26 U.S.C. § 1060 — Special allocation rules for certain asset

Page 2300 TITLE 26—INTERNAL REVENUE CODE § 1060 shall not, for purposes of computing such basis or inventory cost for purposes of this chapter, be greater than the amount of such costs taken into account in computing such customs value. (b) Customs value; import For purposes of this section— (1) Customs value The term ‘‘customs value’’ means the value taken into account for purposes of deter- mining the amount of any customs duties or any other duties which may be imposed on the importation of any property. (2) Import Except as provided in regulations, the term ‘‘import’’ means the entering, or withdrawal from warehouse, for consumption. (Added Pub. L. 99–514, title XII, § 1248(a), Oct. 22, 1986, 100 Stat. 2584.) Statutory Notes and Related Subsidiaries EFFECTIVE DATE Pub. L. 99–514, title XII, § 1248(c), Oct. 22, 1986, 100 Stat. 2584, provided that: ‘‘The amendments made by this section [enacting this section] shall apply to trans- actions entered into after March 18, 1986.’’ § 1060. Special allocation rules for certain asset acquisitions (a) General rule In the case of any applicable asset acquisition, for purposes of determining both— (1) the transferee’s basis in such assets, and (2) the gain or loss of the transferor with re- spect to such acquisition, the consideration received for such assets shall be allocated among such assets acquired in such acquisition in the same manner as amounts are allocated to assets under section 338(b)(5). If in connection with an applicable asset acquisition, the transferee and transferor agree in writing as to the allocation of any consideration, or as to the fair market value of any of the assets, such agreement shall be binding on both the trans- feree and transferor unless the Secretary deter- mines that such allocation (or fair market value) is not appropriate. (b) Information required to be furnished to Sec- retary Under regulations, the transferor and trans- feree in an applicable asset acquisition shall, at such times and in such manner as may be pro- vided in such regulations, furnish to the Sec- retary the following information: (1) The amount of the consideration received for the assets which is allocated to section 197 intangibles. (2) Any modification of the amount de- scribed in paragraph (1). (3) Any other information with respect to other assets transferred in such acquisition as the Secretary deems necessary to carry out the provisions of this section. (c) Applicable asset acquisition For purposes of this section, the term ‘‘appli- cable asset acquisition’’ means any transfer (whether directly or indirectly)— (1) of assets which constitute a trade or busi- ness, and (2) with respect to which the transferee’s basis in such assets is determined wholly by reference to the consideration paid for such assets. A transfer shall not be treated as failing to be an applicable asset acquisition merely because section 1031 applies to a portion of the assets transferred. (d) Treatment of certain partnership trans- actions In the case of a distribution of partnership property or a transfer of an interest in a part- nership— (1) the rules of subsection (a) shall apply but only for purposes of determining the value of section 197 intangibles for purposes of apply- ing section 755, and (2) if section 755 applies, such distribution or transfer (as the case may be) shall be treated as an applicable asset acquisition for purposes of subsection (b). (e) Information required in case of certain trans- fers of interests in entities (1) In general If— (A) a person who is a 10-percent owner with respect to any entity transfers an in- terest in such entity, and (B) in connection with such transfer, such owner (or a related person) enters into an employment contract, covenant not to com- pete, royalty or lease agreement, or other agreement with the transferee, such owner and the transferee shall, at such time and in such manner as the Secretary may prescribe, furnish such information as the Sec- retary may require. (2) 10-percent owner For purposes of this subsection— (A) In general The term ‘‘10-percent owner’’ means, with respect to any entity, any person who holds 10 percent or more (by value) of the interests in such entity immediately before the trans- fer. (B) Constructive ownership Section 318 shall apply in determining ownership of stock in a corporation. Similar principles shall apply in determining the ownership of interests in any other entity. (3) Related person For purposes of this subsection, the term ‘‘related person’’ means any person who is re- lated (within the meaning of section 267(b) or 707(b)(1)) to the 10-percent owner. (f) Cross reference For provisions relating to penalties for failure to file a return required by this section, see section 6721. (Added Pub. L. 99–514, title VI, § 641(a), Oct. 22, 1986, 100 Stat. 2282; amended Pub. L. 100–647, title I, § 1006(h)(1), (2), (3)(B), Nov. 10, 1988, 102 Stat. 3410; Pub. L. 101–508, title XI, § 11323(a), (b)(1), Page 2301 TITLE 26—INTERNAL REVENUE CODE § 1061 1 So in original. Probably should be ‘‘section’’. Nov. 5, 1990, 104 Stat. 1388–464; Pub. L. 103–66, title XIII, § 13261(e), Aug. 10, 1993, 107 Stat. 539.) Editorial Notes PRIOR PROVISIONS A prior section 1060 was renumbered section 1062 of this title. AMENDMENTS 1993—Subsec. (b)(1). Pub. L. 103–66, § 13261(e)(1), sub- stituted ‘‘section 197 intangibles’’ for ‘‘goodwill or going concern value’’. Subsec. (d)(1). Pub. L. 103–66, § 13261(e)(2), substituted ‘‘section 197 intangibles’’ for ‘‘goodwill or going con- cern value (or similar items)’’. 1990—Subsec. (a). Pub. L. 101–508, § 11323(a), inserted at end ‘‘If in connection with an applicable asset acqui- sition, the transferee and transferor agree in writing as to the allocation of any consideration, or as to the fair market value of any of the assets, such agreement shall be binding on both the transferee and transferor unless the Secretary determines that such allocation (or fair market value) is not appropriate.’’ Subsecs. (e), (f). Pub. L. 101–508, § 11323(b)(1), added subsec. (e) and redesignated former subsec. (e) as (f). 1988—Subsec. (b)(3). Pub. L. 100–647, § 1006(h)(1), sub- stituted ‘‘deems’’ for ‘‘may find’’. Subsec. (d). Pub. L. 100–647, § 1006(h)(2), added subsec. (d). Subsec. (e). Pub. L. 100–647, § 1006(h)(3)(B), added sub- sec. (e). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1993 AMENDMENT Amendment by Pub. L. 103–66 applicable, except as otherwise provided, with respect to property acquired after Aug. 10, 1993, see section 13261(g) of Pub. L. 103–66, set out as an Effective Date note under section 197 of this title. EFFECTIVE DATE OF 1990 AMENDMENT Amendment by Pub. L. 101–508 applicable to acquisi- tions after Oct. 9, 1990, but not applicable to any acqui- sition pursuant to a written binding contract in effect on Oct. 9, 1990, and at all times thereafter before such acquisition, see section 11323(d) of Pub. L. 101–508, set out as a note under section 338 of this title. EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Pub. L. 99–514, title VI, § 641(c), Oct. 22, 1986, 100 Stat. 2283, provided that: ‘‘The amendments made by this section [enacting this section and renumbering former section 1060 of this title as section 1061] shall apply to any acquisition of assets after May 6, 1986, unless such acquisition is pursuant to a binding contract which was in effect on May 6, 1986, and at all times thereafter.’’ § 1061. Partnership interests held in connection with performance of services (a) In general If one or more applicable partnership interests are held by a taxpayer at any time during the taxable year, the excess (if any) of— (1) the taxpayer’s net long-term capital gain with respect to such interests for such taxable year, over (2) the taxpayer’s net long-term capital gain with respect to such interests for such taxable year computed by applying paragraphs (3) and (4) of sections 1 1222 by substituting ‘‘3 years’’ for ‘‘1 year’’, shall be treated as short-term capital gain, not- withstanding section 83 or any election in effect under section 83(b). (b) Special rule To the extent provided by the Secretary, sub- section (a) shall not apply to income or gain at- tributable to any asset not held for portfolio in- vestment on behalf of third party investors. (c) Applicable partnership interest For purposes of this section— (1) In general Except as provided in this paragraph or paragraph (4), the term ‘‘applicable partner- ship interest’’ means any interest in a partner- ship which, directly or indirectly, is trans- ferred to (or is held by) the taxpayer in con- nection with the performance of substantial services by the taxpayer, or any other related person, in any applicable trade or business. The previous sentence shall not apply to an in- terest held by a person who is employed by an- other entity that is conducting a trade or business (other than an applicable trade or business) and only provides services to such other entity. (2) Applicable trade or business The term ‘‘applicable trade or business’’ means any activity conducted on a regular, continuous, and substantial basis which, re- gardless of whether the activity is conducted in one or more entities, consists, in whole or in part, of— (A) raising or returning capital, and (B) either— (i) investing in (or disposing of) specified assets (or identifying specified assets for such investing or disposition), or (ii) developing specified assets. (3) Specified asset The term ‘‘specified asset’’ means securities (as defined in section 475(c)(2) without regard to the last sentence thereof), commodities (as defined in section 475(e)(2)), real estate held for rental or investment, cash or cash equiva- lents, options or derivative contracts with re- spect to any of the foregoing, and an interest in a partnership to the extent of the partner- ship’s proportionate interest in any of the foregoing. (4) Exceptions The term ‘‘applicable partnership interest’’ shall not include— (A) any interest in a partnership directly or indirectly held by a corporation, or (B) any capital interest in the partnership which provides the taxpayer with a right to share in partnership capital commensurate with— (i) the amount of capital contributed (de- termined at the time of receipt of such partnership interest), or