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26 U.S.C. § 736 — Payments to a retiring partner or a deceased partner’s successor in interest
Federal law — U.S. Code and appendices · legal_authorities
**(a) Payments considered as distributive share or guaranteed payment** Payments made in liquidation of the interest of a retiring partner or a deceased partner shall, except as provided in subsection (b), be considered—
(1) as a distributive share to the recipient of partnership income if the amount thereof is determined with regard to the income of the partnership, or
(2) as a guaranteed payment described in section 707(c) if the amount thereof is determined without regard to the income of the partnership.
**(b) Payments for interest in partnership**
(1) **General rule** — Payments made in liquidation of the interest of a retiring partner or a deceased partner shall, to the extent such payments (other than payments described in paragraph (2)) are determined, under regulations prescribed by the Secretary, to be made in exchange for the interest of such partner in partnership property, be considered as a distribution by the partnership and not as a distributive share or guaranteed payment under subsection (a).
(2) **Special rules** — For purposes of this subsection, payments in exchange for an interest in partnership property shall not include amounts paid for—
(A) unrealized receivables of the partnership (as defined in section 751(c)), or
(B) good will of the partnership, except to the extent that the partnership agreement provides for a payment with respect to good will.
(3) **Limitation on application of paragraph (2)** — Paragraph (2) shall apply only if—
(A) capital is not a material income-producing factor for the partnership, and
(B) the retiring or deceased partner was a general partner in the partnership.
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Source file: Laws/federal/codes/united-states-code/title-26/section-736-payments-to-a-retiring-partner-or-a-deceased-partners-successor-in-inter--acc03cfe33.md
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Source location: Title 26, Chapter 1, § 736; chapter-001-normal-taxes-and-surtaxes.md
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**(a) Payments considered as distributive share or guaranteed payment** Payments made in liquidation of the interest of a retiring partner or a deceased partner shall, except as provided in subsection (b), be considered—
(1) as a distributive share to the recipient of partnership income if the amount thereof is determined with regard to the income of the partnership, or
(2) as a guaranteed payment described in section 707(c) if the amount thereof is determined without regard to the income of the partnership.
**(b) Payments for interest in partnership**
(1) **General rule** — Payments made in liquidation of the interest of a retiring partner or a deceased partner shall, to the extent such payments (other than payments described in paragraph (2)) are determined, under regulations prescribed by the Secretary, to be made in exchange for the interest of such partner in partnership property, be considered as a distribution by the partnership and not as a distributive share or guaranteed payment under subsection (a).
(2) **Special rules** — For purposes of this subsection, payments in exchange for an interest in partnership property shall not include amounts paid for—
(A) unrealized receivables of the partnership (as defined in section 751(c)), or
(B) good will of the partnership, except to the extent that the partnership agreement provides for a payment with respect to good will.
(3) **Limitation on application of paragraph (2)** — Paragraph (2) shall apply only if—
(A) capital is not a material income-producing factor for the partnership, and
(B) the retiring or deceased partner was a general partner in the partnership.
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Sale or exchange of interest in partnership** The amount of any money, or the fair market value of any property, received by a transferor partner in exchange for all or a part of his 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 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 interest in other partnership property (including money), or
(B) partnership property (including money) other than property described in subparagraph (A)(i) or (ii) in exchange for all or a part of his interest in partnership property described in subparagraph (A)(i) or (ii),
such transactions shall, under regulations prescribed by the Secretary, be considered as a sale or exchange of such property between the distributee and the partnership (as constituted after the distribution).
(2) **Exceptions** — Paragraph (1) shall not apply to—
(A) a distribution of property which the distributee contributed to the partnership, or
(B) payments, described in section 736(a), to a retiring partner or successor in interest of a deceased partner.
(3) **Substantial appreciation** — For purposes of paragraph (1)—
(A) *In general* — Inventory items of the partnership shall be considered to have appreciated substantially in value if their fair market value exceeds 120 percent of the adjusted basis to the partnership of such pro
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 751
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Federal law — U.S. Code and appendices · legal_authorities
This part shall apply to any employee benefit plan described in [section 1003(a) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title29-section1003/a&num=0&edition=prelim) (and not exempted under [section 1003(b) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title29-section1003/b&num=0&edition=prelim)) other than—
(1) an employee welfare benefit plan;
(2) a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees;
(3)
(A) a plan established and maintained by a society, order, or association described in section 501(c)(8) or (9) of title 26, if no part of the contributions to or under such plan are made by employers of participants in such plan, or
(B) a trust described in [section 501(c)(18) of title 26](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section501/c/18&num=0&edition=prelim);
(4) a plan which is established and maintained by a labor organization described in [section 501(c)(5) of title 26](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section501/c/5&num=0&edition=prelim) and which does not at any time after September 2, 1974, provide for employer contributions;
(5) any agreement providing payments to a retired partner or a deceased partner’s successor in interest, as described in [section 736 of title 26](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section736&num=0&edition=prelim);
(6) an individual retirement account or annuity described in [section 408 of title 26](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section408&num=0&edition=prelim), or a retirement bond describ
Source: Supplied U.S. Code snapshot — release unconfirmed · 29 U.S.C. § 1051
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Plans excepted from applicability of this part** This part shall apply to any employee pension benefit plan described in [section 1003(a) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title29-section1003/a&num=0&edition=prelim), (and not exempted under [section 1003(b) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title29-section1003/b&num=0&edition=prelim)), other than—
(1) an employee welfare benefit plan;
(2) an insurance contract plan described in subsection (b);
(3) a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees;
(4)
(A) a plan which is established and maintained by a society, order, or association described in section 501(c)(8) or (9) of title 26, if no part of the contributions to or under such plan are made by employers of participants in such plan; or
(B) a trust described in [section 501(c)(18) of title 26](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section501/c/18&num=0&edition=prelim);
(5) a plan which has not at any time after September 2, 1974, provided for employer contributions;
(6) an agreement providing payments to a retired partner or deceased partner or a deceased partner’s successor in interest as described in [section 736 of title 26](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section736&num=0&edition=prelim);
(7) an individual retirement account or annuity as described in [section 408(a) of title 26](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section408/a&num=0&edition=prelim), or a retirement bond described in [section 409 of title 26](https://uscode.house.g
Source: Supplied U.S. Code snapshot — release unconfirmed · 29 U.S.C. § 1081
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Scope of coverage** This part shall apply to any employee benefit plan described in [section 1003(a) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title29-section1003/a&num=0&edition=prelim) (and not exempted under [section 1003(b) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title29-section1003/b&num=0&edition=prelim)), other than—
(1) a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees; or
(2) any agreement described in [section 736 of title 26](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section736&num=0&edition=prelim), which provides payments to a retired partner or deceased partner or a deceased partner’s successor in interest.
**(b) Securities or policies deemed to be included in plan assets** For purposes of this part:
(1) In the case of a plan which invests in any security issued by an investment company registered under the Investment Company Act of 1940 [[15 U.S.C. 80a–1](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section80a–1&num=0&edition=prelim) et seq.], the assets of such plan shall be deemed to include such security but shall not, solely by reason of such investment, be deemed to include any assets of such investment company.
(2) In the case of a plan to which a guaranteed benefit policy is issued by an insurer, the assets of such plan shall be deemed to include such policy, but shall not, solely by reason of the issuance of such policy, be deemed to include any assets of such insurer. For purposes of this paragraph:
(A) The term “insurer” means an insurance company, insurance service, or insurance o
Source: Supplied U.S. Code snapshot — release unconfirmed · 29 U.S.C. § 1101
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Federal law — U.S. Code and appendices · legal_authorities
Page 1882
TITLE 26—INTERNAL REVENUE CODE
§ 735
Subsec. (b). Pub. L. 109–135, § 403(bb)(2), reenacted
heading without change and amended introductory pro-
visions generally. Prior to amendment, introductory
provisions read as follows: ‘‘In the case of a distribu-
tion of property to a partner, a partnership, with re-
spect to which the election provided in section 754 is in
effect or unless there is a substantial basis reduction,
shall—’’.
2004—Pub. L. 108–357, § 833(c)(5)(A), substituted ‘‘Ad-
justment to basis of undistributed partnership property
where section 754 election or substantial basis reduc-
tion’’ for ‘‘Optional adjustment to basis of undistrib-
uted partnership property’’ in section catchline.
Subsec. (a). Pub. L. 108–357, § 833(c)(1), inserted ‘‘or
unless there is a substantial basis reduction’’ before pe-
riod at end.
Subsec. (b). Pub. L. 108–357, § 833(c)(2), inserted ‘‘or
unless there is a substantial basis reduction’’ after
‘‘section 754 is in effect’’ in introductory provisions.
Subsec. (d). Pub. L. 108–357, § 833(c)(3), added subsec.
(d).
Subsec. (e). Pub. L. 108–357, § 833(c)(4), added subsec.
(e).
1984—Subsec. (b). Pub. L. 98–369 inserted at end
‘‘Paragraph (1)(B) shall not apply to any distributed
property which is an interest in another partnership
with respect to which the election provided in section
754 is not in effect.’’
Statutory Notes and Related Subsidiaries
EFFECTIVE DATE OF 2005 AMENDMENT
Amendment by Pub. L. 109–135 effective as if included
in the provision of the American Jobs Creation Act of
2004, Pub. L. 108–357, to which such amendment relates,
see section 403(nn) of Pub. L. 109–135, set out as a note
under section 26 of this title.
EFFECTIVE DATE OF 2004 AMENDMENT
Pub. L. 108–357, title VIII, § 833(d)(3
Source: Supplied 2024 U.S. Code historical extraction · 26 U.S.C. § 736
Stored review status: historical_2024_not_currentness_verified. Same stored citation; legal effect and authority still require review.