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26 U.S.C. § 706 — Taxable years of partner and partnership
Federal law — U.S. Code and appendices · legal_authorities
**(a) Year in which partnership income is includible** In computing the taxable income of a partner for a taxable year, the inclusions required by section 702 and section 707(c) with respect to a partnership shall be based on the income, gain, loss, deduction, or credit of the partnership for any taxable year of the partnership ending within or with the taxable year of the partner.
**(b) Taxable year**
(1) **Partnership’s taxable year**
(A) *Partnership treated as taxpayer* — The taxable year of a partnership shall be determined as though the partnership were a taxpayer.
(B) *Taxable year determined by reference to partners* — Except as provided in subparagraph (C), a partnership shall not have a taxable year other than—
(i) the majority interest taxable year (as defined in paragraph (4)),
(ii) if there is no taxable year described in clause (i), the taxable year of all the principal partners of the partnership, or
(iii) if there is no taxable year described in clause (i) or (ii), the calendar year unless the Secretary by regulations prescribes another period.
(C) *Business purpose* — A partnership may have a taxable year not described in subparagraph (B) if it establishes, to the satisfaction of the Secretary, a business purpose therefor. For purposes of this subparagraph, any deferral of income to partners shall not be treated as a business purpose.
(2) **Partner’s taxable year** — A partner may not change to a taxable year other than that of a partnership in which he is a principal partner unless he establishes, to the satisfaction of the Secretary, a business purpose therefor.
(3) **Principal partner** — For the purpose of this subsection, a principal partner is a partner having an interest of 5 percent or more in partnership profits or c
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Source location: Title 26, Chapter 1, § 706; chapter-001-normal-taxes-and-surtaxes.md
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**(a) Year in which partnership income is includible** In computing the taxable income of a partner for a taxable year, the inclusions required by section 702 and section 707(c) with respect to a partnership shall be based on the income, gain, loss, deduction, or credit of the partnership for any taxable year of the partnership ending within or with the taxable year of the partner.
**(b) Taxable year**
(1) **Partnership’s taxable year**
(A) *Partnership treated as taxpayer* — The taxable year of a partnership shall be determined as though the partnership were a taxpayer.
(B) *Taxable year determined by reference to partners* — Except as provided in subparagraph (C), a partnership shall not have a taxable year other than—
(i) the majority interest taxable year (as defined in paragraph (4)),
(ii) if there is no taxable year described in clause (i), the taxable year of all the principal partners of the partnership, or
(iii) if there is no taxable year described in clause (i) or (ii), the calendar year unless the Secretary by regulations prescribes another period.
(C) *Business purpose* — A partnership may have a taxable year not described in subparagraph (B) if it establishes, to the satisfaction of the Secretary, a business purpose therefor. For purposes of this subparagraph, any deferral of income to partners shall not be treated as a business purpose.
(2) **Partner’s taxable year** — A partner may not change to a taxable year other than that of a partnership in which he is a principal partner unless he establishes, to the satisfaction of the Secretary, a business purpose therefor.
(3) **Principal partner** — For the purpose of this subsection, a principal partner is a partner having an interest of 5 percent or more in partnership profits or capital.
(4) **Majority interest taxable year; limitation on required changes**
(A) *Majority interest taxable year defined* — For purposes of paragraph (1)(B)(i)—
(i) *In general* — The term “majority interest taxable year” means the taxable year (if any) which, on each testing day, constituted the taxable year of 1 or more partners having (on such day) an aggregate interest in partnership profits and capital of more than 50 percent.
(ii) *Testing days* — The testing days shall be—
(I) the 1st day of the partnership taxable year (determined without regard to clause (i)), or
(II) the days during such representative period as the Secretary may prescribe.
(B) *Further change not required for 3 years* — Except as provided in regulations necessary to prevent the avoidance of this section, if, by reason of paragraph (1)(B)(i), the taxable year of a partnership is changed, such partnership shall not be required to change to another taxable year for either of the 2 taxable years following the year of change.
(5) **Application with other sections** — Except as provided in regulations, for purposes of determining the taxable year to which a partnership is required to change by reason of this subsection, changes in taxable years of other persons required by this subsection, section 441(i), section 584(i), section 644, or section 1378(a) shall be taken into account.
**(c) Closing of partnership year**
(1) **General rule** — Except in the case of a termination of a partnership and except as provided in paragraph (2) of this subsection, the taxable year of a partnership shall not close as the result of the death of a partner, the entry of a new partner, the liquidation of a partner’s interest in the partnership, or the sale or exchange of a partner’s interest in the partnership.
(2) **Treatment of dispositions**
(A) *Disposition of entire interest* — The taxable year of a partnership shall close with respect to a partner whose entire interest in the partnership terminates (whether by reason of death, liquidation, or otherwise).
(B) *Disposition of less than entire interest* — The taxable year of a partnership shall not close (other than at the end of a partnership’s taxable year as determined under subsection (b)(1)) with respect to a partner who sells or exchanges less than his entire interest in the partnership or with respect to a partner whose interest is reduced (whether by entry of a new partner, partial liquidation of a partner’s interest, gift, or otherwise).
**(d) Determination of distributive share when partner’s interest changes**
(1) **In general** — Except as provided in paragraphs (2) and (3), if during any taxable year of the partnership there is a change in any partner’s interest in the partnership, each partner’s distributive share of any item of income, gain, loss, deduction, or credit of the partnership for such taxable year shall be determined by the use of any method prescribed by the Secretary by regulations which takes into account the varying interests of the partners in the partnership during such taxable year.
(2) **Certain cash basis items prorated over period to which attributable**
(A) *In general* — If during any taxable year of the partnership there is a change in any partner’s interest in the partnership, then (except to the extent provided in regulations) each partner’s distributive share of any allocable cash basis item shall be determined—
(i) by assigning the appropriate portion of such item to each day in the period to which it is attributable, and
(ii) by allocating the portion assigned to any such day among the partners in proportion to their interests in the partnership at the close of such day.
(B) *Allocable cash basis item* — For purposes of this paragraph, the term “allocable cash basis item” means any of the following items with respect to which the partnership uses the cash receipts and disbursements method of accounting:
(i) Interest.
(ii) Taxes.
(iii) Payments for services or for the use of property.
(iv) Any other item of a kind specified in regulations prescribed by the Secretary as being an item with respect to which the application of this paragraph is appropriate to avoid significant misstatements of the income of the partners.
(C) *Items attributable to periods not within taxable year* — If any portion of any allocable cash basis item is attributable to—
(i) any period before the beginning of the taxable year, such portion shall be assigned under subparagraph (A)(i) to the first day of the taxable year, or
(ii) any period after the close of the taxable year, such portion shall be assigned under subparagraph (A)(i) to the last day of the taxable year.
(D) *Treatment of deductible items attributable to prior periods* — If any portion of a deductible cash basis item is assigned under subparagraph (C)(i) to the first day of any taxable year—
(i) such portion shall be allocated among persons who are partners in the partnership during the period to which such portion is attributable in accordance with their varying interests in the partnership during such period, and
(ii) any amount allocated under clause (i) to a person who is not a partner in the partnership on such first day shall be capitalized by the partnership and treated in the manner provided for in section 755.
(3) **Items attributable to interest in lower tier partnership prorated over entire taxable year** — If—
(A) during any taxable year of the partnership there is a change in any partner’s interest in the partnership (hereinafter in this paragraph referred to as the “upper tier partnership”), and
(B) such partnership is a partner in another partnership (hereinafter in this paragraph referred to as the “lower tier partnership”),
then (except to the extent provided in regulations) each partner’s distributive share of any item of the upper tier partnership attributable to the lower tier partnership shall be determined by assigning the appropriate portion (determined by applying principles similar to the principles of subparagraphs (C) and (D) of paragraph (2)) of each such item to the appropriate days during which the upper tier partnership is a partner in the lower tier partnership and by allocating the portion assigned to any such day among the partners in proportion to their interests in the upper tier partnership at the close of such day.
(4) **Taxable year determined without regard to subsection (c)(2)(A)** — For purposes of this subsection, the taxable year of a partnership shall be determined without regard to subsection (c)(2)(A).
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Federal law — U.S. Code and appendices · legal_authorities
**(a) In general** For purposes of this subtitle, the taxable year of any trust shall be the calendar year.
**(b) Exception for trusts exempt from tax and charitable trusts** Subsection (a) shall not apply to a trust exempt from taxation under section 501(a) or to a trust described in section 4947(a)(1).
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 644
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Married individuals filing joint returns and surviving spouses** There is hereby imposed on the taxable income of—
(1) every married individual (as defined in section 7703) who makes a single return jointly with his spouse under section 6013, and
(2) every surviving spouse (as defined in section 2(a)),
a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $36,90015% of taxable income. Over $36,900 but not over $89,150$5,535, plus 28% of the excess over $36,900. Over $89,150 but not over $140,000$20,165, plus 31% of the excess over $89,150. Over $140,000 but not over $250,000$35,928.50, plus 36% of the excess over $140,000. Over $250,000$75,528.50, plus 39.6% of the excess over $250,000.
**(b) Heads of households** There is hereby imposed on the taxable income of every head of a household (as defined in section 2(b)) a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $29,60015% of taxable income. Over $29,600 but not over $76,400$4,440, plus 28% of the excess over $29,600. Over $76,400 but not over $127,500$17,544, plus 31% of the excess over $76,400. Over $127,500 but not over $250,000$33,385, plus 36% of the excess over $127,500. Over $250,000$77,485, plus 39.6% of the excess over $250,000.
**(c) Unmarried individuals (other than surviving spouses and heads of households)** There is hereby imposed on the taxable income of every individual (other than a surviving spouse as defined in section 2(a) or the head of a household as defined in section 2(b)) who is not a married individual (as defined in section 7703) a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $22,10015% of taxable income. Over $22,100 but not over $53,50
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 1
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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
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 48
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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) 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
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 401
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** For purposes of this subtitle, the taxable year of an S corporation shall be a permitted year.
**(b) Permitted year defined** For purposes of this section, the term “permitted year” means a taxable year which—
(1) is a year ending December 31, or
(2) is any other accounting period for which the corporation establishes a business purpose to the satisfaction of the Secretary.
For purposes of paragraph (2), any deferral of income to shareholders shall not be treated as a business purpose.
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 1378
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Federal law — U.S. Code and appendices · legal_authorities
Page 1869
TITLE 26—INTERNAL REVENUE CODE
§ 706
Statutory Notes and Related Subsidiaries
EFFECTIVE DATE OF 1984 AMENDMENT
Pub. L. 98–369, div. A, title VII, § 722(e)(3)(A), July 18,
1984, 98 Stat. 974, provided that: ‘‘The amendment made
by paragraph (1) [amending this section] shall take ef-
fect on January 1, 1975.’’
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 2115(c)(3) of Pub. L. 94–455 ef-
fective on Jan. 1, 1975, and applicable to taxable years
ending after Dec. 31, 1974, see section 2115(f) of Pub. L.
94–455, set out as a note under section 613A of this title.
§ 706. Taxable years of partner and partnership
(a) Year in which partnership income is includ-
ible
In computing the taxable income of a partner
for a taxable year, the inclusions required by
section 702 and section 707(c) with respect to a
partnership shall be based on the income, gain,
loss, deduction, or credit of the partnership for
any taxable year of the partnership ending with-
in or with the taxable year of the partner.
(b) Taxable year
(1) Partnership’s taxable year
(A) Partnership treated as taxpayer
The taxable year of a partnership shall be
determined as though the partnership were a
taxpayer.
(B) Taxable year determined by reference to
partners
Except as provided in subparagraph (C), a
partnership shall not have a taxable year
other than—
(i) the majority interest taxable year (as
defined in paragraph (4)),
(ii) if there is no taxable year described
in clause (i), the taxable year of all the
principal partners of the partnership, or
(iii) if there is no taxable year described
in clause (i) or (ii), the calendar year un-
less the Secretary by regulations pre-
scribes another period.
(C) Business purpose
A partnership may have a taxable year not
descri
Source: Supplied 2024 U.S. Code historical extraction · 26 U.S.C. § 706
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