Tax Facts

693 / What is the tax basis of property that is acquired by purchase or exchange?

A taxpayer’s tax basis in property acquired by purchase or in a taxable exchange is its cost (money paid or the fair market value exchanged).1

Special rules apply to stock exchanges made pursuant to a plan of corporate reorganization.2 For the final regulations under IRC Section 358 providing guidance regarding the determination of the basis of stock or securities received in exchange for, or with respect to, stock or securities in certain transactions, see Q 7517. For the rules applicable to stock received in a demutualization, see Q 7517. Proposed regulations relating to redemptions of stock in which the redemption proceeds are treated as a dividend distribution have been withdrawn.3

1. IRC § 1012.

2. See IRC § 354.

3. See 71 Fed. Reg. 20044 (4-19-2006).

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