New-York tribune., 1922-03-05

tioiI ~ uHhnoWN, no general rule Is
given for determining the cost value of
such securities, but each case will be
considered upon the facts.
Prior to March /. 1913
Six different situations arise in The
sale of property acquired prior to March
], 1913. which may be illustrates by the
following:
Frst-In the case Of property ac-
CURED before March /, 1913, when its
fair market value q. of that date is in
excess Of its cost, the taxable gain is
the exess OF the amount realized there
for over such fair market value.
For example, if property purchased
prior to March /. 1913. for $4,000 is
sold for 100000, and the fair market
alue of such property on March !. 1918,
was $1,000, the taxable gain is $4,000.
Second-ln the case of property ac-
quircd before March +. 1918. when its
fair market value as of that date is
lower than its cost the deductible loss
is the excess Of such fair market value
over the amount realized therefor
For example # property purchased
deductible loss is $1,000.
greater than the fair market. value as
Of March ], 1913, and the selling price
exceeds the cost, the gain to be in
Guided in gross income is the excess of
the selling price over the cost.
For example, If property acquired
prior to March !, 1918. for $4,000 is
sold for $4,000, and the fair market
value of such property on March I.
1918, was $4,000, the taxable gain is
$4,000
Fourth Whsre the fair market value
rs of March /, 1918, is greater than the
cost and the selling price is less than
the cost, the deductible loss is the
amount by which the cost exceeds the
selling price.
For example. if property acquired
sold for $4,000, and the fair market
value Of such 1roperty on March J.
1918. was $4,000, the deductible loss
is $4,000.
Fifth--No gain or loss is recognized
in the case Of property acquired before
March 1. 1918, and sold or disposed Of
at more than cost but at less than its
fair market value as Of that date.
For example. If property purchased
prior to March I, 1913. for $4,000 is
sold for $4,000, and the fair market
value OF such property on March J.
1918. was $4,000, there is no taxable
gain or deductible loss.
Sixth-No gain or loss IS recognized
in the case OF property acquired before
March /. 1918, when sold or disposed Of
at less than cost but at more than its
fair market value as of that date.
For example, il property acquired
prior 60 March /. 1913. for $4,000 is
81 ooA fo,, ~. .of
value of such property on March /.
1918, was Sc 900. there is no taxable
gain on the dcductible loss.
Property Exchange
Important rules have been laid down
by the Treasury Department in new
regulations just issued for the pur-
pose Of determining gain or loss in
the exchange of property. Gain or loss
arising from The acquisition and subse-
quent disposition Of property is real
lied only when rs q result of a trans
action between the owner and another
person the property is converted into
other property that is essentially diff
ferent from the property disposed Of
and that has a readily rcalizablc mar
het value.
The amount Of income derived or loss
sustained from an exchange of prop
crty is the difference between the fair
market value Of the property received
in cxchang at the time of tina exchange
and the original cost Of tine property
exchanged, or tie fair market value
thereof on March I, 1918, as the case
may be.
Property has a readily realizable
market value if it can be readily con-
verted into an amount of cash or its
equivalent substantially equal to the
fair value Of the property. In other
words. the property received in ex-
change must be reaGily marketable at
substantially its fair value in order
that q gain or loss be recognized.
Whether or not property has a readily
realiZable market value is one of fact
to be determined in each case and the
regulations OF the department provide
that the taxpayer should call atten tion
in his return to each exchange effected
during the taxable year about which
there could be any doubt.
The law names three exceptions in
which no gain or loss is recognized
even if property received in exchange
has readily realizable market value
These exceptions are az follows:
(a) Where property held for invest
ment is exchanged for other property
Of like kind or where property held
for productive use in trade or busi-
ness is exchanged for other property
of a like use;
(b) When, in the reorganization OF
one or more corpora s.ons a person re-
ceives in place Of any stock or securi-
ties owne by him stock or securities ia
corporation a party to or resulting
from such reorganization;
(c) When person or persons trans
fer any property to corporation and
Immediately after the transfer is OF
are in central Of such corporation.
The new law and regulations offer