§156.  Adjustments in basis for determining gain or loss

A.  General rule.  In computing the adjusted basis for determining gain or loss from the sale or other disposition of property, proper adjustment in respect of the property shall in all cases be made:

(1)  For expenditures, receipts, losses, or other items, properly chargeable to capital account, including taxes and other carrying charges on unimproved and unproductive real property, but no such adjustment shall be made for taxes or other carrying charges for which deductions have been taken by the taxpayer in determining net income for the taxable year or prior taxable years;

(2)  In respect of any period after December 31, 1933, for exhaustion, wear and tear, obsolescence, amortization, and depletion, to the extent allowed (but not less than the amount allowable) under this Chapter or under Act 21 of 1934.  Where for any taxable year prior to the taxable year 1934, the depletion allowance was based on discovery value or a percentage of income, then the adjustment for depletion for such year shall be based on the depletion which would have been allowed for such year if computed without reference to discovery value or a percentage of income;

(3)  In respect of any period prior to January 1, 1934, for exhaustion, wear and tear, obsolescence, amortization, and depletion, to the extent sustained;

(4)  In the case of stock (to the extent not provided for in the foregoing paragraphs) for the amount of distributions previously made, which, under the law applicable to the year in which the distribution was made, were applicable in reduction of basis.  

B.  Substituted basis.  Whenever it appears that a basis of property in the hands of the taxpayer is a substituted basis, then the adjustments provided in Sub-section A of this Section shall be made after first making in respect to such substituted basis proper adjustment of a similar nature in respect of the period during which the property was held by the transferor, donor, or grantor, or during which the other property was held by the person for whom the basis is to be determined.  A similar rule shall be applied in the case of a series of substituted bases.  

The term "substituted basis," as used in this Sub-section means a basis determined under any provision of R.S. 47:140 through 47:155, provided that the basis shall be determined:

(1)  By reference to the basis in the hands of the transferor, donor, or grantor, or

(2)  By reference to other property held at any time by the person for whom the basis is to be determined.  

C.  Discharge of indebtedness.  Where any amount is excluded from gross income under R.S. 47:53.2 (relating to income from discharge of indebtedness) on account of the discharge of indebtedness the whole or a part of the amount so excluded from gross income shall be applied in reduction of the basis of any property held (whether before or after the time of the discharge) by the taxpayer during any portion of the taxable year in which such discharge occurred.  The amount to be so applied (not in excess of the amount so excluded from gross income, reduced by the amount of any deduction disallowed under R.S. 47:53.2) and the particular properties to which the reduction shall be allocated shall be determined under regulations (prescribed by the Collector of Revenue) in effect at the time of the filing of the consent by the taxpayer referred to in R.S. 47:53.2.  The reduction shall be made as of the first day of the taxable year in which the discharge occurred, except in the case of property not held by the taxpayer on such first day, in which case it shall take effect as of the time the holding of the taxpayer began.  

Amended by Acts 1956, No. 435, §1.