Question

In determining, under subsection (a)(2), the recomputed basis of property with respect to which a deduction under section 194 was allowed for any taxable year, the taxpayer shall not take into account adjustments under section 194 to the extent such adjustments are attributable to the amortizable basis of the taxpayer acquired before the 10th taxable year preceding the taxable year in which gain with respect to the property is recognized. What is the condition for determining the recomputed basis of property with respect to which a deduction under section 194 was allowed for any taxable year?

1) The taxpayer shall take into account adjustments under section 194 to the extent such adjustments are attributable to the amortizable basis of the taxpayer acquired before the 10th taxable year preceding the taxable year in which gain with respect to the property is recognized.
2) The taxpayer shall not take into account adjustments under section 194 to the extent such adjustments are attributable to the amortizable basis of the taxpayer acquired before the 10th taxable year preceding the taxable year in which gain with respect to the property is recognized.
3) The taxpayer shall take into account adjustments under section 194 to the extent such adjustments are attributable to the amortizable basis of the taxpayer acquired after the 10th taxable year preceding the taxable year in which gain with respect to the property is recognized.
4) The taxpayer shall not take into account adjustments under section 194 to the extent such adjustments are attributable to the amortizable basis of the taxpayer acquired after the 10th taxable year preceding the taxable year in which gain with respect to the property is recognized.

Answer 1

The condition for determining the recomputed basis of property for section 194 is that adjustments attributable to the amortizable basis acquired before the prior 10th taxable year to the gain should not be included.

Step-by-step explanation:

The condition for determining the recomputed basis of property with respect to which a deduction under section 194 was allowed for any taxable year is that the taxpayer shall not take into account adjustments under section 194 to the extent such adjustments are attributable to the amortizable basis of the taxpayer acquired before the 10th taxable year preceding the taxable year in which gain with respect to the property is recognized. In other words, when calculating the recomputed basis, adjustments from section 194 related to the amortizable basis obtained more than ten years before the gain is recognized should not be considered.