
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC1250]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
                 Subchapter P--Capital Gains and Losses
 
     PART IV--SPECIAL RULES FOR DETERMINING CAPITAL GAINS AND LOSSES
 
Sec. 1250. Gain from dispositions of certain depreciable realty


(a) General rule

    Except as otherwise provided in this section--

         (1) Additional depreciation after December 31, 1975

        (A) In general

            If section 1250 property is disposed of after December 31, 
        1975, then the applicable percentage of the lower of--
                (i) that portion of the additional depreciation (as 
            defined in subsection (b)(1) or (4)) attributable to periods 
            after December 31, 1975, in respect of the property, or
                (ii) the excess of the amount realized (in the case of a 
            sale, exchange, or involuntary conversion), or the fair 
            market value of such property (in the case of any other 
            disposition), over the adjusted basis of such property,

        shall be treated as gain which is ordinary income. Such gain 
        shall be recognized notwithstanding any other provision of this 
        subtitle.

        (B) Applicable percentage

            For purposes of subparagraph (A), the term ``applicable 
        percentage'' means--
                (i) in the case of section 1250 property with respect to 
            which a mortgage is insured under section 221(d)(3) or 236 
            of the National Housing Act, or housing financed or assisted 
            by direct loan or tax abatement under similar provisions of 
            State or local laws and with respect to which the owner is 
            subject to the restrictions described in section 
            1039(b)(1)(B) (as in effect on the day before the date of 
            the enactment of the Revenue Reconciliation Act of 1990), 
            100 percent minus 1 percentage point for each full month the 
            property was held after the date the property was held 100 
            full months;
                (ii) in the case of dwelling units which, on the 
            average, were held for occupancy by families or individuals 
            eligible to receive subsidies under section 8 of the United 
            States Housing Act of 1937, as amended, or under the 
            provisions of State or local law authorizing similar levels 
            of subsidy for lower-income families, 100 percent minus 1 
            percentage point for each full month the property was held 
            after the date the property was held 100 full months;
                (iii) in the case of section 1250 property with respect 
            to which a depreciation deduction for rehabilitation 
            expenditures was allowed under section 167(k), 100 percent 
            minus 1 percentage point for each full month in excess of 
            100 full months after the date on which such property was 
            placed in service;
                (iv) in the case of section 1250 property with respect 
            to which a loan is made or insured under title V of the 
            Housing Act of 1949, 100 percent minus 1 percentage point 
            for each full month the property was held after the date the 
            property was held 100 full months; and
                (v) in the case of all other section 1250 property, 100 
            percent.

        In the case of a building (or a portion of a building devoted to 
        dwelling units), if, on the average, 85 percent or more of the 
        dwelling units contained in such building (or portion thereof) 
        are units described in clause (ii), such building (or portion 
        thereof) shall be treated as property described in clause (ii). 
        Clauses (i), (ii), and (iv) shall not apply with respect to the 
        additional depreciation described in subsection (b)(4) which was 
        allowed under section 167(k).

      (2) Additional depreciation after December 31, 1969, and 
                           before January 1, 1976

        (A) In general

            If section 1250 property is disposed of after December 31, 
        1969, and the amount determined under paragraph (1)(A)(ii) 
        exceeds the amount determined under paragraph (1)(A)(i), then 
        the applicable percentage of the lower of--
                (i) that portion of the additional depreciation 
            attributable to periods after December 31, 1969, and before 
            January 1, 1976, in respect of the property, or
                (ii) the excess of the amount determined under paragraph 
            (1)(A)(ii) over the amount determined under paragraph 
            (1)(A)(i),

        shall also be treated as gain which is ordinary income. Such 
        gain shall be recognized notwithstanding any other provision of 
        this subtitle.

        (B) Applicable percentage

            For purposes of subparagraph (A), the term ``applicable 
        percentage'' means--
                (i) in the case of section 1250 property disposed of 
            pursuant to a written contract which was, on July 24, 1969, 
            and at all times thereafter, binding on the owner of the 
            property, 100 percent minus 1 percentage point for each full 
            month the property was held after the date the property was 
            held 20 full months;
                (ii) in the case of section 1250 property with respect 
            to which a mortgage is insured under section 221(d)(3) or 
            236 of the National Housing Act, or housing financed or 
            assisted by direct loan or tax abatement under similar 
            provisions of State or local laws, and with respect to which 
            the owner is subject to the restrictions described in 
            section 1039(b)(1)(B) (as in effect on the day before the 
            date of the enactment of the Revenue Reconciliation Act of 
            1990), 100 percent minus 1 percentage point for each full 
            month the property was held after the date the property was 
            held 20 full months;
                (iii) in the case of residential rental property (as 
            defined in section 167(j)(2)(B)) other than that covered by 
            clauses (i) and (ii), 100 percent minus 1 percentage point 
            for each full month the property was held after the date the 
            property was held 100 full months;
                (iv) in the case of section 1250 property with respect 
            to which a depreciation deduction for rehabilitation 
            expenditures was allowed under section 167(k), 100 percent 
            minus 1 percentage point for each full month in excess of 
            100 full months after the date on which such property was 
            placed in service; and
                (v) in the case of all other section 1250 property, 100 
            percent.

        Clauses (i), (ii), and (iii) shall not apply with respect to the 
        additional depreciation described in subsection (b)(4).

         (3) Additional depreciation before January 1, 1970

        (A) In general

            If section 1250 property is disposed of after December 31, 
        1963, and the amount determined under paragraph (1)(A)(ii) 
        exceeds the sum of the amounts determined under paragraphs 
        (1)(A)(i) and (2)(A)(i), then the applicable percentage of the 
        lower of--
                (i) that portion of the additional depreciation 
            attributable to periods before January 1, 1970, in respect 
            of the property, or
                (ii) the excess of the amount determined under paragraph 
            (1)(A)(ii) over the sum of the amounts determined under 
            paragraphs (1)(A)(i) and (2)(A)(i),

        shall also be treated as gain which is ordinary income. Such 
        gain shall be recognized notwithstanding any other provision of 
        this subtitle.

        (B) Applicable percentage

            For purposes of subparagraph (A), the term ``applicable 
        percentage'' means 100 percent minus 1 percentage point for each 
        full month the property was held after the date on which the 
        property was held for 20 full months.

                          (4) Special rule

        For purposes of this subsection, any reference to section 167(k) 
    or 167(j)(2)(B) shall be treated as a reference to such section as 
    in effect on the day before the date of the enactment of the Revenue 
    Reconciliation Act of 1990.

                         (5) Cross reference

            For reduction in the case of corporations on capital gain 
        treatment under this section, see section 291(a)(1).

(b) Additional depreciation defined

    For purposes of this section--

                           (1) In general

        The term ``additional depreciation'' means, in the case of any 
    property, the depreciation adjustments in respect of such property; 
    except that, in the case of property held more than one year, it 
    means such adjustments only to the extent that they exceed the 
    amount of the depreciation adjustments which would have resulted if 
    such adjustments had been determined for each taxable year under the 
    straight line method of adjustment.

                     (2) Property held by lessee

        In the case of a lessee, in determining the depreciation 
    adjustments which would have resulted in respect of any building 
    erected (or other improvement made) on the leased property, or in 
    respect of any cost of acquiring the lease, the lease period shall 
    be treated as including all renewal periods. For purposes of the 
    preceding sentence--
            (A) the term ``renewal period'' means any period for which 
        the lease may be renewed, extended, or continued pursuant to an 
        option exercisable by the lessee, but
            (B) the inclusion of renewal periods shall not extend the 
        period taken into account by more than \2/3\ of the period on 
        the basis of which the depreciation adjustments were allowed.

                    (3) Depreciation adjustments

        The term ``depreciation adjustments'' means, in respect of any 
    property, all adjustments attributable to periods after December 31, 
    1963, reflected in the adjusted basis of such property on account of 
    deductions (whether in respect of the same or other property) 
    allowed or allowable to the taxpayer or to any other person for 
    exhaustion, wear and tear, obsolescence, or amortization (other than 
    amortization under section 168 (as in effect before its repeal by 
    the Tax Reform Act of 1976), 169, 185 (as in effect before its 
    repeal by the Tax Reform Act of 1986), 188 (as in effect before its 
    repeal by the Revenue Reconciliation Act of 1990), 190, or 193). For 
    purposes of the preceding sentence, if the taxpayer can establish by 
    adequate records or other sufficient evidence that the amount 
    allowed as a deduction for any period was less than the amount 
    allowable, the amount taken into account for such period shall be 
    the amount allowed.

     (4) Additional depreciation attributable to rehabilitation 
                                expenditures

        The term ``additional depreciation'' also means, in the case of 
    section 1250 property with respect to which a depreciation or 
    amortization deduction for rehabilitation expenditures was allowed 
    under section 167(k) (as in effect on the day before the date of the 
    enactment of the Revenue Reconciliation Act of 1990) or 191 (as in 
    effect before its repeal by the Economic Recovery Tax Act of 1981), 
    the depreciation or amortization adjustments allowed under such 
    section to the extent attributable to such property, except that, in 
    the case of such property held for more than one year after the 
    rehabilitation expenditures so allowed were incurred, it means such 
    adjustments only to the extent that they exceed the amount of the 
    depreciation adjustments which would have resulted if such 
    adjustments had been determined under the straight line method of 
    adjustment without regard to the useful life permitted under section 
    167(k) (as in effect on the day before the date of the enactment of 
    the Revenue Reconciliation Act of 1990) or 191 (as in effect before 
    its repeal by the Economic Recovery Tax Act of 1981).

          (5) Method of computing straight line adjustments

        For purposes of paragraph (1), the depreciation adjustments 
    which would have resulted for any taxable year under the straight 
    line method shall be determined--
            (A) in the case of property to which section 168 applies, by 
        determining the adjustments which would have resulted for such 
        year if the taxpayer had elected the straight line method for 
        such year using the recovery period applicable to such property, 
        and
            (B) in the case any property to which section 168 does not 
        apply, if a useful life (or salvage value) was used in 
        determining the amount allowable as a deduction for any taxable 
        year, by using such life (or value).

(c) Section 1250 property

    For purposes of this section, the term ``section 1250 property'' 
means any real property (other than section 1245 property, as defined in 
section 1245(a)(3)) which is or has been property of a character subject 
to the allowance for depreciation provided in section 167.

(d) Exceptions and limitations

                              (1) Gifts

        Subsection (a) shall not apply to a disposition by gift.

                       (2) Transfers at death

        Except as provided in section 691 (relating to income in respect 
    of a decedent), subsection (a) shall not apply to a transfer at 
    death.

                  (3) Certain tax-free transactions

        If the basis of property in the hands of a transferee is 
    determined by reference to its basis in the hands of the transferor 
    by reason of the application of section 332, 351, 361, 721, or 731, 
    then the amount of gain taken into account by the transferor under 
    subsection (a) shall not exceed the amount of gain recognized to the 
    transferor on the transfer of such property (determined without 
    regard to this section). Except as provided in paragraph (9), this 
    paragraph shall not apply to a disposition to an organization (other 
    than a cooperative described in section 521) which is exempt from 
    the tax imposed by this chapter.

       (4) Like kind exchanges; involuntary conversions, etc.

        (A) Recognition limit

            If property is disposed of and gain (determined without 
        regard to this section) is not recognized in whole or in part 
        under section 1031 or 1033, then the amount of gain taken into 
        account by the transferor under subsection (a) shall not exceed 
        the greater of the following:
                (i) the amount of gain recognized on the disposition 
            (determined without regard to this section), increased as 
            provided in subparagraph (B), or
                (ii) the amount determined under subparagraph (C).

        (B) Increase for certain stock

            With respect to any transaction, the increase provided by 
        this subparagraph is the amount equal to the fair market value 
        of any stock purchased in a corporation which (but for this 
        paragraph) would result in nonrecognition of gain under section 
        1033(a)(2)(A).

        (C) Adjustment where insufficient section 1250 property is 
                acquired

            With respect to any transaction, the amount determined under 
        this subparagraph shall be the excess of--
                (i) the amount of gain which would (but for this 
            paragraph) be taken into account under subsection (a), over
                (ii) the fair market value (or cost in the case of a 
            transaction described in section 1033(a)(2)) of the section 
            1250 property acquired in the transaction.

        (D) Basis of property acquired

            In the case of property purchased by the taxpayer in a 
        transaction described in section 1033(a)(2), in applying section 
        1033(b)(2), such sentence shall be applied--
                (i) first solely to section 1250 properties and to the 
            amount of gain not taken into account under subsection (a) 
            by reason of this paragraph, and
                (ii) then to all purchased properties to which such 
            sentence applies and to the remaining gain not recognized on 
            the transaction as if the cost of the section 1250 
            properties were the basis of such properties computed under 
            clause (i).

        In the case of property acquired in any other transaction to 
        which this paragraph applies, rules consistent with the 
        preceding sentence shall be applied under regulations prescribed 
        by the Secretary.

        (E) Additional depreciation with respect to property disposed of

            In the case of any transaction described in section 1031 or 
        1033, the additional depreciation in respect of the section 1250 
        property acquired which is attributable to the section 1250 
        property disposed of shall be an amount equal to the amount of 
        the gain which was not taken into account under subsection (a) 
        by reason of the application of this paragraph.

                    (5) Section 1081 transactions

        Under regulations prescribed by the Secretary, rules consistent 
    with paragraphs (3) and (4) of this subsection and with subsections 
    (e) and (f) shall apply in the case of transactions described in 
    section 1081 (relating to exchanges in obedience to SEC orders).

       (6) Property distributed by a partnership to a partner

        (A) In general

            For purposes of this section, the basis of section 1250 
        property distributed by a partnership to a partner shall be 
        deemed to be determined by reference to the adjusted basis of 
        such property to the partnership.

        (B) Additional depreciation

            In respect of any property described in subparagraph (A), 
        the additional depreciation attributable to periods before the 
        distribution by the partnership shall be--
                (i) the amount of the gain to which subsection (a) would 
            have applied if such property had been sold by the 
            partnership immediately before the distribution at its fair 
            market value at such time and the applicable percentage for 
            the property had been 100 percent, reduced by
                (ii) if section 751(b) applied to any part of such gain, 
            the amount of such gain to which section 751(b) would have 
            applied if the applicable percentage for the property had 
            been 100 percent.

    (7) Transfers to tax-exempt organization where property will 
                        be used in unrelated business

        (A) In general

            The second sentence of paragraph (3) shall not apply to a 
        disposition of section 1250 property to an organization 
        described in section 511(a)(2) or 511(b)(2) if, immediately 
        after such disposition, such organization uses such property in 
        an unrelated trade or business (as defined in section 513).

        (B) Later change in use

            If any property with respect to the disposition of which 
        gain is not recognized by reason of subparagraph (A) ceases to 
        be used in an unrelated trade or business of the organization 
        acquiring such property, such organization shall be treated for 
        purposes of this section as having disposed of such property on 
        the date of such cessation.

                    (8) Foreclosure dispositions

        If any section 1250 property is disposed of by the taxpayer 
    pursuant to a bid for such property at foreclosure or by operation 
    of an agreement or of process of law after there was a default on 
    indebtedness which such property secured, the applicable percentage 
    referred to in paragraph (1)(B), (2)(B), or (3)(B) of subsection 
    (a), as the case may be, shall be determined as if the taxpayer 
    ceased to hold such property on the date of the beginning of the 
    proceedings pursuant to which the disposition occurred, or, in the 
    event there are no proceedings, such percentage shall be determined 
    as if the taxpayer ceased to hold such property on the date, 
    determined under regulations prescribed by the Secretary, on which 
    such operation of an agreement or process of law, pursuant to which 
    the disposition occurred, began.

(e) Holding period

    For purposes of determining the applicable percentage under this 
section, the provisions of section 1223 shall not apply, and the holding 
period of section 1250 property shall be determined under the following 
rules:

                   (1) Beginning of holding period

        The holding period of section 1250 property shall be deemed to 
    begin--
            (A) in the case of property acquired by the taxpayer, on the 
        day after the date of acquisition, or
            (B) in the case of property constructed, reconstructed, or 
        erected by the taxpayer, on the first day of the month during 
        which the property is placed in service.

                 (2) Property with transferred basis

        If the basis of property acquired in a transaction described in 
    paragraph (1), (2), (3), or (5) of subsection (d) is determined by 
    reference to its basis in the hands of the transferor, then the 
    holding period of the property in the hands of the transferee shall 
    include the holding period of the property in the hands of the 
    transferor.

(f) Special rules for property which is substantially improved

                (1) Amount treated as ordinary income

        If, in the case of a disposition of section 1250 property, the 
    property is treated as consisting of more than one element by reason 
    of paragraph (3), then the amount taken into account under 
    subsection (a) in respect of such section 1250 property as ordinary 
    income shall be the sum of the amounts determined under paragraph 
    (2).

           (2) Ordinary income attributable to an element

        For purposes of paragraph (1), the amount taken into account for 
    any element shall be the sum of a series of amounts determined for 
    the periods set forth in subsection (a), with the amount for any 
    such period being determined by multiplying--
            (A) the amount which bears the same ratio to the lower of 
        the amounts specified in clause (i) or (ii) of subsection 
        (a)(1)(A), in clause (i) or (ii) of subsection (a)(2)(A), or in 
        clause (i) or (ii) of subsection (a)(3)(A), as the case may be, 
        for the section 1250 property as the additional depreciation for 
        such element attributable to such period bears to the sum of the 
        additional depreciation for all elements attributable to such 
        period, by
            (B) the applicable percentage for such element for such 
        period.

    For purposes of this paragraph, determinations with respect to any 
    element shall be made as if it were a separate property.

          (3) Property consisting of more than one element

        In applying this subsection in the case of any section 1250 
    property, there shall be treated as a separate element--
            (A) each separate improvement,
            (B) if, before completion of section 1250 property, units 
        thereof (as distinguished from improvements) were placed in 
        service, each such unit of section 1250 property, and
            (C) the remaining property which is not taken into account 
        under subparagraphs (A) and (B).

            (4) Property which is substantially improved

        For purposes of this subsection--

        (A) In general

            The term ``separate improvement'' means each improvement 
        added during the 36-month period ending on the last day of any 
        taxable year to the capital account for the property, but only 
        if the sum of the amounts added to such account during such 
        period exceeds the greatest of--
                (i) 25 percent of the adjusted basis of the property,
                (ii) 10 percent of the adjusted basis of the property, 
            determined without regard to the adjustments provided in 
            paragraphs (2) and (3) of section 1016(a), or
                (iii) $5,000.

        For purposes of clauses (i) and (ii), the adjusted basis of the 
        property shall be determined as of the beginning of the first 
        day of such 36-month period, or of the holding period of the 
        property (within the meaning of subsection (e)), whichever is 
        the later.

        (B) Exception

            Improvements in any taxable year shall be taken into account 
        for purposes of subparagraph (A) only if the sum of the amounts 
        added to the capital account for the property for such taxable 
        year exceeds the greater of--
                (i) $2,000, or
                (ii) one percent of the adjusted basis referred to in 
            subparagraph (A)(ii), determined, however, as of the 
            beginning of such taxable year.

        For purposes of this section, if the amount added to the capital 
        account for any separate improvement does not exceed the greater 
        of clause (i) or (ii), such improvement shall be treated as 
        placed in service on the first day, of a calendar month, which 
        is closest to the middle of the taxable year.

        (C) Improvement

            The term ``improvement'' means, in the case of any section 
        1250 property, any addition to capital account for such property 
        after the initial acquisition or after completion of the 
        property.

(g) Adjustments to basis

    The Secretary shall prescribe such regulations as he may deem 
necessary to provide for adjustments to the basis of property to reflect 
gain recognized under subsection (a).

(h) Application of section

    This section shall apply notwithstanding any other provision of this 
subtitle.

(Added Pub. L. 88-272, title II, Sec. 231(a), Feb. 26, 1964, 78 Stat. 
100; amended Pub. L. 91-172, title V, Sec. 521(b), (c), (e), title VII, 
Sec. 704(b)(5), title IX, Sec. 910(b), Dec. 30, 1969, 83 Stat. 652, 653, 
670, 720; Pub. L. 92-178, title III, Sec. 303(c)(3), Dec. 10, 1971, 85 
Stat. 522; Pub. L. 93-625, Sec. 5(c), Jan. 3, 1975, 88 Stat. 2112; Pub. 
L. 94-81, Sec. 2(b), Aug. 9, 1975, 89 Stat. 417; Pub. L. 94-455, title 
II, Sec. 202(a)-(c)(1), (2), title XIX, Secs. 1901(b)(3)(K), (31)(A), 
(B), (E), 1906(b)(13)(A), 1951(c)(2)(C), title XXI, Secs. 2122(b)(4), 
2124(a)(3)(D), Oct. 4, 1976, 90 Stat. 1527, 1529, 1530, 1793, 1799, 
1800, 1834, 1840, 1915, 1918; Pub. L. 95-600, title IV, Secs. 404(c)(7), 
405(c)(4), title VII, Sec. 701(f)(3)(C), (E), Nov. 6, 1978, 92 Stat. 
2870, 2871, 2901; Pub. L. 96-222, title I, Sec. 107(a)(1)(D), Apr. 1, 
1980, 94 Stat. 222; Pub. L. 96-223, title II, Sec. 251(a)(2)(D), Apr. 2, 
1980, 94 Stat. 287; Pub. L. 97-34, title II, Secs. 204(e), 212(d)(2)(F), 
Aug. 13, 1981, 95 Stat. 223, 239; Pub. L. 97-448, title I, 
Sec. 102(a)(7), Jan. 12, 1983, 96 Stat. 2368; Pub. L. 98-369, div. A, 
title VII, Sec. 712(a)(1)(B), July 18, 1984, 98 Stat. 946; Pub. L. 99-
514, title II, Sec. 242(b)(2), Oct. 22, 1986, 100 Stat. 2181; Pub. L. 
100-647, title I, Sec. 1002(a)(1), Nov. 10, 1988, 102 Stat. 3352; Pub. 
L. 101-239, title VII, Sec. 7831(b), Dec. 19, 1989, 103 Stat. 2426; Pub. 
L. 101-508, title XI, Secs. 11801(c)(6)(F), (8)(I), (15), 11812(b)(11), 
(12), Nov. 5, 1990, 104 Stat. 1388-524, 1388-527, 1388-536; Pub. L. 104-
7, Sec. 2(b), Apr. 11, 1995, 109 Stat. 93; Pub. L. 104-188, title I, 
Sec. 1702(h)(18), Aug. 20, 1996, 110 Stat. 1874; Pub. L. 105-34, title 
III, Sec. 312(d)(10), Aug. 5, 1997, 111 Stat. 840; Pub. L. 105-206, 
title VI, Sec. 6023(12), July 22, 1998, 112 Stat. 825.)

                       References in Text

    Sections 221 and 236 of the National Housing Act, referred to in 
subsec. (a)(1)(B)(i), (2)(B)(ii), are classified to sections 1715l and 
1715z-1, respectively, of Title 12, Banks and Banking.
    The date of the enactment of the Revenue Reconciliation Act of 1990, 
referred to in subsecs. (a)(1)(B)(i), (2)(B)(ii), (4) and (b)(4), is the 
date of enactment of Pub. L. 101-508, which was approved Nov. 5, 1990.
    Section 8 of the United States Housing Act of 1937, referred to in 
subsec. (a)(1)(B)(ii), is classified to section 1437f of Title 42, The 
Public Health and Welfare.
    The Housing Act of 1949, referred to in subsec. (a)(1)(B)(iv), is 
act July 15, 1949, ch. 338, 63 Stat. 413, as amended. Title V of the 
Housing Act of 1949 is classified generally to subchapter III (Sec. 1471 
et seq.) of chapter 8A of Title 42. For complete classification of this 
Act to the Code, see Short Title note set out under section 1441 of 
Title 42 and Tables.
    The Tax Reform Act of 1976, referred to in subsec. (b)(3), is Pub. 
L. 94-455, Oct. 4, 1976, 90 Stat. 1520, as amended. Section 
1951(a)(4)(A) of the Act repealed section 168 of this title. For 
complete classification of this Act to the Code, see Tables.
    The Tax Reform Act of 1986, referred to in subsec. (b)(3), is Pub. 
L. 99-514, Oct. 22, 1986, 100 Stat. 2085. Section 242(a) of the Act 
repealed section 185 of this title. For complete classification of this 
Act to the Code, see Tables.
    The Revenue Reconciliation Act of 1990, referred to in subsec. 
(b)(3), is title XI of Pub. L. 101-508, Nov. 5, 1990, 104 Stat. 1388-
400. Section 11801(a)(13) of the Act repealed section 188 of this title. 
For complete classification of this Act to the Code, see Short Title 
note set out under section 1 of this title and Tables.
    The Economic Recovery Tax Act of 1981, referred to in subsec. 
(b)(4), is Pub. L. 97-34, Aug. 13, 1981, 95 Stat. 172, as amended. 
Section 191 of this title was repealed by section 212(d)(1) of Pub. L. 
97-34. For complete classification of this Act to the Code, see Tables.


                               Amendments

    1998--Subsec. (d)(4)(D). Pub. L. 105-206 substituted ``section 
1033(b)(2)'' for ``the last sentence of section 1033(b)'' in 
introductory provisions.
    1997--Subsec. (d)(7) to (10). Pub. L. 105-34, Sec. 312(d)(10)(A), 
redesignated pars. (9) and (10) as (7) and (8), respectively, and struck 
out heading and text of former par. (7). Text read as follows: 
``Subsection (a) shall not apply to a disposition of--
        ``(A) property to the extent used by the taxpayer as his 
    principal residence (within the meaning of section 1034, relating to 
    rollover of gain on sale of principal residence), and
        ``(B) property in respect of which the taxpayer meets the age 
    and ownership requirements of section 121 (relating to one-time 
    exclusion of gain from sale of principal residence by individual who 
    has attained age 55) but only to the extent that he meets the use 
    requirements of such section in respect of such property.''
    Subsec. (e)(3). Pub. L. 105-34, Sec. 312(d)(10)(B), struck out 
heading and text of par. (3). Text read as follows: ``If the basis of 
property acquired in a transaction described in paragraph (7) of 
subsection (d) is determined by reference to the basis in the hands of 
the taxpayer of other property, then the holding period of the property 
acquired shall include the holding period of such other property.''
    1996--Subsec. (e)(4). Pub. L. 104-188 struck out par. (4) which read 
as follows:
    ``(4) Qualified low-income housing.--The holding period of any 
section 1250 property acquired which is described in subsection 
(d)(8)(E)(i) shall include the holding period of the corresponding 
element of section 1250 property disposed of.''
    1995--Subsec. (d)(5). Pub. L. 104-7 struck out ``1071 and'' before 
``1081 transactions'' in heading and ``section 1071 (relating to gain 
from sale or exchange to effectuate policies of FCC) or'' before 
``section 1081'' in text.
    1990--Subsec. (a)(1)(B)(i), (2)(B)(ii). Pub. L. 101-508, 
Sec. 11801(c)(15)(A), which directed the insertion of ``(as in effect on 
the day before the date of the enactment of the Revenue Reconciliation 
Act of 1990)'' after ``section 1039(b)(1)(B)'' in pars. (1)(A)(i) and 
(2)(B)(ii) of subsec. (a), was executed to pars. (1)(B)(i) and 
(2)(B)(ii) to reflect the probable intent of Congress.
    Subsec. (a)(4), (5). Pub. L. 101-508, Sec. 11812(b)(11), added par. 
(4) and redesignated former par. (4) as (5).
    Subsec. (b)(3). Pub. L. 101-508, Sec. 11801(c)(6)(F), substituted 
``188 (as in effect before its repeal by the Revenue Reconciliation Act 
of 1990),'' for ``188,''.
    Subsec. (b)(4). Pub. L. 101-508, Sec. 11812(b)(12), substituted 
``section 167(k) (as in effect on the day before the date of the 
enactment of the Revenue Reconciliation Act of 1990)'' for ``section 
167(k)'' in two places.
    Subsec. (d)(3). Pub. L. 101-508, Sec. 11801(c)(8)(I), struck out 
``371(a), 374(a),'' after ``332, 351, 361,''.
    Subsec. (d)(8). Pub. L. 101-508, Sec. 11801(c)(15)(B), struck out 
par. (8) which related to the treatment of gain from the disposition of 
qualified low-income housing.
    Subsecs. (g) to (i). Pub. L. 101-508, Sec. 11801(c)(15)(C), 
redesignated subsecs. (h) and (i) as (g) and (h), respectively, and 
struck out former subsec. (g) which provided special rules for qualified 
low-income housing.
    1989--Subsec. (b)(5)(A). Pub. L. 101-239, Sec. 7831(b)(1), 
substituted ``of property to which section 168 applies'' for ``of 
recovery property''.
    Subsec. (b)(5)(B). Pub. L. 101-239, Sec. 7831(b)(2), substituted 
``to which section 168 does not apply'' for ``which is not recovery 
property''.
    1988--Subsec. (d)(11). Pub. L. 100-647 struck out par. (11) which 
related to section 1245 recovery property.
    1986--Subsec. (b)(3). Pub. L. 99-514 inserted ``(as in effect before 
its repeal by the Tax Reform Act of 1986)'' after ``185''.
    1984--Subsec. (a)(4). Pub. L. 98-369 added par. (4).
    1983--Subsec. (b)(1). Pub. L. 97-448, Sec. 102(a)(7)(B), struck out 
last sentence providing that, for purposes of defining ``additional 
depreciation'', if a useful life (or salvage value) was used in 
determining the amount allowed as a deduction for any taxable year, such 
life (or value) was to be used in determining the depreciation 
adjustments which would have resulted for such year under the straight 
line method.
    Subsec. (b)(5). Pub. L. 97-448, Sec. 102(a)(7)(A), added par. (5).
    1981--Subsec. (b)(4). Pub. L. 97-34, Sec. 212(d)(2)(F), inserted 
``(as in effect before its repeal by the Economic Recovery Tax Act of 
1981)'' after ``section 167(k) or 191'' in two places.
    Subsec. (d)(11). Pub. L. 97-34, Sec. 204(e), added par. (11).
    1980--Subsec. (a)(1)(B). Pub. L. 96-222 inserted ``which was allowed 
under section 167(k)'' at end of last sentence.
    Subsec. (b)(3). Pub. L. 96-223 inserted reference to section 193.
    1978--Subsec. (b)(3). Pub. L. 95-600, Sec. 701(f)(3)(C), struck out 
reference to section 191.
    Subsec. (b)(4). Pub. L. 95-600, Sec. 701(f)(3)(E), inserted 
reference to amortization deduction, amortization adjustments, and to 
section 191 in two places.
    Subsec. (d)(7)(A). Pub. L. 95-600, Sec. 405(c)(4), substituted 
``relating to rollover of gain on sale of principal residence'' for 
``relating to sale or exchange of residence''.
    Subsec. (d)(7)(B). Pub. L. 95-600, Sec. 404(c)(7), inserted 
provisions relating to a one-time exclusion and principal residence and 
substituted ``55'' for ``65''.
    1976--Subsec. (a). Pub. L. 94-455, Sec. 202(a), in revising text 
generally, made the following changes:
    (1) Added par. (1).
    (2) Redesignated as pars. (2) and (3) existing pars. (1) and (2).
    (3) Made the following changes in par. (2): inserted in heading ``, 
and before January 1, 1976''; designated introductory text as subpar. 
``(A) In general''; inserted therein ``and the amount determined under 
paragraph (1)(A)(ii) exceeds the amount determined under paragraph 
(1)(A)(i), then''; redesignated as cl. (i) existing subpar. (A); 
substituted therein ``attributable to periods after December 31, 1969, 
and before January 1, 1976'' for ``(as defined in subsection (b)(1) or 
(4) attributable to periods after December 31, 1969''; substituted cl. 
(ii) and concluding text for subpar. (B) and concluding text which read:
    ``(B) the excess of--
        ``(i) the amount realized (in the case of a sale, exchange, or 
    involuntary conversion), or the fair market value of such property 
    (in the case of any other disposition), over
        ``(ii) the adjusted basis of such property,
shall be treated as gain from the sale or exchange of property which is 
neither a capital asset nor property described in section 1231. Such 
gain shall be recognized notwithstanding any other provision of this 
subtitle.''; redesignated as subpar. (B) existing subpar. (C); 
substituted therein introductory ``subparagraph (A)'' for ``paragraph 
(1)''; and deleted from cl. (ii) ``constructed, reconstructed, or 
acquired by the taxpayer before January 1, 1976,'' after ``section 1250 
property'' and ``is'' before ``financed'', and substituted ``1'' for 
``one''.
    (4) Made the following changes in par. (3): substituted in subpar. 
(A) ``determined under paragraph (1)(A)(ii) exceeds the sum of the 
amounts determined under paragraphs (1)(A)(i) and (2)(A)(i)'' for 
``determined under paragraph (1)(B) exceeds the amount determined under 
paragraph (1)(A)''; and substituted subpar. (A)(ii) and concluding text 
for par. (2)(A)(ii), and concluding text which read:
        ``(ii) the excess of the amount determined under paragraph 
    (1)(B) over the amount determined under paragraph (1)(A),
shall also be treated as gain from the sale or exchange of property 
which is neither a capital asset nor property described in section 1231. 
Such gain shall be recognized notwithstanding any other provisions of 
this subtitle.''
    Subsec. (b)(3). Pub. L. 94-455, Secs. 1951(c)(2)(C), 2122(b)(4), 
2124(a)(3)(D), inserted ``(as in effect before its repeal by the Tax 
Reform Act of 1976)'' after ``section 168'' and reference to sections 
190 and 191.
    Subsec. (d)(4)(B). Pub. L. 94-455, Sec. 1901(b)(31)(A), substituted 
reference to section ``1033(a)(2)(A)'' for ``1033(a)(3)(A)''.
    Subsec. (d)(4)(C). Pub. L. 94-455, Sec. 1901(b)(31)(B), substituted 
reference to section ``1033(a)(2)'' for ``1033(a)(3)''.
    Subsec. (d)(4)(D). Pub. L. 94-455, Sec. 1901(b)(31)(B), (E), 
substituted reference to sections ``1033(a)(2)'' and ``1033(b)'' for 
``1033(a)(3)'' and ``1033(c)'' Sec. 1906(b)(13)(A), struck out ``or his 
delegate'' after ``Secretary''.
    Subsec. (d)(5), (8)(F)(ii). Pub. L. 94-455, Sec. 1906(b)(13)(A), 
struck out ``or his delegate'' after ``Secretary''.
    Subsec. (d)(10). Pub. L. 94-455, Sec. 202(b), added par. (10).
    Subsec. (f)(1). Pub. L. 94-455, Sec. 1901(b)(3)(K), substituted 
``ordinary income'' for ``gain from the sale or exchange of property 
which is neither a capital asset nor property described in section 
1231''.
    Subsec. (f)(2). Pub. L. 94-455, Sec. 202(c)(1), substituted 
introductory text ``the sum of a series of amounts determined for the 
periods set forth in subsection (a), with the amount for any such period 
being determined by multiplying'' for ``the sum of--(A) the amount (if 
any) determined by multiplying''; substituted subpar. (A) as combined 
text for prior subpars. (A)(i) and (B)(i) reading ``(i) the amount which 
bears the same ratio to the lower of the amounts specified in 
subparagraph (A) or (B) of subsection (a)(1) for the section 1250 
property as the additional depreciation for such element attributable to 
periods after December 31, 1969, bears to the sum of the additional 
depreciation for all elements attributable to periods after December 31, 
1969, by'' and ``(i) the amount which bears the same ratio to the lower 
of the amounts specified in subsection (a)(2)(A)(i) or (ii) for the 
section 1250 property as the additional depreciation for such element 
attributable to periods before January 1, 1970, bears to the sum of the 
additional depreciation for all elements attributable to periods before 
January 1, 1970, by''; and substituted subpar. (B) as combined text for 
prior subpars. (A)(ii) and (B)(ii), inserting therein ``for such 
period'' after ``for such element''.
    Subsec. (g)(1). Pub. L. 94-455, Sec. 1901(b)(3)(K), substituted 
``ordinary income'' for ``gain from the sale or exchange of property 
which is neither a capital asset nor property described in section 
1231''.
    Subsec. (g)(2). Pub. L. 94-455, Sec. 202(c)(2), substituted ``shall 
be determined in a manner similar to that provided by subsection 
(f)(2).'' for ``shall be the amount determined by multiplying--
        ``(A) the amount which bears the same ratio to the lower of the 
    additional depreciation or the gain recognized for the section 1250 
    property disposed of as the additional depreciation for such element 
    bears to the sum of the additional depreciation for all elements 
    disposed of, by
        ``(B) the applicable percentage for such element.
For purposes of this paragraph, determinations with respect to any 
element shall be made as if it were a separate property.''
    Subsec. (h). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out ``or 
his delegate'' after ``Secretary''.
    1975--Subsec. (a)(1)(C)(ii). Pub. L. 93-625 substituted ``January 1, 
1976'' for ``January 1, 1975''.
    Subsec. (d)(3), (9). Pub. L. 94-81, Sec. 2(b), inserted reference to 
par. (9) in par. (3), and added par. (9).
    1971--Subsec. (b)(3). Pub. L. 92-178 inserted reference to section 
188.
    1969--Subsec. (a). Pub. L. 91-172, Sec. 521(b), modified the 
recapture rules pertaining to residential housing by allowing a 1 
percent per month reduction in the amount to be recaptured as ordinary 
income after the property has been held for 100 full months, with other 
real property remaining subject to full recapture, applied the existing 
recapture rules where the sale of property was subject to a binding 
contract in existence prior to July 25, 1969, provided that changes in 
the recapture rules are not to apply in federally assisted projects 
(such as programs under section 221(d)(3) or 236 of the National Housing 
Act) or to other publicly assisted housing programs under which the 
return to the investor is limited on a comparable basis, thereby 
rendering these projects subject to a recapture of the depreciation in 
full if the sale occurs in the first 12 months and for a phaseout of the 
recapture of the excess of accelerated over straight-line depreciation 
after 20 months, the recapture being reduced at the rate of 1 percent 
per month until 120 months after which no recapture applies, with such 
recapture rules to continue to apply only with respect to such property 
constructed, reconstructed, or acquired before Jan. 1, 1975, and applied 
new recapture rules to depreciation attributable to periods after Dec. 
31, 1969.
    Subsec. (b)(4). Pub. L. 91-172, Sec. 512(c), added par. (4).
    Subsec. (b)(3). Pub. L. 91-172, Sec. 704(b)(5), inserted reference 
to sections 169 and 185.
    Subsec. (d). Pub. L. 91-172, Secs. 521(e)(1), 910(b)(1), substituted 
``subsection (a)'' for ``subsection (a)(1)'' wherever it appears and 
added par. (8).
    Subsec. (e)(4). Pub. L. 91-172, Sec. 910(b)(2), added par. (4).
    Subsec. (f)(1). Pub. L. 91-172, Sec. 521(e)(2)(A), substituted 
``subsection (a)'' for ``subsection (a)(1)''.
    Subsec. (f)(2). Pub. L. 91-172, Sec. 521(e)(2)(B), redesignated 
subpars. (A) and (B) as cls. (i) and (ii), respectively, of subpar. (A) 
and, in cls. (i) and (ii) as so redesignated, inserted reference to 
depreciation attributable to periods after Dec. 31, 1969, and added 
subpar. (B).
    Subsecs. (g) to (i). Pub. L. 91-172, Sec. 910(b)(3), added subsec. 
(g) and redesignated former subsecs. (g) and (h) as (h) and (i), 
respectively.


                    Effective Date of 1997 Amendment

    Amendment by Pub. L. 105-34 applicable to sales and exchanges after 
May 6, 1997, with certain exceptions, see section 312(d) of Pub. L. 105-
34, set out as a note under section 121 of this title.


                    Effective Date of 1996 Amendment

    Amendment by Pub. L. 104-188 effective, except as otherwise 
expressly provided, as if included in the provision of the Revenue 
Reconciliation Act of 1990, Pub. L. 101-508, title XI, to which such 
amendment relates, see section 1702(i) of Pub. L. 104-188, set out as a 
note under section 38 of this title.


                    Effective Date of 1995 Amendment

    Amendment by Pub. L. 104-7 applicable to sales and exchanges on or 
after January 17, 1995, and to sales and exchanges before such date if 
FCC tax certificate with respect to such sale or exchange was issued on 
or after such date, but not applicable with respect to certain binding 
contracts, see section 2(d) of Pub. L. 104-7, set out as an Effective 
Date of Repeal note under section 1071 of this title.


                    Effective Date of 1990 Amendment

    Amendment by section 11812(b)(11), (12) of Pub. L. 101-508 
applicable to property placed in service after Nov. 5, 1990, but not 
applicable to any property to which section 168 of this title does not 
apply by reason of subsec. (f)(5) of section 168, and not applicable to 
rehabilitation expenditures described in section 252(f)(5) of Pub. L. 
99-514, see section 11812(c) of Pub. L. 101-508, set out as a note under 
section 42 of this title.


                    Effective Date of 1989 Amendment

    Amendment by Pub. L. 101-239 effective as if included in the 
provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which such 
amendment relates, see section 7831(g) of Pub. L. 101-239, set out as a 
note under section 1 of this title.


                    Effective Date of 1988 Amendment

    Amendment by Pub. L. 100-647 effective, except as otherwise 
provided, as if included in the provision of the Tax Reform Act of 1986, 
Pub. L. 99-514, to which such amendment relates, see section 1019(a) of 
Pub. L. 100-647, set out as a note under section 1 of this title.


                    Effective Date of 1986 Amendment

    Amendment by Pub. L. 99-514 applicable to that portion of the basis 
of any property which is attributable to expenditures paid or incurred 
after Dec. 31, 1986, except as otherwise provided, see section 242(c) of 
Pub. L. 99-514, set out as an Effective Date of Repeal note under former 
section 185 of this title.


                    Effective Date of 1984 Amendment

    Amendment by Pub. L. 98-369 effective as if included in the 
provision of the Tax Equity and Fiscal Responsibility Act of 1982, Pub. 
L. 97-248, to which such amendment relates, see section 715 of Pub. L. 
98-369, set out as a note under section 31 of this title.


                    Effective Date of 1983 Amendment

    Amendment by Pub. L. 97-448 effective, except as otherwise provided, 
as if it had been included in the provision of the Economic Recovery Tax 
Act of 1981, Pub. L. 97-34, to which such amendment relates, see section 
109 of Pub. L. 97-448, set out as a note under section 1 of this title.


                    Effective Date of 1981 Amendment

    Amendment by section 204(e) of Pub. L. 97-34 applicable to property 
placed in service after Dec. 31, 1980, in taxable years ending after 
that date, see section 209(a) of Pub. L. 97-34, set out as an Effective 
Date note under section 168 of this title.
    Amendment by section 212(d)(2)(F) of Pub. L. 97-34 applicable to 
expenditures incurred after Dec. 31, 1981, in taxable years ending after 
such date, see section 212(e) of Pub. L. 97-34, set out as a note under 
section 46 of this title.


                    Effective Date of 1980 Amendments

    Amendment by Pub. L. 96-223 applicable to taxable years beginning 
after Dec. 31, 1979, see section 251(b) of Pub. L. 96-223, set out as an 
Effective Date note under section 193 of this title.
    Amendment by Pub. L. 96-222 effective, except as otherwise provided, 
as if it had been included in the provisions of the Revenue Act of 1978, 
Pub. L. 95-600, to which such amendment relates, see section 201 of Pub. 
L. 96-222, set out as a note under section 32 of this title.


                    Effective Date of 1978 Amendment

    Amendment by section 404(c)(7) of Pub. L. 95-600 applicable to sales 
or exchanges after July 26, 1978, in taxable years ending after such 
date, see section 404(d)(1) of Pub. L. 95-600, set out as a note under 
section 121 of this title.
    Amendment by section 405(c)(4) of Pub. L. 95-600 applicable to sales 
and exchanges of residences after July 26, 1978, in taxable years ending 
after such date, see section 405(d) of Pub. L. 95-600, set out as a note 
under section 1038 of this title.
    Amendment by section 701(f)(3)(C), (E) of Pub. L. 95-600 effective 
as if included within the amendment of subsec. (b)(3) and (4) by section 
2124 of Pub. L. 94-455, see section 701(f)(8) of Pub. L. 95-600, set out 
as an Effective and Termination Dates of 1978 Amendments note under 
section 167 of this title.


                    Effective Date of 1976 Amendment

    Section 202(d) of Pub. L. 94-455, as amended by Pub. L. 99-514, 
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ``The amendments 
made by this section (other than subsection (b)) [amending this section 
and section 167 of this title] shall apply for taxable years ending 
after December 31, 1975. The amendment made by subsection (b) [amending 
this section] shall apply with respect to proceedings (and to operations 
of law) referred to in section 1250(d)(10) of the Internal Revenue Code 
of 1986 [formerly I.R.C. 1954] which begin after December 31, 1975.''
    Amendment by section 1901(b)(3)(K), (31)(A), (B), (E) of Pub. L. 94-
455 effective for taxable years beginning after Dec. 31, 1976, see 
section 1901(d) of Pub. L. 94-455, set out as a note under section 2 of 
this title.
    Amendment by section 1951(c)(2)(C) of Pub. L. 94-455 applicable to 
taxable years beginning after Dec. 31, 1976, see section 1951(d) of Pub. 
L. 94-455, set out as a note under section 72 of this title.
    Amendment by section 2122(b)(4) of Pub. L. 94-455 applicable to 
taxable years beginning after Dec. 31, 1976, and before Jan. 1, 1983, 
see section 2122(c) of Pub. L. 94-455, as amended by Pub. L. 96-167, 
9(c), Dec. 29, 1979, 93 Stat. 1278, set out as a note under section 190 
of this title.
    Amendment by section 2124(a)(3)(D) of Pub. L. 94-455 applicable with 
respect to additions to capital accounts made after June 14, 1976 and 
before June 15, 1981, see section 2124(a)(4) of Pub. L. 94-455, set out 
as an Effective Date note under section 642 of this title.


                    Effective Date of 1975 Amendments

    Section 2(c) of Pub. L. 94-81 provided that:
    ``(1) In general.--Except as provided in paragraph (2) the 
amendments made by this section [amending this section and section 1245 
of this title] shall apply to dispositions after December 31, 1969, in 
taxable years ending after such date.
    ``(2) Election for past transactions.--In the case of any 
disposition occurring before the date of the enactment of this Act [Aug. 
9, 1975], the amendments made by this section shall apply only if the 
organization acquiring the property elects (in the manner provided by 
regulations prescribed by the Secretary of the Treasury or his delegate) 
within 1 year after the date of the enactment of this Act to have such 
amendments apply with respect to such property.''
    Amendment by Pub. L. 93-625 applicable with respect to property 
placed in service after Dec. 31, 1973, see section 5(d) of Pub. L. 93-
625, set out as a note under section 167 of this title.


                    Effective Date of 1971 Amendment

    Amendment by Pub. L. 92-178 applicable to taxable years ending after 
Dec. 31, 1971, see section 303(d) of Pub. L. 92-178, set out as a note 
under section 642 of this title.


                    Effective Date of 1969 Amendment

    Amendment by section 521(b), (c), (e) of Pub. L. 91-172 applicable 
with respect to taxable years ending after July 24, 1969, see section 
521(g) of Pub. L. 91-172, set out as a note under section 167 of this 
title.
    Amendment by section 704(b)(5) of Pub. L. 91-172 applicable to 
taxable years ending after Dec. 31, 1968, see section 704(c) of Pub. L. 
91-172, set out as an Effective Date note under section 169 of this 
title.
    Section 910(d) of Pub. L. 91-172, as amended by Pub. L. 99-514, 
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ``The amendments 
made by this section [enacting section 1039 of this title and amending 
this section] shall apply to approved dispositions of qualified housing 
projects (within the meaning of section 1039 of the Internal Revenue 
Code of 1986 [formerly I.R.C. 1954] as added by subsection (a)) after 
October 9, 1969.''


                             Effective Date

    Section 231(c) of Pub. L. 88-272 provided that: ``The amendments 
made by this section [enacting this section and amending sections 170, 
301, 312, 341, 453, 751, and the analysis preceding section 1231 of this 
title] shall apply to dispositions after December 31, 1963, in taxable 
years ending after such date.''


                            Savings Provision

    For provisions that nothing in amendment by Pub. L. 101-508 be 
construed to affect treatment of certain transactions occurring, 
property acquired, or items of income, loss, deduction, or credit taken 
into account prior to Nov. 5, 1990, for purposes of determining 
liability for tax for periods ending after Nov. 5, 1990, see section 
11821(b) of Pub. L. 101-508, set out as a note under section 29 of this 
title.

                  Section Referred to in Other Sections

    This section is referred to in sections 1, 50, 55, 56, 121, 168, 
170, 267, 291, 341, 453, 467, 751, 1017, 1400B, 1400I, 7701 of this 
title.
