§ 14. Ascertainment of gain or loss. 1. For the purpose of
ascertaining the gain derived or loss sustained from the sale or other
disposition of property, real, personal or mixed, the basis shall be the
cost thereof, or the inventoried value if the inventory is made in
accordance with section seventeen of this part.

2. Notwithstanding subdivision one of this section, with respect to
gain derived from the sale or other disposition of any property acquired
prior to January first, nineteen hundred sixty-six, except stock in
trade of the taxpayer or other property of a kind which would properly
be included in the inventory of the taxpayer if on hand at the close of
the taxable year, or property held by the taxpayer primarily for sale to
customers in the ordinary course of its trade or business, and accounts
or notes receivable acquired in the ordinary course of trade or business
from the sale of such stock in trade or property, or for services
rendered, net income shall not include

(a) That portion of the gain included in determining net income
pursuant to subdivision one of this section with respect to each such
property, which exceeds

(b) The amount of gain that would be included in determining net
income pursuant to subdivision one of this section with respect to each
such property if the basis of such property on the date of sale or other
disposition were equal to its fair market value on January first,
nineteen hundred sixty-six, plus or minus all adjustments to basis made
with respect to each such property in computing net income for periods
on or after January first, nineteen hundred sixty-six;
provided that the total adjustment to net income provided by this
subdivision shall not exceed the amount of the taxpayer's net gain from
the sale or other disposition of all such property, as determined
pursuant to subdivision one of this section.

3. In the case of any bond, with respect to which a deduction for
amortizable bond premium is allowable under subdivision nine of section
twenty-one of this part, the basis for determining gain or loss shall be
reduced by the total amount of such deductions so allowable.