The amount realized from the sale or other disposition of property is the sum of any money received plus the fair market value of the property (other than money) received. The fair market value of the property is a question of fact, but only in rare and extraordinary cases does the property have no fair market value.

In computing the amount of gain or loss, however, the cost or other basis of the property shall be properly adjusted for any expenditure, receipt, loss or other item properly chargeable to capital account including the cost of improvements and betterment made to the property since the basic date and carrying charges such as taxes on nonproductive property. Where the taxpayer has elected to deduct carrying charges in computing net income or used such charges in determining his liability for filing returns of income for prior years, the cost or other basis may not be increased by such items in computing the gain or loss from the subsequent sale of such property. The cost or other basis of the property must also be decreased by the amount of the deductions for exhaustion, wear and tear, obsolescence and depletion which have, since the acquisition of the property, been allowable in respect of such property whether or not such deductions were claimed by the taxpayer or formally allowed. Adjustments to the cost or other basis on account of such allowable deductions as distinguished from the deductions actually taken in prior years will be made only on the basis of explicit and convincing evidence (calculations based upon a theoretical formula are not such evidence), that the deductions taken were insufficient or excessive, as the case may be, due regard being given to the expenditures made by the taxpayer to maintain the effective usefulness of the property.

In no case shall the amount of the diminution in respect to depletion exceed a depletion deduction computed without reference to discovery in the case of mines, oil and gas wells.

In the case of stock, the basis must be diminished by the amount of distributions previously made in respect of such stock to the extent that they have been a return of capital. The provisions of ACA 26-51-411 shall not be construed so as to conflict with the provisions of ACA 26-51-404(a)(2) which make special provisions for the reporting of income from the sale of property on the installment plan where the initial payment is 30 percentum or less.

When shares of stock in a corporation are sold from lots purchased at different dates and at different prices and the identity of the lots cannot be determined, the stock sold shall be charged against the earliest purchases of such stock. The excess of the amount realized on the sale over the cost or other basis of the stock will constitute gain.

In the case of stock in respect of which any stock dividend was paid, the basis for determining gain or loss from a sale of a share of such stock shall be the difference between the sale price and the quotient of the cost or other basis of the original shares of stock divided by the total number of the old and new shares.

Where common stock is received as a bonus with a purchase of preferred stock or bonds, the total purchase price shall be fairly apportioned between such common stock and the securities purchased for the purpose of determining the portion of the cost attributable to each class of stock or securities but if that should be impracticable in any case, no profit on any subsequent sale of any part of the stock or securities will be realized until out of the proceeds of sales shall have been recovered the total cost.

Where a corporation issues to its shareholders rights to subscribe to its stock, the value of the rights does not constitute taxable income to the shareholder, although gain may be derived or loss sustained by the shareholder from the sale of such rights. In this connection, the following rules may be stated:

The taxpayer may at his option include the entire proceeds from the sale of stock rights in gross income in which the basis for determining gain or loss, from the subsequent sale of stock in respect of which the rights were issued, shall be the same as though the rights had not been issued.

Sales of real estate or personal property in which more than thirty percent (30%) of the sales price is received in the year in which the sales is consummated will be handled as provided in ACA 26-51-411.

If the property was acquired by gift, (even though the gift was made in contemplation of or was intended to take effect in possession or enjoyment at or after the donor's death) the basis is the same as it would be in the hands of the donor or the last preceding owner by whom it was not acquired by gift. If the donee is unable to ascertain the facts necessary to determine the basis, he shall so state upon his return and the Income Tax Director will, if possible, obtain such facts from the donor or last preceding owner or any other person cognizant therefore. If the Income Tax Director finds it impossible to obtain such facts, the basis shall be the last assessed valuation of the property while in the hands of the donor.

In computing the gain or loss from the sale of other disposition of property acquired by gift on or before March 9, 1929, the basis shall be the assessed valuation of the property.

A taxpayer disposing of patents or copyrights by sale should determine the gain or loss arising therefrom by computing the difference between the selling price and the cost or other basis, with property adjustment for depreciation as provided in ACA 26-51-411(d).