Source: http://www.gpo.gov/fdsys/pkg/USCODE-2011-title26/html/USCODE-2011-title26-subtitleA-chap1-subchapK.htm
Timestamp: 2015-04-19 14:10:50
Document Index: 265964802

Matched Legal Cases: ['§1221', '§213', '§1901', '§701', '§702', '§201', '§1402', '§1901', '§404', '§301', '§402', '§103', '§1001', '§612', '§302', '§302', '§301', '§301', '§1402', '§1402', '§1901', '§1901', '§703', '§2', '§504', '§304', '§501', '§1901', '§2115', '§101', '§2', '§511', '§701', '§1008', '§13150', '§2115', '§1901', '§704', '§213', '§1906', '§201', '§71', '§7642', '§1937', '§1063', '§833', '§213', '§213', '§1906', '§213', '§213', '§833']

Subchapter K—Partners and Partnerships
I.Determination of tax liability.
II.Contributions, distributions, and transfers.
III.Definitions.
IV.Special rules for electing large partnerships.
1997—Pub. L. 105–34, title XII, §1221(b), Aug. 5, 1997, 111 Stat. 1008, added item for part IV.
PART I—DETERMINATION OF TAX LIABILITY
701.Partners, not partnership, subject to tax.
702.Income and credits of partner.
703.Partnership computations.
704.Partner's distributive share.
705.Determination of basis of partner's interest.
706.Taxable years of partner and partnership.
707.Transactions between partner and partnership.
708.Continuation of partnership.
709.Treatment of organization and syndication fees.
1976—Pub. L. 94–455, title II, §213(b)(2), title XIX, §1901(b)(23), Oct. 4, 1976, 90 Stat. 1547, 1798, struck out part IV “Effective date for subchapter” in table of parts of subchapter K of chapter 1 and added item 709.
§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, 68A Stat. 239.)
§702. Income and credits of partner
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,
(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.
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.
(Aug. 16, 1954, ch. 736, 68A Stat. 239; Pub. L. 88–272, title II, §201(d)(7), Feb. 26, 1964, 78 Stat. 32; Pub. L. 94–455, title XIV, §1402(b)(1)(L), (2), title XIX, §§1901(b)(1)(I)(i), (ii), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1732, 1791, 1834; Pub. L. 96–223, title IV, §404(b)(5), Apr. 2, 1980, 94 Stat. 307; Pub. L. 97–34, title III, §301(b)(5), (6)(C), Aug. 13, 1981, 95 Stat. 270; Pub. L. 97–248, title IV, §402(c)(1), Sept. 3, 1982, 96 Stat. 667; Pub. L. 97–448, title I, §103(a)(4), Jan. 12, 1983, 96 Stat. 2375; Pub. L. 98–369, div. A, title X, §1001(b)(9), (e), July 18, 1984, 98 Stat. 1011, 1012; Pub. L. 99–514, title VI, §612(b)(5), Oct. 22, 1986, 100 Stat. 2250; Pub. L. 108–27, title III, §302(e)(8), May 28, 2003, 117 Stat. 764.)
2003—Subsec. (a)(5). Pub. L. 108–27, §§302(e)(8), 303, temporarily amended par. (5) generally. Prior to amendment, par. (5) read as follows: “dividends with respect to which there is a deduction under part VIII of subchapter B,”. See Effective and Termination Dates of 2003 Amendment note below.
1981—Subsec. (a)(5). Pub. L. 97–34, §301(b)(6)(C), inserted reference to “interest” in heading and text which continued the amendment made by Pub. L. 96–223.
Pub. L. 97–34, §301(b)(5), inserted “or 128” after “section 116”.
1976—Subsec. (a)(1), (2). Pub. L. 94–455, §1402(b)(2), provided that “9 months” would be changed to “1 year”.
Pub. L. 94–455, §1402(b)(1)(L), provided that “6 months” would be changed to “9 months” for taxable years beginning in 1977.
Subsec. (a)(7) to (9). Pub. L. 94–455, §§1901(b)(1)(I)(i), 1906(b)(13)(A), redesignated pars. (8) and (9) as (7) and (8), respectively, and in par. (7), as so redesignated, struck out “or his delegate” after “Secretary”. Former par. (7), which related partially tax-exempt interest on obligations of the United States or its instrumentalities, was struck out.
Subsec. (b). Pub. L. 94–455, §1901(b)(1)(I)(ii), substituted “paragraphs (1) through (7)” for “paragraphs (1) through (8)”.
Amendment by Pub. L. 97–248 applicable to partnership taxable years beginning after Sept. 3, 1982, with provision for the applicability of the amendment to any partnership taxable year ending after 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, see section 407(a)(1), (3) of Pub. L. 97–248, set out as an Effective Date note under section 6221 of this title.
Section 1402(b)(1) of Pub. L. 94–455 provided that the amendment made by that section is effective with respect to taxable years beginning in 1977.
Section 1402(b)(2) of Pub. L. 94–455 provided that the amendment made by that section is effective with respect to taxable years beginning after Dec. 31, 1977.
§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),
(Aug. 16, 1954, ch. 736, 68A Stat. 240; Pub. L. 89–570, §2(b), Sept. 12, 1966, 80 Stat. 764; Pub. L. 91–172, title V, §504(c)(3), Dec. 30, 1969, 83 Stat. 633; Pub. L. 92–178, title III, §304(c), Dec. 10, 1971, 85 Stat. 523; Pub. L. 94–12, title V, §501(b)(3), Mar. 29, 1975, 89 Stat. 53; Pub. L. 94–455, title XIX, §1901(b)(21)(F), title XXI, §2115(c)(2), Oct. 4, 1976, 90 Stat. 1798, 1909; Pub. L. 95–30, title I, §101(d)(10), May 23, 1977, 91 Stat. 134; Pub. L. 96–589, §2(e)(1), Dec. 24, 1980, 94 Stat. 3396; Pub. L. 99–514, title V, §511(d)(2)(B), title VII, §701(e)(4)(E), Oct. 22, 1986, 100 Stat. 2249, 2343; Pub. L. 100–647, title I, §1008(i), Nov. 10, 1988, 102 Stat. 3445; Pub. L. 103–66, title XIII, §13150(c)(9), Aug. 10, 1993, 107 Stat. 448.)
1993—Subsec. (b)(1). Pub. L. 103–66 substituted “subsection (b)(5) or (c)(3)” for “subsection (b)(5)”.
1988—Subsec. (b)(1). Pub. L. 100–647 substituted “subsection (b)(5)” for “subsection (b)(5) or (d)(4)”.
1986—Subsec. (b). Pub. L. 99–514 struck out former pars. (1) and (3) which related to elections under sections 57(c) and 163(d), respectively, and redesignated former pars. (2), (4), and (5), as pars. (1), (2), and (3), respectively.
1980—Subsec. (b). Pub. L. 96–589 inserted reference to section 108(b)(5) and (d)(4).
1977—Subsec. (a)(2). Pub. L. 95–30 struck out subpar. (A) which made reference to the standard deduction provided in section 141, and redesignated subpars. (B) to (G) as (A) to (F), respectively.
1976—Subsec. (a)(2)(G). Pub. L. 94–455, §2115(c)(2), substituted “wells” for “production subject to the provisions of section 613A(c)”.
Subsec. (b). Pub. L. 94–455, §1901(b)(21)(F), struck out “under section 615 (relating to pre-1970 exploration expenditures),” after “of the United States, and any election”.
1975—Subsec. (a)(2)(G). Pub. L. 94–12 added subpar. (G).
1971—Subsec. (b). Pub. L. 92–178 substituted “,” for “or” after “(relating to pre-1970 exploration expenditures)” and inserted “under section 57(c) (relating to definition of net lease), or under section 163(d) (relating to limitation on interest on investment indebtedness)” after “(relating to deduction and recapture of certain mining exploration expenditures)”.
1969—Subsec. (b). Pub. L. 91–172 substituted “(relating to pre-1970 exploration expenditures) or under section 617 (relating to deduction and recapture of certain mining exploration expenditures)” for “(relating to exploration expenditures) or under section 617 (relating to additional exploration expenditures in the case of domestic mining)”.
1966—Subsec. (b). Pub. L. 89–570 provided for election under section 615 (relating to exploration expenditures) or under section 617 (relating to additional exploration expenditures in the case of domestic mining).
Amendment by Pub. L. 103–66 applicable to discharges after Dec. 31, 1992, in taxable years ending after such date, see section 13150(d) of Pub. L. 103–66, set out as a note under section 108 of this title.
Amendment by section 511(d)(2)(B) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 511(e) of Pub. L. 99–514, set out as a note under section 163 of this title.
Amendment by section 701(e)(4)(E) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 701(f) of Pub. L. 99–514, set out as an Effective Date note under section 55 of this title.
Amendment by Pub. L. 96–589 applicable to transactions which occur after Dec. 31, 1980, other than transactions which occur in a proceeding in a bankruptcy case or similar judicial proceeding or in a proceeding under Title 11 commencing on or after Dec. 31, 1980, with an exception permitting the debtor to make the amendment applicable to transactions occurring after Sept. 30, 1979; in a specified manner, see section 7(a)(1), (f) of Pub. L. 96–589, set out as a note under section 108 of this title.
Amendment by section 1901(b)(21)(F) of Pub. L. 94–455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.
Amendment by section 2115(c)(2) 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.
Amendment by Pub. L. 94–12 effective Jan. 1, 1975, to apply to taxable years ending after Dec. 31, 1974, see section 501(c) of Pub. L. 94–12, set out as an Effective Date note under section 613A of this title.
Amendment by Pub. L. 91–172 applicable with respect to exploration expenditures paid or incurred after Dec. 31, 1969, see section 504(d)(1) of Pub. L. 91–172, set out as an Effective Date note under section 243 of this title.
For applicability of amendment by section 701(e)(4)(E) of Pub. L. 99–514 notwithstanding any treaty obligation of the United States in effect on Oct. 22, 1986, with provision that for such purposes any amendment by title I of Pub. L. 100–647 be treated as if it had been included in the provision of Pub. L. 99–514 to which such amendment relates, see section 1012(aa)(2), (4) of Pub. L. 100–647, set out as a note under section 861 of this title.
§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
(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
(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
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. 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.
(e) Family partnerships
(1) Recognition of interest created by purchase or gift
A person shall be recognized as a partner for purposes of this subtitle if he owns a capital interest in a partnership in which capital is a material income-producing factor, whether or not such interest was derived by purchase or gift from any other person.
(2) 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.
(3) Purchase of interest by member of family
For purposes of this section, 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.
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, 68A Stat. 240; Pub. L. 94–455, title II, §213(c)(2), (3)(A), (d), (e), title XIX, §1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1548, 1834; Pub. L. 95–600, title II, §201(b)(1), Nov. 6, 1978, 92 Stat. 2816; Pub. L. 98–369, div. A, title I, §71(a), July 18, 1984, 98 Stat. 589; Pub. L. 101–239, title VII, §7642(a), Dec. 19, 1989, 103 Stat. 2379; Pub. L. 102–486, title XIX, §1937(b)(1), Oct. 24, 1992, 106 Stat. 3033; Pub. L. 105–34, title X, §1063(a), Aug. 5, 1997, 111 Stat. 947; Pub. L. 108–357, title VIII, §833(a), Oct. 22, 2004, 118 Stat. 1589.)
2004—Subsec. (c)(1)(C). Pub. L. 108–357 added subpar. (C).
1997—Subsec. (c)(1)(B). Pub. L. 105–34 substituted “7 years” for “5 years” in introductory provisions.
1992—Subsec. (c)(1)(B). Pub. L. 102–486 substituted “is distributed (directly or indirectly)” for “is distributed”.
1989—Subsec. (c). Pub. L. 101–239 amended subsec. (c) generally. Prior to amendment, subsec. (c) read as follows: “Under regulations prescribed by the Secretary, income, gain, loss, and deduction with respect to property contributed to the partnership by a partner shall be shared among 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. Under regulations prescribed by the Secretary, rules similar to the rules of the preceding sentence 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.”
1984—Subsec. (c). Pub. L. 98–369 amended subsec. (c) generally, substituting provisions directing that, under regulations prescribed by the Secretary, income, gain, loss, and deduction with respect to property contributed to the partnership by a partner be shared among 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, and that similar rules apply to contributions by a partner (using the cash receipts and disbursements method of accounting) of accounts payable and other accrued but unpaid items for provisions which had directed that, if the partnership agreement so provided, depreciation, depletion, or gain or loss with respect to property contributed to the partnership by a partner would under regulations prescribed by the Secretary, 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, and struck out provisions which had directed that in determining a partner's distributive share of items described in section 702(a), depreciation, depletion, or gain or loss with respect to property contributed to the partnership by a partner would, except to the extent otherwise provided, be allocated among the partners in the same manner as if such property had been purchased by the partnership and that if the partnership agreement did not provide otherwise, depreciation, depletion, or gain or loss with respect to undivided interests in property contributed to a partnership would be determined as though such undivided interests had not been contributed to the partnership.
1978—Subsec. (d). Pub. L. 95–600 struck out provisions relating to adjusted basis of a partner's interest.
1976—Subsec. (a). Pub. L. 94–455, §213(c)(2), substituted “except as otherwise provided in this chapter” for “except as otherwise provided in this section”.
Subsec. (b). Pub. L. 94–455, §213(d), among other changes, substituted “Determination of distributive share” for “Distributive share determined by income or loss ratio” in heading, in provisions preceding par. (1) “the partner's interest in the partnership (determined by taking into account all facts and circumstances)” for “his distributive share of taxable income or loss of the partnership, as described in section 702(a)(9), for the taxable year”, and in par. (2) provision relating to a lack of substantial economic effect in a partnership agreement for provisions relating to the partnership agreement's purpose being the avoidance or evasion of taxes.
Subsec. (c)(2). Pub. L. 94–455, §1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
Subsec. (d). Pub. L. 94–455, §213(e), inserted provision relating to the determination of the adjusted basis of a partner's liability where there is no personal liability and the applicability of such determination where section 465 of this title applies or the principal activity of the partnership is real estate investment.
Subsec. (f). Pub. L. 94–455, §213(c)(3)(A), added subsec. (f).
Pub. L. 108–357, title VIII, §833(d)(1), Oct. 22, 2004, 118 Stat. 1592, provided that: “The amendment made by subsection (a) [amending this section] shall apply to contributions made after the date of the enactment of this Act [Oct. 22, 2004].”
Section 1063(b) of Pub. L. 105–34 provided that:
“(1) In general.—The amendment made by subsection (a) [amending this section and section 737 of this title] shall apply to property contributed to a partnership after June 8, 1997.
“(2) Binding contracts.—The amendment made by subsection (a) shall not apply to any property contributed pursuant to a written binding contract in effect on June 8, 1997, and at all times thereafter before such contribution if such contract provides for the contribution of a fixed amount of property.”
Section 1937(c) of Pub. L. 102–486 provided that: “The amendments made by this section [enacting section 737 of this title and amending this section and section 731 of this title] shall apply to distributions on or after June 25, 1992.”