United States Code (Last Updated: May 24, 2014) |
Title 26. INTERNAL REVENUE CODE |
SubTitle A. Income Taxes |
Chapter 1. NORMAL TAXES AND SURTAXES |
SubChapter K. Partners and Partnerships |
Part I. DETERMINATION OF TAX LIABILITY |
§ 707. Transactions between partner and partnership
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(a) Partner not acting in capacity as partner (1) In general If a partner engages in a transaction with a partnership other than in his capacity as a member of such partnership, the transaction shall, except as otherwise provided in this section, be considered as occurring between the partnership and one who is not a partner.
(2) Treatment of payments to partners for property or services Under regulations prescribed by the Secretary— (A) Treatment of certain services and transfers of property If— (i) a partner performs services for a partnership or transfers property to a partnership, (ii) there is a related direct or indirect allocation and distribution to such partner, and (iii) the performance of such services (or such transfer) and the allocation and distribution, when viewed together, are properly characterized as a transaction occurring between the partnership and a partner acting other than in his capacity as a member of the partnership, such allocation and distribution shall be treated as a transaction described in paragraph (1). (B) Treatment of certain property transfers If— (i) there is a direct or indirect transfer of money or other property by a partner to a partnership, (ii) there is a related direct or indirect transfer of money or other property by the partnership to such partner (or another partner), and (iii) the transfers described in clauses (i) and (ii), when viewed together, are properly characterized as a sale or exchange of property, such transfers shall be treated either as a transaction described in paragraph (1) or as a transaction between 2 or more partners acting other than in their capacity as members of the partnership. (b) Certain sales or exchanges of property with respect to controlled partnerships (1) Losses disallowed No deduction shall be allowed in respect of losses from sales or exchanges of property (other than an interest in the partnership), directly or indirectly, between— (A) a partnership and a person owning, directly or indirectly, more than 50 percent of the capital interest, or the profits interest, in such partnership, or (B) two partnerships in which the same persons own, directly or indirectly, more than 50 percent of the capital interests or profits interests. In the case of a subsequent sale or exchange by a transferee described in this paragraph, section 267(d) shall be applicable as if the loss were disallowed under section 267(a)(1). For purposes of section 267(a)(2), partnerships described in subparagraph (B) of this paragraph shall be treated as persons specified in section 267(b). (2) Gains treated as ordinary income In the case of a sale or exchange, directly or indirectly, of property, which in the hands of the transferee, is property other than a capital asset as defined in section 1221— (A) between a partnership and a person owning, directly or indirectly, more than 50 percent of the capital interest, or profits interest, in such partnership, or (B) between two partnerships in which the same persons own, directly or indirectly, more than 50 percent of the capital interest or profits interests, any gain recognized shall be considered as ordinary income. (3) Ownership of a capital or profits interest For purposes of paragraphs (1) and (2) of this subsection, the ownership of a capital or profits interest in a partnership shall be determined in accordance with the rules for constructive ownership of stock provided in section 267(c) other than paragraph (3) of such section.
(c) Guaranteed payments To the extent determined without regard to the income of the partnership, payments to a partner for services or the use of capital shall be considered as made to one who is not a member of the partnership, but only for the purposes of section 61(a) (relating to gross income) and, subject to section 263, for purposes of section 162(a) (relating to trade or business expenses).
Amendments
1986—Subsec. (a)(2)(B)(iii). Pub. L. 99–514, § 1805(b), substituted “sale or exchange of property” for “sale of property”.
Subsec. (b)(1). Pub. L. 99–514, § 1812(c)(3)(B), inserted at end “For purposes of section 267(a)(2), partnerships described in subparagraph (B) of this paragraph shall be treated as persons specified in section 267(b).”
Subsec. (b)(1)(A). Pub. L. 99–514, § 1812(c)(3)(A), substituted “a person” for “a partner”.
Subsec. (b)(2)(A). Pub. L. 99–514, § 1812(c)(3)(A), substituted “a person” for “a partner”.
Pub. L. 99–514, § 642(a)(2), substituted “50 percent” for “80 percent”.
Subsec. (b)(2)(B). Pub. L. 99–514, § 642(a)(2), substituted “50 percent” for “80 percent”.
1984—Subsec. (a). Pub. L. 98–369 designated existing provisions as par. (1) and added par. (2).
1976—Subsec. (b)(2). Pub. L. 94–455, § 1901(b)(3)(C), substituted “as ordinary income” for “as gain from the sale or exchange of property other than a capital asset”.
Subsec. (c). Pub. L. 94–455, § 213(b)(3), substituted “and, subject to section 263, for purposes of section 162(a)” for “and section 162(a)”.
Effective Date Of Amendment
Amendment by section 642(a)(2) of Pub. L. 99–514 applicable to sales after
Amendment by sections 1805(b) and 1812(c)(3)(B) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.
Pub. L. 99–514, title XVIII, § 1812(c)(3)(A),
Pub. L. 98–369, div. A, title I, § 73(b),
Amendment by section 213(b)(3) of Pub. L. 94–455 applicable in the case of partnership taxable years beginning after
Amendment by section 1901(b)(3)(C) of Pub. L. 94–455 effective for taxable years beginning after
Miscellaneous
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after