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26 U.S.C. § 707 — Transactions between partner and partnership
Federal law — U.S. Code and appendices · legal_authorities
**(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** — Except as provided 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
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Source location: Title 26, Chapter 1, § 707; chapter-001-normal-taxes-and-surtaxes.md
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**(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** — Except as provided 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).
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Energy credit**
(1) **In general** — For purposes of section 46, except as provided in paragraphs (1)(B), (2)(B), and (3)(B) of subsection (c), the energy credit for any taxable year is the energy percentage of the basis of each energy property placed in service during such taxable year.
(2) **Energy percentage**
(A) *In general* — Except as provided in paragraphs (6) and (7), the energy percentage is—
(i) 6 percent in the case of—
(I) qualified fuel cell property,
(II) energy property described in clause (i) or (iii) of paragraph (3)(A) but only with respect to property the construction of which begins before January 1, 2025,
(III) energy property described in paragraph (3)(A)(ii),
(IV) qualified small wind energy property,
(V) waste energy recovery property,
(VI) energy storage technology,
(VII) qualified biogas property,
(VIII) microgrid controllers, and
(IX) energy property described in clauses (v) and (vii) of paragraph (3)(A), and
(ii) in the case of any energy property to which clause (i) does not apply, 0 percent.
(B) *Coordination with rehabilitation credit* — The energy percentage shall not apply to that portion of the basis of any property which is attributable to qualified rehabilitation expenditures.
(C) *Nonapplication of increases to energy percentage* — For purposes of energy property described in subparagraph (A)(ii), the energy percentage applicable to such property pursuant to such subparagraph shall not be increased or otherwise adjusted by any provision of this section.
(3) **Energy property** — For purposes of this subpart, the term “energy property” means any property—
(A) which is—
(i) equipment which uses solar energy to generate electricity, to he
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Treatment of gain as ordinary income** In the case of a sale or exchange of property, directly or indirectly, between related persons, any gain recognized to the transferor shall be treated as ordinary income if such property is, in the hands of the transferee, of a character which is subject to the allowance for depreciation provided in section 167.
**(b) Related persons** For purposes of subsection (a), the term “related persons” means—
(1) a person and all entities which are controlled entities with respect to such person,
(2) a taxpayer and any trust in which such taxpayer (or his spouse) is a beneficiary, unless such beneficiary’s interest in the trust is a remote contingent interest (within the meaning of section 318(a)(3)(B)(i)), and
(3) except in the case of a sale or exchange in satisfaction of a pecuniary bequest, an executor of an estate and a beneficiary of such estate.
**(c) Controlled entity defined**
(1) **General rule** — For purposes of this section, the term “controlled entity” means, with respect to any person—
(A) a corporation more than 50 percent of the value of the outstanding stock of which is owned (directly or indirectly) by or for such person,
(B) a partnership more than 50 percent of the capital interest or profits interest in which is owned (directly or indirectly) by or for such person, and
(C) any entity which is a related person to such person under paragraph (3), (10), (11), or (12) of section 267(b).
(2) **Constructive ownership** — For purposes of this section, ownership shall be determined in accordance with rules similar to the rules under section 267(c) (other than paragraph (3) thereof).
**(d) Employer and related employee association** For purposes of subsection (a), the term “related person” also includes—
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Definition of surviving spouse**
(1) **In general** — For purposes of section 1, the term “surviving spouse” means a taxpayer—
(A) whose spouse died during either of his two taxable years immediately preceding the taxable year, and
(B) who maintains as his home a household which constitutes for the taxable year the principal place of abode (as a member of such household) of a dependent (i) who (within the meaning of section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) is a son, stepson, daughter, or stepdaughter of the taxpayer, and (ii) with respect to whom the taxpayer is entitled to a deduction for the taxable year under section 151.
(2) **Limitations** — Notwithstanding paragraph (1), for purposes of section 1 a taxpayer shall not be considered to be a surviving spouse—
(A) if the taxpayer has remarried at any time before the close of the taxable year, or
(B) unless, for the taxpayer’s taxable year during which his spouse died, a joint return could have been made under the provisions of section 6013 (without regard to subsection (a)(3) thereof).
(3) **Special rule where deceased spouse was in missing status** — If an individual was in a missing status (within the meaning of section 6013(f)(3)) as a result of service in a combat zone (as determined for purposes of section 112) and if such individual remains in such status until the date referred to in subparagraph (A) or (B), then, for purposes of paragraph (1)(A), the date on which such individual died shall be treated as the earlier of the date determined under subparagraph (A) or the date determined under subparagraph (B):
(A) the date on which the determination is made under [section 556 of title 37](https://uscode.house.gov/view.xhtml?req=granuleid:
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Federal law — U.S. Code and appendices · legal_authorities
**(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.
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Requirements for qualification** A trust created or organized in the United States and forming part of a stock bonus, pension, or profit-sharing plan of an employer for the exclusive benefit of his employees or their beneficiaries shall constitute a qualified trust under this section—
(1) if contributions are made to the trust by such employer, or employees, or both, or by another employer who is entitled to deduct his contributions under section 404(a)(3)(B) (relating to deduction for contributions to profit-sharing and stock bonus plans), or by a charitable remainder trust pursuant to a qualified gratuitous transfer (as defined in section 664(g)(1)), for the purpose of distributing to such employees or their beneficiaries the corpus and income of the fund accumulated by the trust in accordance with such plan;
(2) if under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees and their beneficiaries under the trust, for any part of the corpus or income to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of his employees or their beneficiaries (but this paragraph shall not be construed, in the case of a multiemployer plan, to prohibit the return of a contribution within 6 months after the plan administrator determines that the contribution was made by a mistake of fact or law (other than a mistake relating to whether the plan is described in section 401(a) or the trust which is part of such plan is exempt from taxation under section 501(a), or the return of any withdrawal liability payment determined to be an overpayment within 6 months of such determination));
(3) if the plan of which such trust is a part satisfies the requireme
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Federal law — U.S. Code and appendices · legal_authorities
Page 1871
TITLE 26—INTERNAL REVENUE CODE
§ 707
scribes another period’’ for ‘‘or such other period as the
Secretary may prescribe in regulations’’.
Subsec. (b)(4). Pub. L. 100–647, § 1008(e)(1)(B), sub-
stituted ‘‘Majority interest taxable year; limitation on
required changes’’ for ‘‘Application of majority interest
rule’’ in heading and amended text generally. Prior to
amendment, text read as follows: ‘‘Clause (i) of para-
graph (1)(B) shall not apply to any taxable year of a
partnership unless the period which constitutes the
taxable year of 1 or more of its partners who have an
aggregate interest in partnership profits and capital of
greater than 50 percent has been the same for—
‘‘(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 with-
in 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 pe-
riod.’’
Subsec. (b)(5). Pub. L. 100–647, § 1008(e)(3), added par.
(5).
1986—Subsec. (b). Pub. L. 99–514, § 806(a)(3), struck out
‘‘Adoption of’’ before ‘‘taxable year’’ in heading.
Subsec. (b)(1). Pub. L. 99–514, § 806(a)(1), amended par.
(1) generally. Prior to amendment, par. (1) read as fol-
lows: ‘‘The taxable year of a partnership shall be deter-
mined as though the partnership were a taxpayer. A
partnership may not change to, or adopt, a taxable
year other than that of all its principal partners unless
it establishes, to the satisfaction of the Secretary, a
business purpose therefor
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