[Code of Federal Regulations]
[Title 26, Volume 10]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.996-5]

[Page 732-733]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.996-5  Adjustment to basis.

    (a) Addition to basis. Under section 996(e)(1) amounts representing 
deemed distributions as provided in section 995(b) shall increase the 
basis of the stock with respect to which the distribution is made.
    (b) Reductions of basis. Under section 996(e)(2), the portion of an 
actual distribution treated as made out of previously taxed income shall 
reduce the basis of the stock with respect to which it is made and, to 
the extent that it exceeds the adjusted basis of such stock, shall be 
treated as gain from the sale or exchange of property. In the case of 
stock includible in the gross estate of a decedent for which an election 
is made under section 2032 (relating to alternate valuation), this 
paragraph shall not apply to any distribution made after the date of the

[[Page 733]]

decendent's death and before the alternate valuation date provided by 
section 2032. See section 1014(d) for a special rule for determining the 
basis of stock in a DISC, or former DISC, acquired from a decedent.

[T.D. 7324, 39 FR 35124, Sept. 30, 1974]