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26 U.S.C. § 705 (INTERNAL REVENUE CODE)
§ 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, 68A Stat. 242; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), title XXI, § 2115(c)(3), Oct. 4, 1976, 90 Stat. 1834, 1909; Pub. L. 98–369, div. A, title VII, § 722(e)(1), July 18, 1984, 98 Stat. 974.)
heading: Amendments
text: 1984—Subsec. (a)(3). Pub. L. 98–369 substituted “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)” for “under section 611 with respect to oil and gas wells”.
1976—Subsec. (a)(3). Pub. L. 94–455, § 2115(c)(3), added par. (3).
Subsec. (b). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
heading: Effective Date of 1984 Amendment
text: Pub. L. 98–369, div. A, title VII, § 722(e)(3)(A), July 18, 1984, 98 Stat. 974, provided that: “The amendment made by paragraph (1) [amending this section] shall take effect on January 1, 1975.”
heading: Effective Date of 1976 Amendment
text: Amendment by section 2115(c)(3) of Pub. L. 94–455 effective on Jan. 1, 1975, and applicable to taxable years ending after Dec. 31, 1974, see section 2115(f) of Pub. L. 94–455, set out as a note under section 613A of this title.
26 U.S.C. § 708 (INTERNAL REVENUE CODE)
§ 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—
(A) 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, or
(B) within a 12-month period there is a sale or exchange of 50 percent or more of the total interest in partnership capital and profits.
(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, 68A Stat. 244.)
26 U.S.C. § 722 (INTERNAL REVENUE CODE)
§ 722. Basis of contributing partner’s interest
The basis of an interest in a partnership acquired by a contribution of property, including money, to the partnership shall be the amount of such money and the adjusted basis of such property to the contributing partner at the time of the contribution increased by the amount (if any) of gain recognized under section 721(b) to the contributing partner at such time.
(Aug. 16, 1954, ch. 736, 68A Stat. 245; Pub. L. 94–455, title XXI, § 2131(c), Oct. 4, 1976, 90 Stat. 1924; Pub. L. 98–369, div. A, title VII, § 722(f)(1), July 18, 1984, 98 Stat. 974.)
heading: Amendments
text: 1984—Pub. L. 98–369 inserted “under section 721(b)” after “gain recognized”.
1976—Pub. L. 94–455 inserted “increased by the amount (if any) of gain recognized to the contributing partner at such time” after “at the time of the contribution”.
heading: Effective Date of 1984 Amendment
text: Pub. L. 98–369, div. A, title VII, § 722(f)(2), July 18, 1984, 98 Stat. 974, provided that: “The amendments made by paragraph (1) [amending this section and section 723 of this title] shall take effect as if included in the amendments made by section 2131 of the Tax Reform Act of 1976 [Pub. L. 94–455].”
heading: Effective Date of 1976 Amendment
text: For effective date of amendment made by Pub. L. 94–455, see section 2131(f)(3)–(5) of Pub. L. 94–455, set out as a note under section 721 of this title.
26 U.S.C. § 723 (INTERNAL REVENUE CODE)
§ 723. Basis of property contributed to partnership
The basis of property contributed to a partnership by a partner shall be the adjusted basis of such property to the contributing partner at the time of the contribution increased by the amount (if any) of gain recognized under section 721(b) to the contributing partner at such time.
(Aug. 16, 1954, ch. 736, 68A Stat. 245; Pub. L. 94–455, title XXI, § 2131(c), Oct. 4, 1976, 90 Stat. 1924; Pub. L. 98–369, div. A, title VII, § 722(f)(1), July 18, 1984, 98 Stat. 974.)
heading: Amendments
text: 1984—Pub. L. 98–369 inserted “under section 721(b)” after “gain recognized”.
1976—Pub. L. 94–455 inserted “increased by the amount (if any) of gain recognized to the contributing partner at such time” after “at the time of the contribution”.
heading: Effective Date of 1984 Amendment
text: Amendment by Pub. L. 98–369 effective as if included in amendments made by section 2131 of the Tax Reform Act of 1976, Pub. L. 94–455, see section 722(f)(2) of Pub. L. 98–369, set out as a note under section 722 of this title.
heading: Effective Date of 1976 Amendment
text: For effective date of amendment made by Pub. L. 94–455, see section 2131(f)(3)–(5) of Pub. L. 94–455, set out as a note under section 721 of this title.
26 U.S.C. § 733 (INTERNAL REVENUE CODE)
§ 733. Basis of distributee partner’s interest
In the case of a distribution by a partnership to a partner other than in liquidation of a partner’s interest, the adjusted basis to such partner of his interest in the partnership shall be reduced (but not below zero) by—
(1) the amount of any money distributed to such partner, and
(2) the amount of the basis to such partner of distributed property other than money, as determined under section 732.
(Aug. 16, 1954, ch. 736, 68A Stat. 247.)
26 U.S.C. § 741 (INTERNAL REVENUE CODE)
§ 741. Recognition and character of gain or loss on sale or exchange
In the case of a sale or exchange of an interest in a partnership, gain or loss shall be recognized to the transferor partner. Such gain or loss shall be considered as gain or loss from the sale or exchange of a capital asset, except as otherwise provided in section 751 (relating to unrealized receivables and inventory items).
(Aug. 16, 1954, ch. 736, 68A Stat. 248; Pub. L. 107–147, title IV, § 417(12), Mar. 9, 2002, 116 Stat. 56.)
heading: Amendments
text: 2002—Pub. L. 107–147 struck out “which have appreciated substantially in value” after “inventory items”.
26 U.S.C. § 752 (INTERNAL REVENUE CODE)
§ 752. Treatment of certain liabilities
(a) Increase in partner’s liabilities
Any increase in a partner’s share of the liabilities of a partnership, or any increase in a partner’s individual liabilities by reason of the assumption by such partner of partnership liabilities, shall be considered as a contribution of money by such partner to the partnership.
(b) Decrease in partner’s liabilities
Any decrease in a partner’s share of the liabilities of a partnership, or any decrease in a partner’s individual liabilities by reason of the assumption by the partnership of such individual liabilities, shall be considered as a distribution of money to the partner by the partnership.
(c) Liability to which property is subject
For purposes of this section, a liability to which property is subject shall, to the extent of the fair market value of such property, be considered as a liability of the owner of the property.
(d) Sale or exchange of an interest
In the case of a sale or exchange of an interest in a partnership, liabilities shall be treated in the same manner as liabilities in connection with the sale or exchange of property not associated with partnerships.
(Aug. 16, 1954, ch. 736, 68A Stat. 251.)
heading: Overruling of Raphan Case
text: Pub. L. 98–369, div. A, title I, § 79, July 18, 1984, 98 Stat. 597, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
“(a) General Rule.—
Section 752 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (and the regulations prescribed thereunder) shall be applied without regard to the result reached in the case of Raphan vs the United States, 3 Cl. Ct. 457 (1983).
“(b) Regulations.—
In amending the regulations prescribed under section 752 of such Code to reflect subsection (a), the Secretary of the Treasury or his delegate shall prescribe regulations relating to liabilities, including the treatment of guarantees, assumptions, indemnity agreements, and similar arrangements.”
26 U.S.C. § 754 (INTERNAL REVENUE CODE)
§ 754. Manner of electing optional adjustment to basis of partnership property
If a partnership files an election, in accordance with regulations prescribed by the Secretary, the basis of partnership property shall be adjusted, in the case of a distribution of property, in the manner provided in section 734 and, in the case of a transfer of a partnership interest, in the manner provided in section 743. Such an election shall apply with respect to all distributions of property by the partnership and to all transfers of interests in the partnership during the taxable year with respect to which such election was filed and all subsequent taxable years. Such election may be revoked by the partnership, subject to such limitations as may be provided by regulations prescribed by the Secretary.
(Aug. 16, 1954, ch. 736, 68A Stat. 251; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.)
heading: Amendments
text: 1976—Pub. L. 94–455 struck out “or his delegate” after “Secretary” wherever appearing.
26 U.S.C. § 755 (INTERNAL REVENUE CODE)
§ 755. Rules for allocation of basis
(a) General rule
Any increase or decrease in the adjusted basis of partnership property under section 734(b) (relating to the optional adjustment to the basis of undistributed partnership property) or section 743(b) (relating to the optional adjustment to the basis of partnership property in the case of a transfer of an interest in a partnership) shall, except as provided in subsection (b), be allocated—
(1) in a manner which has the effect of reducing the difference between the fair market value and the adjusted basis of partnership properties, or
(2) in any other manner permitted by regulations prescribed by the Secretary.
(b) Special rule
In applying the allocation rules provided in subsection (a), increases or decreases in the adjusted basis of partnership property arising from a distribution of, or a transfer of an interest attributable to, property consisting of—
(1) capital assets and property described in section 1231(b), or
(2) any other property of the partnership,
shall be allocated to partnership property of a like character except that the basis of any such partnership property shall not be reduced below zero. If, in the case of a distribution, the adjustment to basis of property described in paragraph (1) or (2) is prevented by the absence of such property or by insufficient adjusted basis for such property, such adjustment shall be applied to subsequently acquired property of a like character in accordance with regulations prescribed by the Secretary.
(c) No allocation of basis decrease to stock of corporate partner
In making an allocation under subsection (a) of any decrease in the adjusted basis of partnership property under section 734(b)—
(1) no allocation may be made to stock in a corporation (or any person related (within the meaning of sections 267(b) and 707(b)(1)) to such corporation) which is a partner in the partnership, and
(2) any amount not allocable to stock by reason of paragraph (1) shall be allocated under subsection (a) to other partnership property.
Gain shall be recognized to the partnership to the extent that the amount required to be allocated under paragraph (2) to other partnership property exceeds the aggregate adjusted basis of such other property immediately before the allocation required by paragraph (2).
(Aug. 16, 1954, ch. 736, 68A Stat. 252; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 108–357, title VIII, § 834(a), Oct. 22, 2004, 118 Stat. 1592.)
heading: Amendments
text: 2004—Subsec. (c). Pub. L. 108–357 added subsec. (c).
1976—Subsecs. (a), (b). Pub. L. 94–455 struck out “or his delegate” after “Secretary” wherever appearing.
heading: Effective Date of 2004 Amendment
text: Pub. L. 108–357, title VIII, § 834(b), Oct. 22, 2004, 118 Stat. 1592, provided that: “The amendment made by this section [amending this section] shall apply to distributions after the date of the enactment of this Act [Oct. 22, 2004].”
26 U.S.C. § 771 (INTERNAL REVENUE CODE)
§ 771. Application of subchapter to electing large partnerships
The preceding provisions of this subchapter to the extent inconsistent with the provisions of this part shall not apply to an electing large partnership and its partners.
(Added Pub. L. 105–34, title XII, § 1221(a), Aug. 5, 1997, 111 Stat. 1002.)
heading: Prior Provisions
text: A prior section 771, act Aug. 16, 1954, ch. 736, 68A Stat. 253, related to the effective date for this subchapter, prior to repeal by Pub. L. 94–455, title XIX, § 1901(a)(94), Oct. 4, 1976, 90 Stat. 1780.
heading: Effective Date
text: Pub. L. 105–34, title XII, § 1221(c), Aug. 5, 1997, 111 Stat. 1008, provided that: “The amendments made by this section [enacting this part] shall apply to partnership taxable years beginning after December 31, 1997.”
This part applicable to partnership taxable years beginning after Dec. 31, 1997, see section 1226 of Pub. L. 105–34, as amended, set out as an Effective Date of 1997 Amendment note under section 6011 of this title.
26 U.S.C. § 773 (INTERNAL REVENUE CODE)
§ 773. Computations at partnership level
(a) General rule
(1) Taxable income
The taxable income of an electing large partnership shall be computed in the same manner as in the case of an individual except that—
(A) the items described in section 772(a) shall be separately stated, and
(B) the modifications of subsection (b) shall apply.
(2) Elections
All elections affecting the computation of the taxable income of an electing large partnership or the computation of any credit of an electing large partnership shall be made by the partnership; except that the election under section 901, and any election under section 108, shall be made by each partner separately.
(3) Limitations, etc.
(A) In general
Except as provided in subparagraph (B), all limitations and other provisions affecting the computation of the taxable income of an electing large partnership or the computation of any credit of an electing large partnership shall be applied at the partnership level (and not at the partner level).
(B) Certain limitations applied at partner level
The following provisions shall be applied at the partner level (and not at the partnership level):
(i) Section 68 (relating to overall limitation on itemized deductions).
(ii) Sections 49 and 465 (relating to at risk limitations).
(iii) Section 469 (relating to limitation on passive activity losses and credits).
(iv) Any other provision specified in regulations.
(4) Coordination with other provisions
Paragraphs (2) and (3) shall apply notwithstanding any other provision of this chapter other than this part.
(b) Modifications to determination of taxable income
In determining the taxable income of an electing large partnership—
(1) Certain deductions not allowed
The following deductions shall not be allowed:
(A) The deduction for personal exemptions provided in section 151.
(B) The net operating loss deduction provided in section 172.
(C) The additional itemized deductions for individuals provided in part VII of subchapter B (other than section 212 thereof).
(2) Charitable deductions
In determining the amount allowable under section 170, the limitation of section 170(b)(2) shall apply.
(3) Coordination with section 67
In lieu of applying section 67, 70 percent of the amount of the miscellaneous itemized deductions shall be disallowed.
(c) Special rules for income from discharge of indebtedness
If an electing large partnership has income from the discharge of any indebtedness—
(1) such income shall be excluded in determining the amounts referred to in section 772(a), and
(2) in determining the income tax of any partner of such partnership—
(A) such income shall be treated as an item required to be separately taken into account under section 772(a), and
(B) the provisions of section 108 shall be applied without regard to this part.
(Added Pub. L. 105–34, title XII, § 1221(a), Aug. 5, 1997, 111 Stat. 1004.)
26 U.S.C. § 776 (INTERNAL REVENUE CODE)
§ 776. Special rules for partnerships holding oil and gas properties
(a) Computation of percentage depletion
In the case of an electing large partnership, except as provided in subsection (b)—
(1) the allowance for depletion under section 611 with respect to any partnership oil or gas property shall be computed at the partnership level without regard to any provision of section 613A requiring such allowance to be computed separately by each partner,
(2) such allowance shall be determined without regard to the provisions of section 613A(c) limiting the amount of production for which percentage depletion is allowable and without regard to paragraph (1) of section 613A(d), and
(3) paragraph (3) of section 705(a) shall not apply.
(b) Treatment of certain partners
(1) In general
In the case of a disqualified person, the treatment under this chapter of such person’s distributive share of any item of income, gain, loss, deduction, or credit attributable to any partnership oil or gas property shall be determined without regard to this part. Such person’s distributive share of any such items shall be excluded for purposes of making determinations under sections 772 and 773.
(2) Disqualified person
For purposes of paragraph (1), the term “disqualified person” means, with respect to any partnership taxable year—
(A) any person referred to in paragraph (2) or (4) of section 613A(d) for such person’s taxable year in which such partnership taxable year ends, and
(B) any other person if such person’s average daily production of domestic crude oil and natural gas for such person’s taxable year in which such partnership taxable year ends exceeds 500 barrels.
(3) Average daily production
For purposes of paragraph (2), a person’s average daily production of domestic crude oil and natural gas for any taxable year shall be computed as provided in section 613A(c)(2)—
(A) by taking into account all production of domestic crude oil and natural gas (including such person’s proportionate share of any production of a partnership),
(B) by treating 6,000 cubic feet of natural gas as a barrel of crude oil, and
(C) by treating as 1 person all persons treated as 1 taxpayer under section 613A(c)(8) or among whom allocations are required under such section.
(Added Pub. L. 105–34, title XII, § 1221(a), Aug. 5, 1997, 111 Stat. 1007.)
26 U.S.C. § 803 (INTERNAL REVENUE CODE)
§ 803. Life insurance gross income
(a) In general
For purposes of this part, the term “life insurance gross income” means the sum of the following amounts:
(1) Premiums
(A) The gross amount of premiums and other consideration on insurance and annuity contracts, less
(B) return premiums, and premiums and other consideration arising out of indemnity reinsurance.
(2) Decreases in certain reserves
Each net decrease in reserves which is required by section 807(a) to be taken into account under this paragraph.
(3) Other amounts
All amounts not includible under paragraph (1) or (2) which under this subtitle are includible in gross income.
(b) Special rules for premiums
(1) Certain items included
For purposes of subsection (a)(1)(A), the term “gross amount of premiums and other consideration” includes—
(A) advance premiums,
(B) deposits,
(C) fees,
(D) assessments,
(E) consideration in respect of assuming liabilities under contracts not issued by the taxpayer, and
(F) the amount of policyholder dividends reimbursable to the taxpayer by a reinsurer in respect of reinsured policies,
on insurance and annuity contracts.
(2) Policyholder dividends excluded from return premiums
For purposes of subsection (a)(1)(B)—
(A) In general
Except as provided in subparagraph (B), the term “return premiums” does not include any policyholder dividends.
(B) Exception for indemnity reinsurance
Subparagraph (A) shall not apply to amounts of premiums or other consideration returned to another life insurance company in respect of indemnity reinsurance.
(Added Pub. L. 98–369, div. A, title II, § 211(a), July 18, 1984, 98 Stat. 721.)
heading: Prior Provisions
text: A prior section 803, acts Aug. 16, 1954, ch. 736, 68A Stat. 256; Mar. 13, 1956, ch. 83, § 2, 70 Stat. 39, related to income and deductions in the case of life insurance companies, prior to the general revision of this part by Pub. L. 86–69, § 2(a), June 25, 1959, 73 Stat. 112.
heading: Effective Date
text: Section applicable to taxable years beginning after Dec. 31, 1983, see section 215 of Pub. L. 98–369, set out as a note under section 801 of this title.