2023 Laws of Puerto Rico › TITLE THIRTEEN - Taxation and Finance (§§ 1 — 33423) › Subtitle 17 - Internal Revenue Code of 2011 (§§ 30001 — 33423) › PART II - Income Taxes (§§ 30041 — 30622) › Chapter 1013 - Other Special Taxpayers (§§ 30501 — 30622) › Subchapter D - Special Partnerships and Partners (§§ 30551 — 30578) › § 30557 - Transactions between partner and special 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/her 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 the regulations prescribed by the Secretary:
(A) Treatment of certain services and transfers of property. — If:
(i) A partner performs services for a special partnership or transfers property to a special 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 special partnership and a partner acting other than in his/her capacity as a member of the special partnership, such allocation or distribution shall be treated as a transaction described in clause (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 special partnership;
(ii) there is a related direct or indirect transfer of money or other property by the special partnership to such partner (or another partner), and
(iii) the transfers described in subparagraphs (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 clause (1) or as a transaction between two (2) or more partners acting other than in their capacity as members of the special partnership.
(3) Other transactions. — If:
(A) A corporation (“the transferor corporation”) transfers property (“the transferred property”) to a special partnership (“the transferee”) in exchange for an interest in such partnership or as a capital contribution,
(B) at the time of the transfer of property the fair market value of the property exceeds its basis to the transferor corporation, and
(C) during the “applicable period” (as defined in this clause), the transferee or any special partnership directly or indirectly controlled by the transferee, distributes the transferred property to a person who at the time of the transfer described in paragraph (A) was a shareholder of the transferor corporation, then the transfers and distributions described in paragraphs (B) and (C) shall be treated as if they never occurred between the persons therein indicated, and the transferred property shall be considered as distributed by the transferor corporation to the shareholder described in paragraph (C) at the time of the contribution described in paragraph (A).
For purposes of this clause, the term “applicable period” means the period of sixty (60) months that begins with the first month of the first taxable year of the transferor corporation that begins after the transfer. The period prescribed for the assessment and collection of a deficiency provided in §§ 33001 et seq. of this title relative to that which is provided in this clause shall not be initiated until the income tax return of the transferor corporation for the last taxable year within which the last month of the applicable period ends is filed.
(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 interest in the partnership), directly or indirectly, in transactions described in § 30137(b) of this title.
(2) Rules of ownership. — For purposes of clause (1), the ownership of a capital or profits interest in a partnership shall be determined in accordance with the rules of constructive ownership provided in § 30137(b) of this title.
(c) 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 § 30141(a)(1) of this title:
(1) Between a special partnership and a person owning, directly or indirectly, more than fifty percent (50%) of the capital interest, or profits interest, in such partnership, or
(2) between two special partnerships in which the same persons own, directly or indirectly, more than fifty percent (50%) of the capital interest or profits interests, any gain recognized shall be considered as ordinary income.
(d) Ownership of a capital or profits interest. — For purposes of clauses (1) and (2) of subsection (c), the ownership of a capital or profits interest in a partnership shall be determined in accordance with the rules of constructive ownership of a partnership’s capital provided in § 30137(b)(2) of this title.
(e) 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 purposes of §§ 30101 and 30122 of this title, subject to the limitations of § 30137 of this title.
History —Jan. 31, 2011, No. 1, § 1114.07, retroactive to Jan. 1, 2011.