i) of this subdivision (b). See example 6 of subparagraph
(3) of this paragraph.
(iii) The election provided for in this subdivision (b) shall be
made not later

[[Page 498]]

than the time prescribed by law for filing the taxpayer's income tax
return (including extensions thereof) for the first taxable year
beginning after December 31, 1963, and shall be made in a statement
attached to such return.
(3) The application of subparagraphs (1) and (2) of this paragraph
may be illustrated by the following examples:

Example 1. A taxpayer owning three operating mineral interests,
designated Nos. 1, 2, and 3, within a single operating unit, properly
elects to aggregate such properties under section 614(b) for the
calendar year 1954 in his income tax return filed on April 15, 1955. The
unadjusted bases and adjustments under section 1016 for depletion
through December 31, 1953, in respect of such properties are as follows:

------------------------------------------------------------------------
Adjustments
Unadjusted under
basis Section
1016
------------------------------------------------------------------------
No. 1.......................................... $25,000 $27,000
No. 2.......................................... 18,000 10,000
No. 3.......................................... 15,000 4,000
-------------
Total...................................... 58,000 41,000
------------------------------------------------------------------------

The adjusted basis of the aggregated property as of January 1, 1954, is
$17,000 ($58,000-$41,000).
Example 2. Assume the same facts as in example 1, except that a
portion of the aggregated property is sold on June 1, 1956, for $15,000
which is also the fair market value of such portion on the date of sale.
In order to determine the gain or loss from this sale as well as the
adjusted basis of the retained property, an apportionment must be made.
The aggregated property had a fair market value of $25,000 on the date
of sale. From January 1, 1954, through May 31, 1956, $10,000 of
depletion has been allowed with respect to the aggregated property. The
adjusted basis of the portion sold is determined as follows:
[GRAPHIC] [TIFF OMITTED] TC08OC91.019

Therefore, the gain on this sale of the portion sold is $10,800
($15,000-$4,200). The adjusted basis of the property retained is $2,800
($7,000-$4,200).
Example 3. Assume the same facts as in example 2, except that
instead of selling, the taxpayer subleases one of the leases making up
the aggregated property, retaining a one-eighth royalty interest
therein. The fair market value of such lease is $15,000 on the date of
the sublease. The adjusted basis of such royalty interest is $4,200
which is computed as follows:
[GRAPHIC] [TIFF OMITTED] TC08OC91.020

Example 4. In 1953, a taxpayer owned mineral interests Nos. 1, 2,
and 3 which he operated as a unit. He owned no other operating interests
during that year. The unadjusted bases of these properties were $10,000,
$15,000, and $20,000, respectively, and depletion allowed through
December 31, 1953, was $5,000 with respect to each property. The
taxpayer operated these properties during the year 1954 and, in
addition, operated as part of the unit mineral interest No. 4 which he
acquired on July 1, 1954, on which date he made the first exploration
expenditure with respect thereto. He paid $20,000 for No. 4. In his
return for the calendar year 1954, the taxpayer elected under section
614(b) to aggregate all of these mineral interests. The taxpayer must
compute cost depletion for the calendar year 1954 on the basis of an
aggregated property with an adjusted basis of $30,000 ($45,000-$15,000)
for the period from January 1 to June 30, and with an adjusted basis of
$50,000 (less depletion for the first six months) for the period from
July 1 to December 31. If applicable, the taxpayer must compute
percentage depletion on the basis of gross income and taxable income
from the aggregated property for the entire year, including the gross
income and deductions with respect to operating mineral interest

[[Page 499]]

No. 4 for the period from July 1 to December 31. If a portion of the
aggregated property is sold during the first six months, its adjusted
basis must be determined at the time of sale with an adjustment for
depletion to the date of sale. If percentage depletion is applicable, it
must be allocated on an equitable basis to the periods prior and
subsequent to the date of sale in order to determine the adjustment for
depletion to the date of sale.
Example 5. A taxpayer owns two operating mineral interests in oil
wells, designated Nos. 1 and 2, in tract A, and another such interest,
designated No. 3, in tract B. All three interests are in the same
operating unit (as defined in paragraph (c) of Sec. 1.614- 2). The
taxpayer, who is on a calendar year basis, has properly elected under
Sec. 1.614-2 to aggregate such interests for the calendar years 1954
through 1963. The unadjusted bases and adjustments under section 1016
for depletion through December 31, 1953, in respect of such interests
are as follows:

------------------------------------------------------------------------
Adjustments
Unadjusted under
basis section
1016
------------------------------------------------------------------------
No. 1.......................................... $42,000 $11,000
No. 2.......................................... 37,000 4,000
No. 3.......................................... 19,000 23,000
------------------------
Total...................................... 98,000 38,000
------------------------------------------------------------------------

The adjusted basis of the aggregated property as of January 1, 1954, is
therefore $60,000 ($98,000 minus $38,000). The taxpayer properly elects
under section 614(b) and Sec. 1.614-8 to treat Nos. 1 and 2 as separate
properties for the calendar year 1964 and thereafter and does not elect
to use the allocation of adjustments method of determining basis
provided in subparagraph (2) (ii) (b) of this paragraph. No. 3 will be
treated as a separate property, also, because it is in a different tract
than the taxpayer's other interests. From January 1, 1954, through
December 31, 1963, $50,000 of depletion has been allowed with respect to
the aggregated property, leaving an adjusted basis of $10,000 ($60,000
minus $50,000) on January 1, 1964. On December 31, 1963, the aggregated
property has a fair market value of $40,000. Nos. 1, 2, and 3 have fair
market values of $16,000, $22,000, and $2,000, respectively.
Accordingly, the adjusted bases of Nos. 1, 2, and 3 on January 1, 1964,
are $4,000,
[GRAPHIC] [TIFF OMITTED] TC08OC91.021

$5,500 [$10,000x(22,000/40,000)], and

$500 [$10,000x(2,000/40,000)] respectively.
Example 6. A taxpayer owns four operating mineral interests in oil
wells, designated Nos. 1, 2, 3, and 4. All four interests are in the
same operating unit and the same tract or parcel of land. The taxpayer,
who is on a calendar year basis, has properly elected under Sec. 1.614-
2 to aggregate such interests for the calendar years 1954 through 1963.
The taxpayer properly elects under section 614(b) and paragraph (a) of
Sec. 1.614-8 to treat Nos. 1 and 2 as separate properties for the
calendar year 1964 and thereafter. The taxpayer also properly elects to
use the allocation of adjustments method of determining basis as
provided in subparagraph (2) (ii) (b) of this paragraph. The unadjusted
bases of Nos. 1, 2, and combined 3 and 4, the adjustments attributable
to each, and the deaggregated basis of each (prior to further adjustment
as provided in subparagraph (2) (ii) (b)(ii) of this paragraph) are as
follows:

----------------------------------------------------------------------------------------------------------------
Attributable Basis upon
Basis upon Adjustments adjustments deaggregation
acquisition to time of during after first
aggregation aggregation adjustment
----------------------------------------------------------------------------------------------------------------
No. 1.................................................... $35,000 $1,000 $16,000 $18,000
No. 2.................................................... 30,000 11,000 23,000 0
No. 3.................................................... 25,000 3,000 5,000 .............
No. 4.................................................... 10,000 12,000 9,000 6,000
--------------
Total.................................................. 100,000 27,000 53,000 24,000
----------------------------------------------------------------------------------------------------------------

The total of the adjusted bases (prior to further adjustment) of the
interests which were included in the aggregation is $24,000 while the
adjusted basis of the aggregation is $20,000 ($100,000 minus the sum of
$27,000 and $53,000). Therefore, the adjusted bases of the interests are
further reduced by $4,000 ($24,000 minus $20,000). The adjusted basis of
No. 1 of $18,000 is further reduced by $3,000 [$4,000x(18,000/24,000)]
to $15,000. Similarly, the adjusted basis of combined Nos. 3 and 4 of
$6,000 is further reduced by $1,000 [$4,000x(6,000/24,000)] to $5,000.
Assume further that the taxpayer also owns interest No. 5 in the same
tract or parcel of land, that such interest was not a part of any
aggregation, that such interest had a basis of $15,000 upon acquisition
and had subsequent adjustments in reduction of basis totalling $17,000,
and that the taxpayer does not elect to treat such interest as a
separate property. In such case, Nos. 3, 4, and 5 will be combined. The
combination will have an adjusted basis of $3,000, determined by adding
the unadjusted basis of No. 5 ($15,000) and the adjusted bases of
combined Nos. 3 and 4 upon deaggregation ($5,000), and subtracting from
the total thereof ($20,000) the adjustments to No. 5 ($17,000).

(4) Basis for gain and loss where mineral interests acquired before
March 1, 1913, are included in an aggregation. Where mineral interests
acquired before March 1, 1913, are included in an aggregation under
section 614 (b), (c),

[[Page 500]]

or (e), the aggregated property has two bases, one for the determination
of gain and another for the determination of loss upon the disposition
of the whole or a part of the aggregated property. For the purpose of
determining gain, the adjusted basis of the aggregated property on the
effective date of aggregation shall be the sum of:
(i) The unadjusted bases of those mineral interests acquired on or
after March 1, 1913, plus
(ii) The cost of any interest acquired before March 1, 1913
(adjusted for the period before March 1, 1913), or the fair market value
of such interest as of March 1, 1913, whichever is greater,

and such sum shall be adjusted by the total of all adjustments to the
bases of the several mineral interests aggregated as required by section
1016 to the effective date of aggregation. For the purpose of
determining loss, the adjusted basis of the aggregated property on the
effective date of aggregation shall be the sum of:
(iii) The unadjusted bases of those mineral interests acquired on or
after March 1, 1913, plus
(iv) The cost of those interests acquired before March 1, 1913,
adjusted for the period before March 1, 1913,

and such sum shall be adjusted by the total of all adjustments to the
bases of the several mineral interests aggregated as required by section
1016 to the effective date of aggregation. Thereafter, the adjustments
to basis required by section 1016 shall apply to the total adjusted
basis of the aggregated property for all purposes of the Code. Upon
disposition of a part of the aggregated property, or upon termination of
the aggregation for any reason, or upon change in the treatment of any
mineral interests in the aggregation with consent of the Commissioner,
the adjusted basis for determining gain and the adjusted basis for
determining loss with respect to each resultant part of the aggregated
property shall be determined in accordance with subparagraph (2) of this
paragraph. The provisions of this subparagraph may be illustrated by the
following examples:

Example 1. At the close of 1953 a taxpayer owned two operating
mineral interests designated as Nos. 1 and 2 in the same operating unit.
Operating mineral interest No. 1 was acquired by the taxpayer before
March 1, 1913, and on such date its basis with reference to its fair
market value was $50,000 and its adjusted basis with reference to its
cost was $44,000. The unadjusted basis of operating mineral interest No.
2, acquired after March 1, 1913, was $30,000. Adjustments under section
1016 for depletion from March 1, 1913, through December 31, 1953, were
$37,000 for operating mineral interest No. 1 and $20,000 for operating
mineral interest No. 2. Assume that the taxpayer elected for the taxable
year 1954 to aggregate operating mineral interests Nos. 1 and 2. The
adjusted basis of the aggregated property as of January 1, 1954, for the
purpose of determining gain would be $23,000 ($50,000 plus $30,000)
minus ($37,000 plus $20,000). For the purpose of determining loss, the
adjusted basis would be $17,000 ($44,000 plus $30,000) minus ($37,000
plus $20,000).
Example 2. Assume the same facts as in example 1 and further assume
that for the taxable years 1954 and 1955, the taxpayer was allowed
$5,000 of depletion on the aggregated property, that on January 1, 1956,
he sold a portion of the aggregated property for $20,000, and that, as
of January 1, 1956, the aggregated property had a fair market value of
$24,000. At the time of sale, the adjusted basis of the aggregated
property for the purpose of determining gain was $18,000 ($23,000-
$5,000); and the adjusted basis for the purpose of determining loss was
$12,000 ($17,000-$5,000). The adjusted basis of the portion sold would
be computed as follows:
[GRAPHIC] [TIFF OMITTED] TC08OC91.022

Taxpayer's gain would then be computed as follows:

[[Page 501]]

[GRAPHIC] [TIFF OMITTED] TC08OC91.023

The adjusted basis of the portion retained as of January 1, 1956, for
the purpose of determining gain is $3,000 ($18,000-$15,000). For the
purpose of determining loss, the adjusted basis is $2,000 ($12,000-
$10,000).
Example 3. Assume the same facts as in example 2, except that a
portion of the aggregated property was sold for $5,000 and that the fair
market value of the aggregated property at the time of sale was $10,000.
The adjusted basis of the portion sold would be computed as follows:
[GRAPHIC] [TIFF OMITTED] TC08OC91.024

Taxpayers loss would then be computed as follows:
[GRAPHIC] [TIFF OMITTED] TC08OC91.025

(5) Basis for gain and loss where mineral interests acquired before
March 1, 1913, are included in a combination and one or more of such
interests have not previously been included in an aggregation. Where
mineral interests acquired before March 1, 1913, are included in a
combination under section 614(b) and Sec. 1.614-8 and one or more of
such interests have not previously been included in an aggregation, the
combined property has two bases, one for the determination of gain and
another for the determination of loss upon the disposition of the whole
or a part of the combined property. For the purpose of determining gain,
the adjusted basis of the combined property on the effective date of
combination shall be the sum of:
(i) The adjusted bases at the time of deaggregation, as determined
under subparagraph (2) of this paragraph, of all interests which have
previously been included in an aggregation,
(ii) The unadjusted bases of other mineral interests acquired on or
after March 1, 1913, and
(iii) The cost of each other interest acquired before March 1, 1913
(adjusted for the period before March 1, 1913), or the fair market value
of such interest as of March 1, 1913, whichever is greater,

and such sum shall be adjusted by the total of all adjustments to the
bases of the mineral interests as required by section 1016 to the
effective date of combination. For the purpose of determining loss, the
adjusted basis of the combined property on the effective date of
combination shall be the sum of:
(iv) The adjusted bases at the time of deaggregation, as determined
under subparagraph (2) of this paragraph, of all interests which have
previously been included in an aggregation.

[[Page 502]]

(v) The unadjusted bases of other mineral interests acquired on or
after March 1, 1913, and
(vi) The cost of other mineral interests acquired before March 1,
1913, adjusted for the period before March 1, 1913,

and such sum shall be adjusted by the total of all adjustments to the
bases of the mineral interests as required by section 1016 to the
effective date of combination. Thereafter, the adjustments to basis
required by section 1016 shall apply to the total adjusted basis of the
combined property for all purposes of the Code. Upon disposition of a
part of the combined property, the adjusted basis for determining gain
and the adjusted basis for determining loss with respect to each
resultant part of the combined property shall be determined in
accordance with subparagraph (2) of this paragraph.
(b) Holding period of aggregated or combined properties. Where a
taxpayer sells or exchanges either a part or all of an aggregated or
combined property which includes part or all of a mineral interest which
the taxpayer has held for (1 year 6 months for taxable years beginning
before 1977; 9 months for taxable years beginning in 1977) or less, the
sales price and adjusted basis attributable to the interest sold must be
apportioned in proportion to the relative fair market values as of the
date of sale to determine the amount of income represented by the sale
of property held for (1 year 6 months for taxable years beginning before
1977; 9 months for taxable years beginning in 1977) or less. The
application of this rule may be illustrated by the following example:

Example. Taxpayer A owns operating mineral interests Nos. 1, 2, and
3. He acquired interests Nos. 1 and 2 in 1953 but purchased and made
development expenditures on interest No. 3 on December 1, 1954. In his
return for the taxable year 1954, taxpayer A elects to aggregate
interests Nos. 1, 2, and 3 which are operated as a unit. On May 1, 1955,
taxpayer A sells the north half of the aggregated property which
includes portions of interests Nos. 1, 2, and 3. The sales price of the
north half was $80,000; the adjusted basis of the aggregated property as
of the date of sale was $20,000; and the fair market value of the
aggregated property as of the date of sale was $100,000. The adjusted
basis applicable to the north half is computed as follows:
[GRAPHIC] [TIFF OMITTED] TC08OC91.026

The total gain on the sale is $64,000 ($80,000-$16,000).
The gain attributable to the sale of the portion held for six months
or less is computed as follows (assuming that the fair market value of
the portion of No. 3 included in the sale as of the date of sale was
$30,000):
[GRAPHIC] [TIFF OMITTED] TC08OC91.027

The gain on the portion of No. 3 sold is $24,000 ($30,000-$6,000).

(c) Acquisition of property with transferor's basis. If a separate
property or an aggregated or combined property is acquired in a
transaction in which the basis of such property in the hands of the
taxpayer is determined by reference to the basis of such property in the
hands of a transferor, then the election of such transferor as to the

[[Page 503]]

treatment of such separate, aggregated, or combined property shall be
binding upon the taxpayer for all taxable years ending after the
transfer unless, in the case of an aggregation, the aggregation
terminates or consent to make a change is obtained under paragraph (d)
(4) of Sec. 1.614-2, paragraph (f) (7) of Sec. 1.614-3, or paragraph
(b) (3) or (e) (5) of Sec. 1.614-5, whichever is applicable.
(d) Abandonment and casualty losses. In the case of mineral
interests which are aggregated or combined as one property, no losses
resulting from worthlessness or abandonment are allowable until all the
mineral rights in the entire aggregated or combined property are proven
to be worthless or until the entire aggregated or combined property is
disposed of or abandoned. Casualty losses are allowable in accordance
with the rules applicable to casualty losses in general. For rules
applicable to losses in general, see section 165 and the regulations
thereunder.

[T.D. 6524, 26 FR 159, Jan. 10, 1961, as amended by T.D. 6859, 30 FR
13701, Oct. 28, 1965; T.D. 7728, 45 FR 72650, Nov. 3, 1980]