26 USC 737 - Recognition of precontribution gain in case of certain distributions to contributing partner

U.S Code last checked for updates: Apr 29, 2024

§ 737.

Recognition of precontribution gain in case of certain distributions to contributing partner

(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

(2)

Partnership’s basis in contributed property

(d)

Exceptions

(1)

Distributions of previously contributed property

(2)

Coordination with section 751

(e)

Marketable securities treated as money

(Added Pub. L. 102–486, title XIX, § 1937(a), Oct. 24, 1992, 106 Stat. 3032; amended Pub. L. 103–465, title VII, § 741(b), Dec. 8, 1994, 108 Stat. 5009; Pub. L. 104–188, title I, § 1704(j)(8), Aug. 20, 1996, 110 Stat. 1882; Pub. L. 105–34, title X, § 1063(a), Aug. 5, 1997, 111 Stat. 947.)

cite as: 26 USC 737