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 1009 - Partnerships and Partners (§§ 30321 — 30378) › Subchapter E - Miscellaneous Provisions (§§ 30371 — 30375) › § 30371 - Unrealized receivables and inventory items

(a) Sale or exchange of interest in partnership. — The amount of any money, or the fair market value of any property, received by a partner in exchange for all or part of his/her interest in the partnership attributable to:
(1) Unrealized receivables of the partnership, or
(2) inventory items of the partnership, shall be considered as an amount realized from the sale or exchange of property other than a capital asset.
(b) Certain distributions treated as sales or exchanges. —
(1) General rule. — To the extent that a partner receives in a distribution:
(A) Partnership property which is:
(i) Unrealized receivables, or
(ii) inventory items which have appreciated substantially in value, in exchange for all or a part of his/her interest in other partnership property (including money), or
(B) partnership property (including money) other than property described in subparagraph (i) or (ii) of paragraph (A) in exchange for all or part of his/her interest in partnership property described in said subparagraph (i) or (ii) of paragraph (A), such transactions shall, under regulations prescribed by the Secretary, be considered as a sale or exchange of such property between the distributee partner and the partnership (as constituted after the distribution).
(2) Exceptions. — Clause (1) shall not apply to:
(A) A distribution of property which the distribute partner contributed to the partnership, or
(B) payments described in § 30356(a) of this title, to a retiring partner or successor in interest of a decedent partner.
(3) Substantial appreciation. — For purposes of clause (1):
(A) In general. — Inventory items of the partnership shall be considered to have appreciated substantially in value if their fair market value exceeds one hundred twenty percent (120%) of the adjusted basis to the partnership of such property.
(B) Certain property excluded. — For purposes of paragraph (A), any inventory property shall be excluded if a principal purpose for acquiring such property was to avoid the provisions of this subsection related to inventory items.
(c) Unrealized receivables. — For purposes of this chapter, the term “unrealized receivables” includes, to the extent not previously includible in income under the method of accounting used by the partnership, any rights (contractual or otherwise) to payment for:
(1) Goods delivered, or to be delivered, to the extent that the proceeds therefrom would be treated as amounts received from the sale or exchange of property other than a capital asset, or
(2) services rendered, or to be rendered.
(d) Inventory items. — For purposes of this chapter, the term “inventory items” means:
(1) Property of the partnership of the kind described in § 30141(a)(1)(A) of this title,
(2) any other property of the partnership which, on sale or exchange by the partnership, would be considered property other than a capital asset and other than property described in § 30141(i) of this title, and
(3) any other property held by the partnership which, if held by the selling or distributee partner, would be considered property of the kind described in clause (1) or (2).
(e) Special rules in the case of tiered partnerships, etc. — In determining whether property of a partnership is:
(1) An unrealized receivable, or
(2) an inventory item, such partnership shall be treated as owning its proportionate share of the property of any other partnership in which it is a partner. Under regulations to be promulgated by the Secretary, rules similar to the rules of the preceding sentence shall also apply in the case of interests in trusts.
History —Jan. 31, 2011, No. 1, § 1075.01, retroactive to Jan. 1, 2011.