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26 U.S.C. § 704 — Partner’s distributive share
Federal law — U.S. Code and appendices · legal_authorities
**(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**
(1) **In general** — Under regulations prescribed by the Secretary—
(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
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Source location: Title 26, Chapter 1, § 704; chapter-001-normal-taxes-and-surtaxes.md
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**(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**
(1) **In general** — Under regulations prescribed by the Secretary—
(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** — Under regulations prescribed by the Secretary, if—
(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**
(1) **In general** — 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.
(2) **Carryover** — 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.
(3) **Special rules**
(A) *In general* — In determining the amount of any loss under paragraph (1), there shall be taken into account the partner’s distributive share of amounts described in paragraphs (4) and (6) of section 702(a).
(B) *Exception* — In the case of a charitable contribution of property whose fair market value exceeds its adjusted basis, subparagraph (A) shall not apply to the extent of the partner’s distributive share of such excess.
**(e) Partnership interests created by gift**
(1) **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.
(2) **Purchase of interest by member of family** — For purposes of this subsection, 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.
**(f) Cross reference** For rules in the case of the sale, exchange, liquidation, or reduction of a partner’s interest, see section 706(c)(2).
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Partnership** For purposes of this subtitle, the term “partnership” includes a syndicate, group, pool, joint venture, or other unincorporated organization through or by means of which any business, financial operation, or venture is carried on, and which is not, within the meaning of this title, a corporation or a trust or estate. Under regulations the Secretary may, at the election of all the members of an unincorporated organization, exclude such organization from the application of all or part of this subchapter, if it is availed of—
(1) for investment purposes only and not for the active conduct of a business,
(2) for the joint production, extraction, or use of property, but not for the purpose of selling services or property produced or extracted, or
(3) by dealers in securities for a short period for the purpose of underwriting, selling, or distributing a particular issue of securities,
if the income of the members of the organization may be adequately determined without the computation of partnership taxable income.
**(b) Partner** For purposes of this subtitle, the term “partner” means a member of a partnership. In the case of a capital interest in a partnership in which capital is a material income-producing factor, whether a person is a partner with respect to such interest shall be determined without regard to whether such interest was derived by gift from any other person.
**(c) Partnership agreement** For purposes of this subchapter, a partnership agreement includes any modifications of the partnership agreement made prior to, or at, the time prescribed by law for the filing of the partnership return for the taxable year (not including extensions) which are agreed to by all the partners, or which are adopted in such other manner as may be provide
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Partners** In the case of a distribution by a partnership to a partner—
(1) gain shall not be recognized to such partner, except to the extent that any money distributed exceeds the adjusted basis of such partner’s interest in the partnership immediately before the distribution, and
(2) loss shall not be recognized to such partner, except that upon a distribution in liquidation of a partner’s interest in a partnership where no property other than that described in subparagraph (A) or (B) is distributed to such partner, loss shall be recognized to the extent of the excess of the adjusted basis of such partner’s interest in the partnership over the sum of—
(A) any money distributed, and
(B) the basis to the distributee, as determined under section 732, of any unrealized receivables (as defined in section 751(c)) and inventory (as defined in section 751(d)).
Any gain or loss recognized under this subsection shall be considered as gain or loss from the sale or exchange of the partnership interest of the distributee partner.
**(b) Partnerships** No gain or loss shall be recognized to a partnership on a distribution to a partner of property, including money.
**(c) Treatment of marketable securities**
(1) **In general** — For purposes of subsection (a)(1) and section 737—
(A) the term “money” includes marketable securities, and
(B) such securities shall be taken into account at their fair market value as of the date of the distribution.
(2) **Marketable securities** — For purposes of this subsection:
(A) *In general* — The term “marketable securities” means financial instruments and foreign currencies which are, as of the date of the distribution, actively traded (within the meaning of section 1092(d)(1)).
(B) *Other property* — Such term includes
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 731
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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.
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 709
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Limitation to amount at risk**
(1) **In general** — In the case of—
(A) an individual, and
(B) a C corporation with respect to which the stock ownership requirement of paragraph (2) of section 542(a) is met,
engaged in an activity to which this section applies, any loss from such activity for the taxable year shall be allowed only to the extent of the aggregate amount with respect to which the taxpayer is at risk (within the meaning of subsection (b)) for such activity at the close of the taxable year.
(2) **Deduction in succeeding year** — Any loss from an activity to which this section applies not allowed under this section for the taxable year shall be treated as a deduction allocable to such activity in the first succeeding taxable year.
(3) **Special rules for applying paragraph (1)(B)** — For purposes of paragraph (1)(B)—
(A) section 544(a)(2) shall be applied as if such section did not contain the phrase “or by or for his partner”; and
(B) sections 544(a)(4)(A) and 544(b)(1) shall be applied by substituting “the corporation meet the stock ownership requirements of section 542(a)(2)” for “the corporation a personal holding company”.
**(b) Amounts considered at risk**
(1) **In general** — For purposes of this section, a taxpayer shall be considered at risk for an activity with respect to amounts including—
(A) the amount of money and the adjusted basis of other property contributed by the taxpayer to the activity, and
(B) amounts borrowed with respect to such activity (as determined under paragraph (2)).
(2) **Borrowed amounts** — For purposes of this section, a taxpayer shall be considered at risk with respect to amounts borrowed for use in an activity to the extent that he—
(A) is personally liable for the repayment of such amou
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 465
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** In the case of any distribution by a partnership to a partner, such partner shall be treated as recognizing gain in an amount equal to the lesser of—
(1) the excess (if any) of (A) the fair market value of property (other than money) received in the distribution over (B) the adjusted basis of such partner’s interest in the partnership immediately before the distribution reduced (but not below zero) by the amount of money received in the distribution, or
(2) the net precontribution gain of the partner.
Gain recognized under the preceding sentence shall be in addition to any gain recognized under section 731. The character of such gain shall be determined by reference to the proportionate character of the net precontribution gain.
**(b) Net precontribution gain** For purposes of this section, the term “net precontribution gain” means the net gain (if any) which would have been recognized by the distributee partner under section 704(c)(1)(B) if all property which—
(1) had been contributed to the partnership by the distributee partner within 7 years of the distribution, and
(2) is held by such partnership immediately before the distribution,
had been distributed by such partnership to another partner.
**(c) Basis rules**
(1) **Partner’s interest** — The adjusted basis of a partner’s interest in a partnership shall be increased by the amount of any gain recognized by such partner under subsection (a). For purposes of determining the basis of the distributed property (other than money), such increase shall be treated as occurring immediately before the distribution.
(2) **Partnership’s basis in contributed property** — Appropriate adjustments shall be made to the adjusted basis of the partnership in the contributed property referred to in subsecti
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 737
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** Except as otherwise provided in this section, the allowance for depletion under section 611 with respect to any oil or gas well shall be computed without regard to section 613.
**(b) Exemption for certain domestic gas wells**
(1) **In general** — The allowance for depletion under section 611 shall be computed in accordance with section 613 with respect to—
(A) regulated natural gas, and
(B) natural gas sold under a fixed contract,
and 22 percent shall be deemed to be specified in subsection (b) of section 613 for purposes of subsection (a) of that section.
(2) **Natural gas from geopressured brine** — The allowance for depletion under section 611 shall be computed in accordance with section 613 with respect to any qualified natural gas from geopressured brine, and 10 percent shall be deemed to be specified in subsection (b) of section 613 for purposes of subsection (a) of such section.
(3) **Definitions** — For purposes of this subsection—
(A) *Natural gas sold under a fixed contract* — The term “natural gas sold under a fixed contract” means domestic natural gas sold by the producer under a contract, in effect on February 1, 1975, and at all times thereafter before such sale, under which the price for such gas cannot be adjusted to reflect to any extent the increase in liabilities of the seller for tax under this chapter by reason of the repeal of percentage depletion for gas. Price increases after February 1, 1975, shall be presumed to take increases in tax liabilities into account unless the taxpayer demonstrates to the contrary by clear and convincing evidence.
(B) *Regulated natural gas* — The term “regulated natural gas” means domestic natural gas produced and sold by the producer, before July 1, 1976, subject to the jurisdic
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 613A
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** The basis of partnership property shall not be adjusted as the result of a transfer of an interest in a partnership by sale or exchange or on the death of a partner unless the election provided by section 754 (relating to optional adjustment to basis of partnership property) is in effect with respect to such partnership or unless the partnership has a substantial built-in loss immediately after such transfer.
**(b) Adjustment to basis of partnership property** In the case of a transfer of an interest in a partnership by sale or exchange or upon the death of a partner, a partnership with respect to which the election provided in section 754 is in effect or which has a substantial built-in loss immediately after such transfer shall—
(1) increase the adjusted basis of the partnership property by the excess of the basis to the transferee partner of his interest in the partnership over his proportionate share of the adjusted basis of the partnership property, or
(2) decrease the adjusted basis of the partnership property by the excess of the transferee partner’s proportionate share of the adjusted basis of the partnership property over the basis of his interest in the partnership.
Under regulations prescribed by the Secretary, such increase or decrease shall constitute an adjustment to the basis of partnership property with respect to the transferee partner only. A partner’s proportionate share of the adjusted basis of partnership property shall be determined in accordance with his interest in partnership capital and, in the case of property contributed to the partnership by a partner, section 704(c) (relating to contributed property) shall apply in determining such share. In the case of an adjustment under this subsection to the basis of partnership
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 743
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Federal law — U.S. Code and appendices · legal_authorities
Page 1865
TITLE 26—INTERNAL REVENUE CODE
§ 704
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.)
Editorial Notes
AMENDMENTS
1993—Subsec. (b)(1). Pub. L. 103–66 substituted ‘‘sub-
section (b)(5) or (c)(3)’’ for ‘‘subsection (b)(5)’’.
1988—Subsec. (b)(1). Pub. L. 100–647 substituted ‘‘sub-
section (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 sec-
tions 57(c) and 163(d), respectively, and redesignated
former pars. (2), (4), and (5), as pars. (1), (2), and (3), re-
spectively.
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), sub-
stituted ‘‘wells’’ for ‘‘production subject to the provi-
sions of section 613A(c)’’.
Subsec. (b). Pub. L. 94–455, § 1901(b)(21)(F), struck out
‘‘under section 615 (relating to pre-1970 exploration ex-
penditures),’’ after ‘‘of the United States, and any elec-
tion’’.
1975—Subsec. (a)(2)(G). Pub. L. 94–12 added subpar.
(G).
1971—Subsec. (b). Pub. L. 92–178 substituted ‘‘,’’ for
‘‘or’’ after
Source: Supplied 2024 U.S. Code historical extraction · 26 U.S.C. § 704
Stored review status: historical_2024_not_currentness_verified. Same stored citation; legal effect and authority still require review.