24916
. Proper adjustment with regard to the property shall in all
cases be made as follows:
(a) For expenditures, receipts, losses, or other items properly
chargeable to capital account. However, no adjustment shall be made
for any of the following:
(1) Sales or use tax paid or incurred in connection with the
acquisition of property for which a tax credit is claimed pursuant to
Section 23612.2.
(2) Taxes or other carrying charges described in Section 24426, or
for expenditures described in Sections 24364 and 24369 for which
deductions have been taken in determining net income for the taxable
year or any prior taxable year.
(b) For exhaustion, wear and tear, obsolescence, amortization, and
depletion:
(1) In the case of corporations subject to the tax imposed by
Chapter 2 (commencing with Section 23101), to the extent sustained
prior to January 1, 1928, and to the extent allowed (but not less
than the amount allowable) under this part, except that no deduction
shall be made for amounts in excess of the amount which would have
been allowable had depreciation not been computed on the basis of
January 1, 1928, value and amounts in excess of the adjustments
required by Section 113(b)(1)(B) of the Federal Revenue Act of 1938
for depletion prior to January 1, 1932.
(2) In the case of a taxpayer subject to the tax imposed by
Chapter 3 (commencing with Section 23501), to the extent sustained
prior to January 1, 1937, and for periods thereafter to the extent
allowed (but not less than the amount allowable) under the provisions
of this part.
(3) If a taxpayer has not claimed an amortization deduction for an
emergency facility, the adjustment under paragraph (1) shall be made
only to the extent ordinarily provided under Sections 24349 and
24372.
(c) In the case of stock (to the extent not provided for in the
foregoing subdivisions) for the amount of distributions previously
made which, under the law applicable to the year in which the
distribution was made, either were tax free or were applicable in
reduction of basis (not including distributions made by a
corporation, which was classified as a personal service corporation
under the provisions of the Federal Revenue Act of 1918 or 1921, out
of its earnings or profits which were taxable in accordance with the
provisions of Section 218 of the Federal Revenue Act of 1918 or
1921).
(d) (1) In the case of corporations subject to the tax imposed by
Chapter 2 (commencing with Section 23101), in the case of any bond,
as defined in Section 24363, to the extent of the deductions
allowable pursuant to Section 24360 with respect thereto.
(2) In the case of taxpayers subject to the tax imposed by Chapter
3 (commencing with Section 23501), in the case of any bond, as
defined in Section 24363, the interest on which is wholly exempt from
the tax imposed by this part, to the extent of the amortizable bond
premium disallowable as a deduction pursuant to subdivision (b) of
Section 24360, and in the case of any other bond, as defined in
Section 24363, to the extent of the deductions allowable pursuant to
subdivision (a) of Section 24360 (or the amount applied to reduce
interest payments under paragraph (2) of subdivision (a) of Section
24363.5) with respect thereto.
(3) In the case of property pledged to the Commodity Credit
Corporation, to the extent of the amount received as a loan from the
Commodity Credit Corporation and treated by the taxpayer as income
for the year in which received pursuant to Section 24273, and to the
extent of any deficiency on that loan with respect to which the
taxpayer has been relieved from liability.
(e) For amounts allowed as deductions as deferred expenses under
Section 616(b) of the Internal Revenue Code, relating to certain
expenditures in the development of mines, and resulting in a
reduction of the taxpayer's tax, but not less than the amounts
allowable under that section for the taxable year and prior years.
(f) For amounts allowable as deductions as deferred expenses under
Section 617(a) of the Internal Revenue Code, relating to certain
exploration expenditures, and resulting in a reduction of the
taxpayer's tax, but not less than the amounts allowable under that
section for the taxable year and prior years.
(g) For amounts allowed as deductions as deferred expenses under
subdivision (a) of Section 24366, relating to research and
experimental expenditures, and resulting in a reduction of the
corporation's taxes under this part, but not less than the amounts
allowable under that section for the taxable year and prior years.
(h) For amounts allowed as deductions under Sections 24356.2,
24356.3, and 24356.4.
(i) (1) To the extent provided in Section 179A(e)(6)(A) of the
Internal Revenue Code, relating to basis reduction for clean-fuel
vehicles and certain refueling property.
(2) This subdivision shall apply to property placed in service
after June 30, 1993, without regard to taxable year.
(j) In the case of property the acquisition of which resulted
under Section 1044 of the Internal Revenue Code, relating to rollover
of publicly traded securities gain into specialized small business
investment companies, in the nonrecognition of any part of the gain
realized on the sale of other property, to the extent provided in
Section 1044(d) of the Internal Revenue Code, relating to basis
adjustments.