§ 1.1017-2 - Adjusted basis; discharge of indebtedness; special cases.

(a) Section 1.1017-1 prescribes the general rule to be followed in adjusting basis of property where there is a proper exclusion from gross income under section 108(a). The taxpayer may, however, have the basis of his property adjusted in a manner different from that set forth in § 1.1017-1 upon a proper showing to the satisfaction of the Commissioner. Such adjustment, however, shall be consistent with the principles of § 1.1017-1. Variations from such general rule may, for example, involve adjusting the basis of only part of the taxpayer's property or adjusting the basis of all the taxpayer's property, according to a fixed allocation.

(b) A request for variations from the general rule prescribed in § 1.1017-1 shall be filed by the taxpayer with his return for the taxable year in which the discharge of indebtedness occurred unless a consent is permitted (under § 1.108 (a) through (2) after the original return has been filed, in which case such request shall be filed with the amended return or claim for credit or refund, as the case may be. Agreement between the taxpayer and the Commissioner as to any variations from such general rule shall be effected only by a closing agreement entered into under the provisions of section 7121. If no agreement is reached between the taxpayer and the Commissioner as to variations from the general rule prescribed in § 1.1017-1, then the consent filed on Form 982 shall be deemed to be a consent to the application of such general rule and such general rule shall prevail in the determination of the basis of the taxpayer's property. If no agreement is reached between the taxpayer and the Commissioner as to variations from the general rule and the taxpayer specifically states that he does not consent to the application of the general rule, then section 108(a) and section 1017 shall not apply.