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For reacquisitions governed by section 1038(a), section
1038(b)(1) requires the seller to recognize gain to the extent
that money and the fair market value of other property received
from the sale prior to reacquisition exceed the amount of gain
recognized in previous periods.5 Section 1038(b)(2) limits the
amount of gain to be recognized to the amount by which the
original sale price exceeded the sum of: (1) The adjusted basis
of the property, (2) gain previously recognized on the sale, and
4(...continued)
(2) the seller of such property reacquires such
property in partial or full satisfaction of such
indebtedness,
then except as provided in subsections (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.
5 Sec. 1038(b)(1) provides:
In the case of a reacquisition of real property to
which subsection (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 returned as income for periods prior
to such reacquisition.
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Last modified: May 25, 2011