24941-24956
REVENUE AND TAXATION CODE
SECTION 24941-24956
24941. Section 1031 of the Internal Revenue Code, relating to
exchange of property held for productive use or investment, shall
apply, except as otherwise provided.
24941.5. Section 1031(i) of the Internal Revenue Code, relating to
special rules for mutual ditch, reservoir, or irrigation company
stock, shall not apply.
24942. (a) No gain or loss shall be recognized to a corporation on
the receipt of money or other property in exchange for stock
(including treasury stock) of that corporation. No gain or loss shall
be recognized by a corporation with respect to any lapse or
acquisition of an option, or with respect to a securities futures
contract (as defined in Section 1234B of the Internal Revenue Code,
to buy or sell its stock (including treasury stock).
(b) For basis of property acquired by a corporation in certain
exchanges for its stock, see Sections 24552 to 24554, inclusive.
24943. If property (as a result of its destruction in whole or in
part, theft, seizure, or requisition or condemnation or threat or
imminence thereof) is compulsorily or involuntarily converted--
(a) Into property similar or related in service or use to the
property so converted, no gain shall be recognized.
(b) Into money, and the disposition of the converted property
occurred before January 1, 1953, no gain shall be recognized if such
money is forthwith in good faith, under regulations prescribed by the
Franchise Tax Board, expended in the acquisition of other property
similar or related in service or use to the property so converted, or
in the acquisition of control of a corporation owning such other
property, or in the establishment of a replacement fund. If any part
of the money is not so expended, the gain shall be recognized to the
extent of the money which is not so expended (regardless of whether
such money is received in one or more taxable years and regardless of
whether or not the money which is not so expended constitutes gain).
For purposes of this subsection and Section 24944, the term
"disposition of the converted property" means the destruction, theft,
seizure, requisition, or condemnation of the converted property, or
the sale or exchange of such property under threat or imminence of
requisition or condemnation.
For purposes of this section and Section 24944, the term "control"
means the ownership of stock possessing at least 80 percent of the
total combined voting power of all classes of stock entitled to vote
and at least 80 percent of the total number of shares of all other
classes of stock of the corporation.
24944. If property (as a result of its destruction in whole or in
part, theft, seizure, or requisition or condemnation or threat or
imminence thereof) is compulsorily or involuntarily converted into
money or into property not similar or related in service or use to
the converted property, and the disposition of the converted property
(as defined in subdivision (b) of Section 24943) occurred after
December 31, 1952, the gain (if any) shall be recognized except to
the extent hereinafter provided in this section:
(a) If the taxpayer during the period specified in subdivision
(b), for the purpose of replacing the property so converted,
purchases other property similar or related in service or use to the
property so converted, or purchases stock in the acquisition of
control of a corporation owning such other property, at the election
of the taxpayer the gain shall be recognized only to the extent that
the amount realized upon such conversion (regardless of whether such
amount is received in one or more taxable years) exceeds the cost of
such other property or such stock. Such election shall be made at
such time and in such manner as the Franchise Tax Board may by
regulations prescribe. For purposes of this subdivision--
(1) No property or stock acquired before the disposition of the
converted property shall be considered to have been acquired for the
purpose of replacing such converted property unless held by the
taxpayer on the date of such disposition; and
(2) The taxpayer shall be considered to have purchased property or
stock only if, but for the provisions of Section 24947, the
unadjusted basis of such property or stock would be its cost within
the meaning of Section 24912.
(b) The period referred to in subdivision (a) shall be the period
beginning with the date of the disposition of the converted property,
or the earliest date of the threat or imminence of requisition or
condemnation of the converted property, whichever is the earlier, and
ending--
(1) Two years after the close of the first taxable year in which
any part of the gain upon the conversion is realized; or
(2) Subject to such terms and conditions as may be specified by
the Franchise Tax Board, at the close of such later date as the
Franchise Tax Board may designate on application by the taxpayer.
Such application shall be made at such time and in such manner as the
Franchise Tax Board may by regulations prescribe.
(c) For purposes of this section and Section 24943, replacement
property "similar or related in service or use" shall include, in the
case of a nonprofit water utility corporation, personal property
used for the transmission or storage of water.
24945. If a taxpayer has made the election provided in Section
24944(a), then--
(a) The statutory period for the assessment of any deficiency, for
any taxable year in which any part of the gain on such conversion is
realized, attributable to such gain shall not expire prior to the
expiration of four years from the date the Franchise Tax Board is
notified by the taxpayer (in such manner as the Franchise Tax Board
may by regulations prescribe) of the replacement of the converted
property or of an intention not to replace; and
(b) Such deficiency may be assessed before the expiration of such
four-year period notwithstanding the provisions of any other law or
rule of law which would otherwise prevent such assessment.
24946. If the election provided in Section 24944(a) is made by the
taxpayer and such other property or such stock was purchased before
the beginning of the last taxable year in which any part of the gain
upon such conversion is realized, any deficiency, to the extent
resulting from such election, for any taxable year ending before such
last taxable year may be assessed (notwithstanding the provisions of
Section 19057 or the provisions of any other law or rule of law
which would otherwise prevent such assessment) at any time before the
expiration of the period within which a deficiency for such last
taxable year may be assessed.
24947. (a) Section 1033(b) of the Internal Revenue Code, relating
to basis of property acquired through involuntary conversion, shall
apply, except as otherwise provided.
(b) Section 1033(b)(1) of the Internal Revenue Code is modified by
substituting "subdivision (a) of Section 24943" in lieu of
"subsection (a)(1)."
(c) Section 1033(b)(2) of the Internal Revenue Code is modified by
substituting "subdivision (b) of Section 24943" in lieu of
"subsection (a)(2)."
(d) Section 1033(b)(3) of the Internal Revenue Code is modified by
substituting "subdivision (b) of Section 24943" in lieu of
"subsection (a)(2)(E)."
24948. For purposes of this part, if property lying within an
irrigation project is sold or otherwise disposed of in order to
conform to the acreage limitation provisions of federal reclamation
laws, such sale or disposition shall be treated as an involuntary
conversion to which Sections 24943 to 24949, inclusive, apply.
24949. For purposes of this part, if livestock are destroyed by or
on account of disease, or are sold or exchanged because of disease,
such destruction or such sale or exchange shall be treated as an
involuntary conversion to which Sections 24943 to 24949, inclusive,
apply.
24949.1. (a) For purposes of this part, the sale or exchange of
livestock (other than poultry) held by a taxpayer for draft,
breeding, or dairy purposes in excess of the number the taxpayer
would sell if he or she followed his or her usual business practices
shall be treated as an involuntary conversion to which Sections 24943
to 24949, inclusive, apply if the livestock are sold or exchanged by
the taxpayer solely on account of drought, flood, or other
weather-related conditions.
(b) (1) In the case of drought, flood, or other weather-related
conditions described in subdivision (a) that result in the area being
designated as eligible for assistance by the federal government,
subdivision (b) of Section 24944 shall be applied with respect to any
converted property by substituting "four years" for "two years."
(2) The Franchise Tax Board may extend the period for replacement
under Sections 24943 to 24949, inclusive (after the application of
paragraph (1)), for the additional time as the Franchise Tax Board
determines appropriate if the weather-related conditions that
resulted in the application of paragraph (1) continue for more than
three years.
24949.2. (a) For purposes of Sections 24943 through 24945, if real
property (not including stock in trade or other property held
primarily for sale) held for productive use in trade or business or
for investment is (as a result of its seizure, requisition, or
condemnation, or threat or imminence thereof) compulsorily or
involuntarily converted, property of a like kind to be held either
for productive use in trade or business or for investment shall be
treated as property similar or related in service or use to the
property so converted.
(b) (1) Subdivision (a) shall not apply to the purchase of stock
in the acquisition of control of a corporation described in
subdivision (a) of Section 24944.
(2) Subdivision (a) shall apply with respect to the compulsory or
involuntary conversion of any real property only if the disposition
of the converted property (within the meaning of subdivision (b) of
Section 24943) occurs after December 31, 1960.
(c) (1) A taxpayer may elect, at such time and in such manner as
the Franchise Tax Board may prescribe, to treat property which
constitutes an outdoor advertising display as real property for
purposes of this part with respect to which an election under Section
24356.2 (relating to election to expense certain depreciable
business assets) is in effect.
(2) An election made under paragraph (1) may not be revoked
without the consent of the Franchise Tax Board.
(3) For purposes of this subdivision, the term "outdoor
advertising display" means a rigidly assembled sign, display, or
device permanently affixed to the ground or permanently attached to a
building or other inherently permanent structure constituting, or
used for the display of, a commercial or other advertisement to the
public.
(4) For purposes of this subdivision, an interest in real property
purchased as replacement property for a compulsorily or
involuntarily converted outdoor advertising display defined in
paragraph (3) (and treated by the taxpayer as real property) shall be
considered property of a like kind as the property converted without
regard to whether the taxpayer's interest in the replacement
property is the same kind of interest the taxpayer held in the
converted property.
(d) In the case of a compulsory or involuntary conversion
described in subdivision (a), paragraph (1) of subdivision (b) of
Section 24944 shall be applied by substituting "three years" for "two
years."
(e) Subdivision (d) shall apply with respect to any disposition of
converted property (within the meaning of Section 24944) after
December 31, 1976.
24949.3. For purposes of Sections 24943 through 24946, if, because
of drought, flood, other weather-related conditions, or soil
contamination or other environmental contamination, it is not
feasible for the taxpayer to reinvest the proceeds from compulsorily
or involuntarily converted livestock in property similar or related
in use to the livestock so converted, other property (including real
property in the case of soil contamination or other environmental
contamination) used for farming purposes shall be treated as property
similar or related in service or use to the livestock so converted.
24949.5. (a) For purposes of Sections 24943 through 24946, Section
1033(h) of the Internal Revenue Code, relating to special rules for
property damaged by federally declared disasters, shall apply, except
as otherwise provided.
(b) For purposes of Sections 24943 through 24946, Section 1033(i)
of the Internal Revenue Code, relating to replacement property must
be acquired from unrelated person in certain cases, shall apply,
except as otherwise provided.
(c) For purposes of Sections 24943 through 24946, Section 1033(j)
of the Internal Revenue Code, relating to sales or exchanges to
implement microwave relocation policy, shall apply, except as
otherwise provided.
(d) For purposes of Sections 24943 to 24946, inclusive, Section
1033(k) of the Internal Revenue Code, relating to sales or exchanges
under certain hazard mitigation programs, shall apply, except as
otherwise provided.
24950. Section 1035 of the Internal Revenue Code, relating to
certain exchanges of insurance policies, shall apply, except as
otherwise provided.
24950.5. The amendments made by Section 844 of the Pension
Protection Act of 2006 (Public Law 109-280) to Section 1035 of the
Internal Revenue Code shall not apply.
24951. Section 1036 of the Internal Revenue Code, relating to stock
for stock of same corporation, shall apply, except as otherwise
provided.
24952. (a) If--
(1) A sale of real property gives rise to indebtedness to the
seller which is secured by the real property sold, and
(2) The seller of such property reacquires such property in
partial or full satisfaction of such indebtedness,
then, except as provided in subdivisions (b) and (d), no gain or loss
shall result to the seller from such reacquisition, and no debt
shall become worthless or partially worthless as a result of such
reacquisition.
(b) (1) In the case of a reacquisition of real property to which
subdivision (a) applies, gain shall result from such reacquisition to
the extent that--
(A) The amount of money and the fair market value of other
property (other than obligations of the purchaser) received, prior to
such reacquisition, with respect to the sale of such property,
exceeds
(B) The amount of the gain on the sale of such property included
in the measure of tax or returned as income for periods prior to such
reacquisition.
(2) The amount of gain determined under paragraph (1) resulting
from a reacquisition during any taxable year beginning after December
31, 1964, shall not exceed the amount by which the price at which
the real property was sold exceeded its adjusted basis, reduced by
the sum of--
(A) The amount of the gain on the sale of such property included
in the measure of tax or returned as income for periods prior to the
reacquisition of such property, and
(B) The amount of money and the fair market value of other
property (other than obligations of the purchaser received with
respect to the sale of such property) paid or transferred by the
seller in connection with the reacquisition of such property.
For purposes of this paragraph, the price at which real property
is sold is the gross sales price reduced by the selling commissions,
legal fees, and other expenses incident to the sale of such property
which are properly taken into account in determining gain or loss on
such sale.
(3) Except as provided in this section, the gain determined under
this subdivision resulting from a reacquisition to which subdivision
(a) applies shall be recognized, notwithstanding any other provision
of this part.
(c) If subdivision (a) applies to the reacquisition of any real
property, the basis of such property upon such reacquisition shall be
the adjusted basis of the indebtedness to the seller secured by such
property (determined as of the date of reacquisition), increased by
the sum of--
(1) The amount of the gain determined under subdivision (b)
resulting from such reacquisition, and
(2) The amount described in subparagraph (B) of paragraph (2) of
subdivision (b).
If any indebtedness to the seller secured by such property is not
discharged upon the reacquisition of such property, the basis of such
indebtedness shall be zero.
(d) If, prior to a reacquisition of real property to which
subdivision (a) applies, the seller has treated indebtedness secured
by such property as having become worthless or partially worthless--
(1) Such seller shall be considered as receiving, upon the
reacquisition of such property, an amount equal to the amount of such
indebtedness treated by him as having become worthless, and
(2) The adjusted basis of such indebtedness shall be increased (as
of the date of reacquisition) by an amount equal to the amount so
considered as received by such seller.
24954. For taxable years beginning on or after January 1, 1995,
Section 1042 of the Internal Revenue Code, relating to sales of stock
to employee stock ownership plans or certain cooperatives, shall
apply, except as otherwise provided.
24954.1. Section 1042(g) of the Internal Revenue Code, relating to
application of section to sales of stock in agricultural refiners and
processors to eligible farm cooperatives, shall not apply.
24955. (a) No gain shall be recognized with respect to a sale of an
assisted housing development to a tenant association, nonprofit
organization, profit-motivated organization or individual, or public
agency which obligates itself and any successors in interest to
maintain the assisted housing development affordable to persons or
families of lower income or very low income for either a period of 30
years from the date of sale or the remaining term of existing
federal government assistance as listed in subdivision (a) of Section
65863.10 of the Government Code, whichever is greater, provided that
all of the proceeds from the sale are reinvested in residential real
property, other than a personal residence, in this state within two
years after the sale. This obligation shall be recorded at the time
of sale in the office of the county recorder of the county in which
the development is located.
(b) No gain shall be recognized with respect to a sale of a
majority or more of units in an assisted housing development
converted to condominium interests, to a tenant association,
nonprofit organization, profit-motivated organization or individual,
or public agency which obligates itself and any successors in
interest to maintain the condominiums affordable to persons or
families of lower income or very low income for either a period of 30
years from the date of sale or the remaining term of existing
federal government assistance as listed in subdivision (a) of Section
65863.10 of the Government Code, provided that all of the proceeds
from the sale are reinvested in residential real property, other than
a personal residence, in this state within two years after the sale.
This obligation shall be recorded at the time of sale in the office
of the county recorder of the county in which the development is
located.
(c) No gain shall be recognized with respect to a sale of real
property to a majority or more of existing lower income and very low
income residents of that property, provided that all of the proceeds
from the sale are reinvested in residential real property, other than
a personal residence, in this state within two years after the sale.
(d) No gain shall be recognized with respect to a sale of a
majority or more of units converted to condominium interests to the
existing lower income or very low income residents of that property,
provided that all of the proceeds from the sale are reinvested in
residential real property, other than a personal residence, in this
state within two years after the sale.
(e) For purposes of this section:
(1) "Assisted housing development" means a multifamily rental
housing development that receives federal government assistance,
appearing of record and containing a legal description of the
property, as defined in subdivision (a) of Section 65863.10 of the
Government Code.
(2) "Tenant association" means a group of tenants who have formed
a nonprofit corporation, cooperative corporation, or other entity or
organization; or a local nonprofit, regional, or national
organization whose purpose includes the acquisition of an assisted
housing development, real property, or condominium and which
represents the interests of at least a majority of the tenants in the
assisted housing development, real property, or condominium.
(3) "Nonprofit organization" means a not-for-profit corporation
organized pursuant to Division 2 (commencing with Section 5000) of
Title 1 of the Corporations Code, which has as its principal purpose
the ownership, development, or management of housing or community
development projects for persons and families of lower income and
very low income, and which has a broadly representative board, a
majority of whose members are community-based and has a proven track
record of community service.
(4) "Public agency" means a housing authority, redevelopment
agency, or any other agency of a city, county, or city and county,
whether general law or chartered, which is authorized to own,
develop, or manage housing or community development projects for
persons and families of lower income and very low income.
(5) "Regional or national organization" means a not-for-profit,
charitable corporation organized on a multicounty, state, or
multistate basis which has as its principal purpose the ownership,
development, or management of housing or community development
projects for persons and families of lower income and very low
income.
(6) "Regional or national agency" means a multicounty, state, or
multistate agency which is authorized to own, develop, or manage
housing or community development projects for persons and families of
lower income and very low income.
(7) "Profit-motivated organization or individual" means an
individual or two or more persons organized pursuant to Division 1
(commencing with Section 100) of Title 1 of, Division 3 (commencing
with Section 1200) of Title 1 of, or Division 1 (commencing with
Section 15001) of Title 2 of, the Corporations Code, which carries on
as a business for profit.
(8) "Lower income" means those residents having an income as
defined by Section 50079.5 of the Health and Safety Code.
(9) "Very low income" means those residents having an income as
defined by Section 50105 of the Health and Safety Code.
(10) "Resident" means a tenant or other person who lawfully
occupies a unit located in a qualified low-income housing project as
defined under Section 23610.5, and whose income qualifies as lower
income or very low income.
(11) "Condominium" means the interest in real property defined in
Section 783 of the Civil Code.
(f) If the purchase of residential real property results in the
nonrecognition of gain on the sale of an assisted housing
development, real property, or condominium under subdivision (a),
(b), (c), or (d), in determining the adjusted basis of the purchased
residential real property as of any time following the sale of the
assisted housing development, real property, or condominium, the
adjustments to the basis shall include a reduction by an amount equal
to the amount of the gain not so recognized on the sale of the
assisted housing development, real property, or condominium. If more
than one parcel of residential real property has been purchased, the
nonrecognized gain from the sale of the assisted housing development,
real property, or condominium shall be attributed to the parcels of
residential real property on a pro rata basis based upon the purchase
prices of those parcels.
(g) In accordance with subdivision (a), (b), (c), or (d), if the
sale of an assisted housing development, real property, or
condominium results in a gain during the taxable year, then all of
the following shall apply:
(1) The statutory period for the assessment of any deficiency
attributable to any part of the gain shall not expire before the
expiration of four years from the date the Franchise Tax Board is
notified (on the form as the Franchise Tax Board may provide) of one
of the following:
(A) The cost of purchasing the residential real property which
satisfies the requirement of subdivision (a), (b), (c), or (d), and
results in the nonrecognition of gain.
(B) The intention not to reinvest all of the proceeds from the
sale in residential real property within the period specified in
subdivision (a), (b), (c), or (d).
(C) The failure to reinvest all of the proceeds from the sale in
residential real property within the period specified in subdivision
(a), (b), (c), or (d).
(2) The deficiency may be assessed before the expiration of the
period specified in paragraph (1), notwithstanding the provisions of
any other law or rule of law which would otherwise prevent the
assessment.
(3) All information regarding the sale of an assisted housing
development, real property, or condominium, at a gain in accordance
with subdivision (a), (b), (c), or (d), shall be disclosed in the
return for the taxable year in which the sale took place in order to
determine if the sale qualifies and the amount of nonrecognition of
gain qualifies under subdivision (a), (b), (c), or (d).
(h) The Department of Housing and Community Development shall do
all of the following:
(1) Certify that the lower income or very low income resident
meets the definitions provided in paragraphs (8) and (9) of
subdivision (e).
(2) Provide an annual listing to the Franchise Tax Board, in a
form and manner agreed upon by the Franchise Tax Board and the
Department of Housing and Community Development, of the names and
identification numbers of the persons who are members of the group of
purchasers who are lower income or very low income residents that
were issued a certification, and the names and identification numbers
of the sellers of the property.
(3) Provide the group of purchasers who are lower income or very
low income residents a copy of the certification.
(i) The group of purchasers who are lower income or very low
income residents shall do all of the following:
(1) Provide the Department of Housing and Community Development
with documents, as deemed necessary by the department, verifying the
income of each member of the group.
(2) Provide a copy of the certification to the seller of the
assisted housing development, real property, or condominium.
(3) Retain a copy of the certification.
(j) The seller of the assisted housing development, real property,
or condominium shall do all of the following:
(1) Obtain a copy of the certification from the group of
purchasers who are lower income or very low income residents of the
assisted housing development, real property, or condominium.
(2) Retain a copy of the group's lower income or very low income
certification for tax purposes.
24956. (a) Section 1044 of the Internal Revenue Code, relating to
rollover of publicly traded securities gain into specialized small
business investment companies, shall apply, except as otherwise
provided.
(b) The provisions of Section 1044 of the Internal Revenue Code,
relating to rollover of publicly traded securities gain into
specialized small business investment companies, shall not apply to
any taxable year (or portion thereof) that those provisions (or
similar provisions) are not applicable for federal income tax
purposes.