PART I—DETERMINATION OF TAX LIABILITY
Editorial Notes
Amendments
1976—
§701. Partners, not partnership, subject to tax
A partnership as such shall not be subject to the income tax imposed by this chapter. Persons carrying on business as partners shall be liable for income tax only in their separate or individual capacities.
(Aug. 16, 1954, ch. 736,
§702. Income and credits of partner
(a) General rule
In determining his income tax, each partner shall take into account separately his distributive share of the partnership's—
(1) gains and losses from sales or exchanges of capital assets held for not more than 1 year,
(2) gains and losses from sales or exchanges of capital assets held for more than 1 year,
(3) gains and losses from sales or exchanges of property described in section 1231 (relating to certain property used in a trade or business and involuntary conversions),
(4) charitable contributions (as defined in section 170(c)),
(5) dividends with respect to which section 1(h)(11) or part VIII of subchapter B applies,
(6) taxes, described in section 901, paid or accrued to foreign countries and to possessions of the United States,
(7) other items of income, gain, loss, deduction, or credit, to the extent provided by regulations prescribed by the Secretary, and
(8) taxable income or loss, exclusive of items requiring separate computation under other paragraphs of this subsection.
(b) Character of items constituting distributive share
The character of any item of income, gain, loss, deduction, or credit included in a partner's distributive share under paragraphs (1) through (7) of subsection (a) shall be determined as if such item were realized directly from the source from which realized by the partnership, or incurred in the same manner as incurred by the partnership.
(c) Gross income of a partner
In any case where it is necessary to determine the gross income of a partner for purposes of this title, such amount shall include his distributive share of the gross income of the partnership.
(d) Cross reference
For rules relating to procedures for determining the tax treatment of partnership items see subchapter C of
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
2003—Subsec. (a)(5).
1986—Subsec. (a)(5).
1984—Subsec. (a)(1), (2).
1983—Subsec. (a)(5).
1982—Subsec. (d).
1981—Subsec. (a)(5).
1980—Subsec. (a)(5).
1976—Subsec. (a)(1), (2).
Subsec. (a)(7) to (9).
Subsec. (b).
1964—Subsec. (a)(5).
Statutory Notes and Related Subsidiaries
Effective Date of 2003 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by
Effective Date of 1984 Amendment
Amendment by
Effective Date of 1983 Amendment
Amendment by
Effective Date of 1982 Amendment
"(1) Except as provided in paragraph (2), the amendments made by sections 402, 403, and 404 [enacting
"(2) [Former] Section 6232 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] shall apply to periods after December 31, 1982.
"(3) The amendments made by sections 402, 403, and 404 shall apply to any partnership taxable year (or in the case of [former] section 6232 of such Code, to any period) ending after the date of the enactment of this Act [Sept. 3, 1982] if the partnership, each partner, and each indirect partner requests such application and the Secretary of the Treasury or his delegate consents to such application."
Effective Date of 1981 Amendment
Amendment by section 301(b)(5) of
Effective and Termination Dates of 1980 Amendment
Amendment by
Effective Date of 1976 Amendment
Amendment by section 1901(b)(1)(I)(i), (ii) of
Effective Date of 1964 Amendment
Amendment by
§703. Partnership computations
(a) Income and deductions
The taxable income of a partnership shall be computed in the same manner as in the case of an individual except that—
(1) the items described in section 702(a) shall be separately stated, and
(2) the following deductions shall not be allowed to the partnership:
(A) the deductions for personal exemptions provided in section 151,
(B) the deduction for taxes provided in section 164(a) with respect to taxes, described in section 901, paid or accrued to foreign countries and to possessions of the United States,
(C) the deduction for charitable contributions provided in section 170,
(D) the net operating loss deduction provided in section 172,
(E) the additional itemized deductions for individuals provided in part VII of subchapter B (sec. 211 and following), and
(F) the deduction for depletion under section 611 with respect to oil and gas wells.
(b) Elections of the partnership
Any election affecting the computation of taxable income derived from a partnership shall be made by the partnership, except that any election under—
(1) subsection (b)(5) or (c)(3) of section 108 (relating to income from discharge of indebtedness),
(2) section 617 (relating to deduction and recapture of certain mining exploration expenditures), or
(3) section 901 (relating to taxes of foreign countries and possessions of the United States),
shall be made by each partner separately.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
1993—Subsec. (b)(1).
1988—Subsec. (b)(1).
1986—Subsec. (b).
1980—Subsec. (b).
1977—Subsec. (a)(2).
1976—Subsec. (a)(2)(G).
Subsec. (b).
1975—Subsec. (a)(2)(G).
1971—Subsec. (b).
1969—Subsec. (b).
1966—Subsec. (b).
Statutory Notes and Related Subsidiaries
Effective Date of 1993 Amendment
Amendment by
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by section 511(d)(2)(B) of
Amendment by section 701(e)(4)(E) of
Effective Date of 1980 Amendment
Amendment by
Effective Date of 1977 Amendment
Amendment by
Effective Date of 1976 Amendment
Amendment by section 1901(b)(21)(F) of
Amendment by section 2115(c)(2) of
Effective Date of 1975 Amendment
Amendment by
Effective Date of 1969 Amendment
Amendment by
Effective Date of 1966 Amendment
Amendment by
Applicability of Certain Amendments by Pub. L. 99–514 in Relation to Treaty Obligations of United States
For applicability of amendment by section 701(e)(4)(E) of
§704. Partner's distributive share
(a) Effect of partnership agreement
A partner's distributive share of income, gain, loss, deduction, or credit shall, except as otherwise provided in this chapter, be determined by the partnership agreement.
(b) Determination of distributive share
A partner's distributive share of income, gain, loss, deduction, or credit (or item thereof) shall be determined in accordance with the partner's interest in the partnership (determined by taking into account all facts and circumstances), if—
(1) the partnership agreement does not provide as to the partner's distributive share of income, gain, loss, deduction, or credit (or item thereof), or
(2) the allocation to a partner under the agreement of income, gain, loss, deduction, or credit (or item thereof) does not have substantial economic effect.
(c) Contributed property
(1) In general
Under regulations prescribed by the Secretary—
(A) income, gain, loss, and deduction with respect to property contributed to the partnership by a partner shall be shared among the partners so as to take account of the variation between the basis of the property to the partnership and its fair market value at the time of contribution,
(B) if any property so contributed is distributed (directly or indirectly) by the partnership (other than to the contributing partner) within 7 years of being contributed—
(i) the contributing partner shall be treated as recognizing gain or loss (as the case may be) from the sale of such property in an amount equal to the gain or loss which would have been allocated to such partner under subparagraph (A) by reason of the variation described in subparagraph (A) if the property had been sold at its fair market value at the time of the distribution,
(ii) the character of such gain or loss shall be determined by reference to the character of the gain or loss which would have resulted if such property had been sold by the partnership to the distributee, and
(iii) appropriate adjustments shall be made to the adjusted basis of the contributing partner's interest in the partnership and to the adjusted basis of the property distributed to reflect any gain or loss recognized under this subparagraph, and
(C) if any property so contributed has a built-in loss—
(i) such built-in loss shall be taken into account only in determining the amount of items allocated to the contributing partner, and
(ii) except as provided in regulations, in determining the amount of items allocated to other partners, the basis of the contributed property in the hands of the partnership shall be treated as being equal to its fair market value at the time of contribution.
For purposes of subparagraph (C), the term "built-in loss" means the excess of the adjusted basis of the property (determined without regard to subparagraph (C)(ii)) over its fair market value at the time of contribution.
(2) Special rule for distributions where gain or loss would not be recognized outside partnerships
Under regulations prescribed by the Secretary, if—
(A) property contributed by a partner (hereinafter referred to as the "contributing partner") is distributed by the partnership to another partner, and
(B) other property of a like kind (within the meaning of section 1031) is distributed by the partnership to the contributing partner not later than the earlier of—
(i) the 180th day after the date of the distribution described in subparagraph (A), or
(ii) the due date (determined with regard to extensions) for the contributing partner's return of the tax imposed by this chapter for the taxable year in which the distribution described in subparagraph (A) occurs,
then to the extent of the value of the property described in subparagraph (B), paragraph (1)(B) shall be applied as if the contributing partner had contributed to the partnership the property described in subparagraph (B).
(3) Other rules
Under regulations prescribed by the Secretary, rules similar to the rules of paragraph (1) shall apply to contributions by a partner (using the cash receipts and disbursements method of accounting) of accounts payable and other accrued but unpaid items. Any reference in paragraph (1) or (2) to the contributing partner shall be treated as including a reference to any successor of such partner.
(d) Limitation on allowance of losses
(1) In general
A partner's distributive share of partnership loss (including capital loss) shall be allowed only to the extent of the adjusted basis of such partner's interest in the partnership at the end of the partnership year in which such loss occurred.
(2) Carryover
Any excess of such loss over such basis shall be allowed as a deduction at the end of the partnership year in which such excess is repaid to the partnership.
(3) Special rules
(A) In general
In determining the amount of any loss under paragraph (1), there shall be taken into account the partner's distributive share of amounts described in paragraphs (4) and (6) of section 702(a).
(B) Exception
In the case of a charitable contribution of property whose fair market value exceeds its adjusted basis, subparagraph (A) shall not apply to the extent of the partner's distributive share of such excess.
(e) Partnership interests created by gift
(1) Distributive share of donee includible in gross income
In the case of any partnership interest created by gift, the distributive share of the donee under the partnership agreement shall be includible in his gross income, except to the extent that such share is determined without allowance of reasonable compensation for services rendered to the partnership by the donor, and except to the extent that the portion of such share attributable to donated capital is proportionately greater than the share of the donor attributable to the donor's capital. The distributive share of a partner in the earnings of the partnership shall not be diminished because of absence due to military service.
(2) Purchase of interest by member of family
For purposes of this subsection, an interest purchased by one member of a family from another shall be considered to be created by gift from the seller, and the fair market value of the purchased interest shall be considered to be donated capital. The "family" of any individual shall include only his spouse, ancestors, and lineal descendants, and any trusts for the primary benefit of such persons.
(f) Cross reference
For rules in the case of the sale, exchange, liquidation, or reduction of a partner's interest, see section 706(c)(2).
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
2017—Subsec. (d).
2015—Subsec. (e).
2004—Subsec. (c)(1)(C).
1997—Subsec. (c)(1)(B).
1992—Subsec. (c)(1)(B).
1989—Subsec. (c).
1984—Subsec. (c).
1978—Subsec. (d).
1976—Subsec. (a).
Subsec. (b).
Subsec. (c)(2).
Subsec. (d).
Subsec. (f).
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Effective Date of 2015 Amendment
Effective Date of 2004 Amendment
Effective Date of 1997 Amendment
"(1)
"(2)
Effective Date of 1992 Amendment
Effective Date of 1989 Amendment
Effective Date of 1984 Amendment
Effective Date of 1978 Amendment
Amendment by
Effective Date of 1976 Amendment
Amendment by section 213(c)(2), (c)(3)(A), (d) of
Amendment by section 213(e) of
Transitional Rule for Limitation on Allowance of Losses
§705. Determination of basis of partner's interest
(a) General rule
The adjusted basis of a partner's interest in a partnership shall, except as provided in subsection (b), be the basis of such interest determined under section 722 (relating to contributions to a partnership) or section 742 (relating to transfers of partnership interests)—
(1) increased by the sum of his distributive share for the taxable year and prior taxable years of—
(A) taxable income of the partnership as determined under section 703(a),
(B) income of the partnership exempt from tax under this title, and
(C) the excess of the deductions for depletion over the basis of the property subject to depletion;
(2) decreased (but not below zero) by distributions by the partnership as provided in section 733 and by the sum of his distributive share for the taxable year and prior taxable years of—
(A) losses of the partnership, and
(B) expenditures of the partnership not deductible in computing its taxable income and not properly chargeable to capital account; and
(3) decreased (but not below zero) by the amount of the partner's deduction for depletion for any partnership oil and gas property to the extent such deduction does not exceed the proportionate share of the adjusted basis of such property allocated to such partner under section 613A(c)(7)(D).
(b) Alternative rule
The Secretary shall prescribe by regulations the circumstances under which the adjusted basis of a partner's interest in a partnership may be determined by reference to his proportionate share of the adjusted basis of partnership property upon a termination of the partnership.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
1984—Subsec. (a)(3).
1976—Subsec. (a)(3).
Subsec. (b).
Statutory Notes and Related Subsidiaries
Effective Date of 1984 Amendment
Effective Date of 1976 Amendment
Amendment by section 2115(c)(3) of
§706. Taxable years of partner and partnership
(a) Year in which partnership income is includible
In computing the taxable income of a partner for a taxable year, the inclusions required by section 702 and section 707(c) with respect to a partnership shall be based on the income, gain, loss, deduction, or credit of the partnership for any taxable year of the partnership ending within or with the taxable year of the partner.
(b) Taxable year
(1) Partnership's taxable year
(A) Partnership treated as taxpayer
The taxable year of a partnership shall be determined as though the partnership were a taxpayer.
(B) Taxable year determined by reference to partners
Except as provided in subparagraph (C), a partnership shall not have a taxable year other than—
(i) the majority interest taxable year (as defined in paragraph (4)),
(ii) if there is no taxable year described in clause (i), the taxable year of all the principal partners of the partnership, or
(iii) if there is no taxable year described in clause (i) or (ii), the calendar year unless the Secretary by regulations prescribes another period.
(C) Business purpose
A partnership may have a taxable year not described in subparagraph (B) if it establishes, to the satisfaction of the Secretary, a business purpose therefor. For purposes of this subparagraph, any deferral of income to partners shall not be treated as a business purpose.
(2) Partner's taxable year
A partner may not change to a taxable year other than that of a partnership in which he is a principal partner unless he establishes, to the satisfaction of the Secretary, a business purpose therefor.
(3) Principal partner
For the purpose of this subsection, a principal partner is a partner having an interest of 5 percent or more in partnership profits or capital.
(4) Majority interest taxable year; limitation on required changes
(A) Majority interest taxable year defined
For purposes of paragraph (1)(B)(i)—
(i) In general
The term "majority interest taxable year" means the taxable year (if any) which, on each testing day, constituted the taxable year of 1 or more partners having (on such day) an aggregate interest in partnership profits and capital of more than 50 percent.
(ii) Testing days
The testing days shall be—
(I) the 1st day of the partnership taxable year (determined without regard to clause (i)), or
(II) the days during such representative period as the Secretary may prescribe.
(B) Further change not required for 3 years
Except as provided in regulations necessary to prevent the avoidance of this section, if, by reason of paragraph (1)(B)(i), the taxable year of a partnership is changed, such partnership shall not be required to change to another taxable year for either of the 2 taxable years following the year of change.
(5) Application with other sections
Except as provided in regulations, for purposes of determining the taxable year to which a partnership is required to change by reason of this subsection, changes in taxable years of other persons required by this subsection, section 441(i), section 584(i), section 644, or section 1378(a) shall be taken into account.
(c) Closing of partnership year
(1) General rule
Except in the case of a termination of a partnership and except as provided in paragraph (2) of this subsection, the taxable year of a partnership shall not close as the result of the death of a partner, the entry of a new partner, the liquidation of a partner's interest in the partnership, or the sale or exchange of a partner's interest in the partnership.
(2) Treatment of dispositions
(A) Disposition of entire interest
The taxable year of a partnership shall close with respect to a partner whose entire interest in the partnership terminates (whether by reason of death, liquidation, or otherwise).
(B) Disposition of less than entire interest
The taxable year of a partnership shall not close (other than at the end of a partnership's taxable year as determined under subsection (b)(1)) with respect to a partner who sells or exchanges less than his entire interest in the partnership or with respect to a partner whose interest is reduced (whether by entry of a new partner, partial liquidation of a partner's interest, gift, or otherwise).
(d) Determination of distributive share when partner's interest changes
(1) In general
Except as provided in paragraphs (2) and (3), if during any taxable year of the partnership there is a change in any partner's interest in the partnership, each partner's distributive share of any item of income, gain, loss, deduction, or credit of the partnership for such taxable year shall be determined by the use of any method prescribed by the Secretary by regulations which takes into account the varying interests of the partners in the partnership during such taxable year.
(2) Certain cash basis items prorated over period to which attributable
(A) In general
If during any taxable year of the partnership there is a change in any partner's interest in the partnership, then (except to the extent provided in regulations) each partner's distributive share of any allocable cash basis item shall be determined—
(i) by assigning the appropriate portion of such item to each day in the period to which it is attributable, and
(ii) by allocating the portion assigned to any such day among the partners in proportion to their interests in the partnership at the close of such day.
(B) Allocable cash basis item
For purposes of this paragraph, the term "allocable cash basis item" means any of the following items with respect to which the partnership uses the cash receipts and disbursements method of accounting:
(i) Interest.
(ii) Taxes.
(iii) Payments for services or for the use of property.
(iv) Any other item of a kind specified in regulations prescribed by the Secretary as being an item with respect to which the application of this paragraph is appropriate to avoid significant misstatements of the income of the partners.
(C) Items attributable to periods not within taxable year
If any portion of any allocable cash basis item is attributable to—
(i) any period before the beginning of the taxable year, such portion shall be assigned under subparagraph (A)(i) to the first day of the taxable year, or
(ii) any period after the close of the taxable year, such portion shall be assigned under subparagraph (A)(i) to the last day of the taxable year.
(D) Treatment of deductible items attributable to prior periods
If any portion of a deductible cash basis item is assigned under subparagraph (C)(i) to the first day of any taxable year—
(i) such portion shall be allocated among persons who are partners in the partnership during the period to which such portion is attributable in accordance with their varying interests in the partnership during such period, and
(ii) any amount allocated under clause (i) to a person who is not a partner in the partnership on such first day shall be capitalized by the partnership and treated in the manner provided for in section 755.
(3) Items attributable to interest in lower tier partnership prorated over entire taxable year
If—
(A) during any taxable year of the partnership there is a change in any partner's interest in the partnership (hereinafter in this paragraph referred to as the "upper tier partnership"), and
(B) such partnership is a partner in another partnership (hereinafter in this paragraph referred to as the "lower tier partnership"),
then (except to the extent provided in regulations) each partner's distributive share of any item of the upper tier partnership attributable to the lower tier partnership shall be determined by assigning the appropriate portion (determined by applying principles similar to the principles of subparagraphs (C) and (D) of paragraph (2)) of each such item to the appropriate days during which the upper tier partnership is a partner in the lower tier partnership and by allocating the portion assigned to any such day among the partners in proportion to their interests in the upper tier partnership at the close of such day.
(4) Taxable year determined without regard to subsection (c)(2)(A)
For purposes of this subsection, the taxable year of a partnership shall be determined without regard to subsection (c)(2)(A).
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
2018—Subsec. (b)(5).
1997—Subsec. (b)(5).
Subsec. (c)(2).
Subsec. (c)(2)(A).
"(i) with respect to a partner who sells or exchanges his entire interest in a partnership, and
"(ii) with respect to a partner whose interest is liquidated, except that the taxable year of a partnership with respect to a partner who dies shall not close prior to the end of the partnership's taxable year."
1988—Subsec. (b)(1)(B)(i).
Subsec. (b)(1)(B)(iii).
Subsec. (b)(4).
"(A) the 3-taxable year period of such partner or partners ending on or before the beginning of such taxable year of the partnership, or
"(B) if the partnership has not been in existence during all of such 3-taxable year period, the taxable years of such partner or partners ending with or within the period of existence.
This paragraph shall apply without regard to whether the same partners or interests are taken into account in determining the 50 percent interest during any period."
Subsec. (b)(5).
1986—Subsec. (b).
Subsec. (b)(1).
Subsec. (b)(4).
Subsec. (d)(2)(A)(i).
Subsec. (d)(2)(B).
Subsec. (d)(2)(C)(i).
1984—Subsec. (c)(2)(A).
Subsec. (c)(2)(B).
Subsec. (d).
1976—Subsec. (b)(1), (2).
Subsec. (c)(2).
Statutory Notes and Related Subsidiaries
Effective Date of 1997 Amendment
Amendment by section 507(b)(2) of
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by section 806(a) of
Amendment by section 1805(a) of
Effective Date of 1984 Amendment
"(1) in the case of items described in section 706(d)(2) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by subsection (a)), to amounts attributable to periods after March 31, 1984, and
"(2) in the case of items described in section 706(d)(3) of such Code (as added by subsection (a)), to amounts paid or accrued by the other partnership after March 31, 1984."
Effective Date of 1976 Amendment
Amendment by section 213(c)(1) of
Construction of Section 806 of Pub. L. 99–514
Nothing in section 806 of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
§707. Transactions between partner and partnership
(a) Partner not acting in capacity as partner
(1) In general
If a partner engages in a transaction with a partnership other than in his capacity as a member of such partnership, the transaction shall, except as otherwise provided in this section, be considered as occurring between the partnership and one who is not a partner.
(2) Treatment of payments to partners for property or services
Under regulations prescribed by the Secretary—
(A) Treatment of certain services and transfers of property
If—
(i) a partner performs services for a partnership or transfers property to a partnership,
(ii) there is a related direct or indirect allocation and distribution to such partner, and
(iii) the performance of such services (or such transfer) and the allocation and distribution, when viewed together, are properly characterized as a transaction occurring between the partnership and a partner acting other than in his capacity as a member of the partnership,
such allocation and distribution shall be treated as a transaction described in paragraph (1).
(B) Treatment of certain property transfers
If—
(i) there is a direct or indirect transfer of money or other property by a partner to a partnership,
(ii) there is a related direct or indirect transfer of money or other property by the partnership to such partner (or another partner), and
(iii) the transfers described in clauses (i) and (ii), when viewed together, are properly characterized as a sale or exchange of property,
such transfers shall be treated either as a transaction described in paragraph (1) or as a transaction between 2 or more partners acting other than in their capacity as members of the partnership.
(b) Certain sales or exchanges of property with respect to controlled partnerships
(1) Losses disallowed
No deduction shall be allowed in respect of losses from sales or exchanges of property (other than an interest in the partnership), directly or indirectly, between—
(A) a partnership and a person owning, directly or indirectly, more than 50 percent of the capital interest, or the profits interest, in such partnership, or
(B) two partnerships in which the same persons own, directly or indirectly, more than 50 percent of the capital interests or profits interests.
In the case of a subsequent sale or exchange by a transferee described in this paragraph, section 267(d) shall be applicable as if the loss were disallowed under section 267(a)(1). For purposes of section 267(a)(2), partnerships described in subparagraph (B) of this paragraph shall be treated as persons specified in section 267(b).
(2) Gains treated as ordinary income
In the case of a sale or exchange, directly or indirectly, of property, which in the hands of the transferee, is property other than a capital asset as defined in section 1221—
(A) between a partnership and a person owning, directly or indirectly, more than 50 percent of the capital interest, or profits interest, in such partnership, or
(B) between two partnerships in which the same persons own, directly or indirectly, more than 50 percent of the capital interests or profits interests,
any gain recognized shall be considered as ordinary income.
(3) Ownership of a capital or profits interest
For purposes of paragraphs (1) and (2) of this subsection, the ownership of a capital or profits interest in a partnership shall be determined in accordance with the rules for constructive ownership of stock provided in section 267(c) other than paragraph (3) of such section.
(c) Guaranteed payments
To the extent determined without regard to the income of the partnership, payments to a partner for services or the use of capital shall be considered as made to one who is not a member of the partnership, but only for the purposes of section 61(a) (relating to gross income) and, subject to section 263, for purposes of section 162(a) (relating to trade or business expenses).
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
1986—Subsec. (a)(2)(B)(iii).
Subsec. (b)(1).
Subsec. (b)(1)(A).
Subsec. (b)(2)(A).
Subsec. (b)(2)(B).
1984—Subsec. (a).
1976—Subsec. (b)(2).
Subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 1986 Amendment
Amendment by section 642(a)(2) of
Amendment by sections 1805(b) and 1812(c)(3)(B) of
Effective Date of 1984 Amendment
"(1)
"(A) in the case of arrangements described in section 707(a)(2)(A) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as amended by subsection (a)), to services performed or property transferred after February 29, 1984, and
"(B) in the case of transfers described in section 707(a)(2)(B) of such Code (as so amended), to property transferred after March 31, 1984.
"(2)
"(3)
"(A) such transfer was proposed in a written private offering memorandum circulated before February 28, 1984;
"(B) the out-of-pocket costs incurred with respect to such offering exceeded $250,000 as of February 28, 1984;
"(C) the encumbrances placed on such property in anticipation of such transfer all constitute obligations for which neither the partnership nor any partner is liable; and
"(D) the transferor of such property is the sole general partner of the partnership."
Effective Date of 1976 Amendment
Amendment by section 213(b)(3) of
Amendment by section 1901(b)(3)(C) of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
§708. Continuation of partnership
(a) General rule
For purposes of this subchapter, an existing partnership shall be considered as continuing if it is not terminated.
(b) Termination
(1) General rule
For purposes of subsection (a), a partnership shall be considered as terminated only if no part of any business, financial operation, or venture of the partnership continues to be carried on by any of its partners in a partnership.
(2) Special rules
(A) Merger or consolidation
In the case of the merger or consolidation of two or more partnerships, the resulting partnership shall, for purposes of this section, be considered the continuation of any merging or consolidating partnership whose members own an interest of more than 50 percent in the capital and profits of the resulting partnership.
(B) Division of a partnership
In the case of a division of a partnership into two or more partnerships, the resulting partnerships (other than any resulting partnership the members of which had an interest of 50 percent or less in the capital and profits of the prior partnership) shall, for purposes of this section, be considered a continuation of the prior partnership.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
2017—Subsec. (b)(1).
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Amendment by
§709. Treatment of organization and syndication fees
(a) General rule
Except as provided in subsection (b), no deduction shall be allowed under this chapter to the partnership or to any partner for any amounts paid or incurred to organize a partnership or to promote the sale of (or to sell) an interest in such partnership.
(b) Deduction of organization fees
(1) Allowance of deduction
If a partnership elects the application of this subsection (in accordance with regulations prescribed by the Secretary) with respect to any organizational expenses—
(A) the partnership shall be allowed a deduction for the taxable year in which the partnership begins business in an amount equal to the lesser of—
(i) the amount of organizational expenses with respect to the partnership, or
(ii) $5,000, reduced (but not below zero) by the amount by which such organizational expenses exceed $50,000, and
(B) the remainder of such organizational expenses shall be allowed as a deduction ratably over the 180-month period beginning with the month in which the partnership begins business.
(2) Dispositions before close of amortization period
In any case in which a partnership is liquidated before the end of the period to which paragraph (1)(B) applies, any deferred expenses attributable to the partnership which were not allowed as a deduction by reason of this section may be deducted to the extent allowable under section 165.
(3) Organizational expenses defined
The organizational expenses to which paragraph (1) applies, are expenditures which—
(A) are incident to the creation of the partnership;
(B) are chargeable to capital account; and
(C) are of a character which, if expended incident to the creation of a partnership having an ascertainable life, would be amortized over such life.
(Added
Editorial Notes
Amendments
2005—Subsec. (b)(1).
2004—Subsec. (b).
Statutory Notes and Related Subsidiaries
Effective Date of 2005 Amendment
Amendment by
Effective Date of 2004 Amendment
Amendment by
Effective Date
"(1)
"(2)
"(3)