Treasury Regulations · 26 CFR
§ 1.9001-3. Basis adjustments for taxable years between changeover date and 1956 adjustment date.
Regulation text, no changes From the eCFR, current as of October 15, 2026. The eCFR is an authoritative but unofficial editorial compilation of the Code of Federal Regulations; the official text is the annual CFR on govinfo. Compare it with this section on ecfr.gov (external site) or the official annual CFR on govinfo (external site).
Regulation under 26 U.S.C. § 9001
Cite as 26 CFR § 1.9001-3
At a glance
Read from the text and its source citation. Not part of the regulation.
- Status
- In the current eCFR
- Source
- T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 21, 1960; T.D. 9989, 89 FR 17606, Mar. 11, 2024, unless otherwise noted.
- Issued under
- 26 U.S.C. § 9001
- Length
- 813 words · about 4 min to read
- Cross-references
- cites 1 Code section and 2 regulations; cited by 0
¶(a) In general.
¶(1) Subsection (e) of the Act provides the adjustments required to be made in determining the adjusted basis of any retirement-straight line property as of any time on or after the changeover date and before the taxpayer's 1956 adjustment date. This adjusted basis shall be used for all purposes of the Internal Revenue Code of 1939 and the Internal Revenue Code of 1954 for taxable years beginning on or after the changeover date and before the taxpayer's 1956 adjustment date, except as provided in subparagraph (4) of this paragraph. The adjustments so required, which are set forth in paragraphs (b) and (c) of this section, shall not be used in determining the adjusted basis of property for taxable years beginning before the changeover date or on or after the taxpayer's 1956 adjustment date.
¶(2) In order to arrive at the adjusted basis as of any specific date occurring on or after the changeover date and before the 1956 adjustment date, the taxpayer shall start with the unadjusted basis of all retirement-straight line property held on the changeover date by the taxpayer or its predecessor and shall, as of that specific date and with respect to both the asset and reserve accounts, (i) make the adjustments prescribed by this section and subsection (e) of the Act and (ii) also make those adjustments required, in accordance with the method of accounting regularly used, for additions, retirements, and other dispositions of property. For an illustration of adjustments required in accordance with the method of accounting regularly used, see the example in paragraph (d) of this section.
¶(4) Although this section, and subsection (e) of the Act, shall apply in determining the excess-profits tax, they shall not apply in determining adjusted basis for the purpose of computing equity capital for any day under section 437(c) (relating to the Excess Profits Tax Act of 1950) (64 Stat. 1137) of the Internal Revenue Code of 1939. For the adjustments to be made in computing equity capital under such section, see paragraph (c) of § 1.9001-4.
¶(b) Adjustment for terms-letter reserve. Pursuant to subsection (e)(1) of the Act, the basis of any retirement-straight line property shall be adjusted, as of any specific applicable date occurring on or after the changeover date and before the 1956 adjustment date, for the amount of the terms-letter reserve applicable to such property.
¶(c) Adjustment for depreciation allowable under the terms-letter. Pursuant to subsection (e)(2) of the Act, the basis of any retirement-straight line property shall be adjusted, as of any specific applicable date occurring on or after the changeover date and before the 1956 adjustment date, for depreciation applicable to such property and allowable under the terms-letter.
¶(d) Illustration of basis adjustments required for taxable years beginning on or after the changeover date and before the 1956 adjustment date. The application of this section may be illustrated by the following example, which is based upon the assumption that multiple asset accounts are used:
¶Example.
(1) The facts are assumed to be the same as those in the example under paragraph (e) of § 1.9001-2, except that the adjusted basis of retirement-straight line property is determined as of January 1, 1955, and the depreciation allowable under the terms-letter from the changeover date to December 31, 1954, is $2,100.
(2) The adjusted basis on January 1, 1955, of the retirement-straight line property held by the taxpayer on that date is $4,195, determined as follows and in accordance with this section:
| (i) Asset account: | ||
| Unadjusted cost on January 1, 1943 | $10,000 | |
| Less: | ||
| Adjustment for abnormal retirement | $1,500 | |
| Adjustment for normal retirement | 1,000 | |
| 2,500 | ||
| Balance as of January 1, 1955 | 7,500 | |
| (ii) Credits to reserve for depreciation: | ||
| Entire terms-letter reserve as of January 1, 1943 | 3,000 | |
| Depreciation allowable under terms-letter from January 1, 1943, to December 31, 1954 | 2,100 | |
| Total credits | 5,100 | |
| (iii) Charges to reserve for depreciation: | ||
| Part of terms-letter reserve applicable to property abnormally retired on December 31, 1954 | 450 | |
| Depreciation applicable to property abnormally retired and allowable from January 1, 1943, to December 31, 1954 | 345 | |
| Adjustment for normal retirement | 1,000 | |
| Total charges | 1,795 | |
| (iv) Balance in reserve for depreciation: | ||
| Total credits | 5,100 | |
| Total charges | 1,795 | |
| Balance as of January 1, 1955 | 3,305 | |
| (v) Adjusted basis of property: | ||
| Balance in asset account | 7,500 | |
| Balance in reserve for depreciation | 3,305 | |
| Adjusted basis as of January 1, 1955 | 4,195 | |
Cross-references
Computed from the citations in the text of 26 CFR.
Code sections it cites
Regulations it cites
Where it sits in 26 CFR
- Subchapter A Income tax
- Part 1 Income taxes
- General actuarial valuations
Nearby sections
- § 1.9000-8 Extension of time for making certain payments.
- § 1.9001 Statutory provisions; Retirement-Straight Line Adjustment Act of 1958.
- § 1.9001-1 Change from retirement to straight-line method of computing depreciation.
- § 1.9001-2 Basis adjustments for taxable years beginning on or after 1956 adjustment date.
- § 1.9001-3 Basis adjustments for taxable years between changeover date and 1956 adjustment date.
- § 1.9001-4 Adjustments required in computing excess-profits credit.
- § 1.9002 Statutory provisions; Dealer Reserve Income Adjustment Act of 1960 (74 Stat. 124).
- § 1.9002-1 Purpose, applicability, and definitions.
- § 1.9002-2 Election to have the provisions of section 481 of the Internal Revenue Code of 1954 apply.