26 U.S.C. § 707
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.
Under regulations prescribed by the Secretary-
If-
such allocation and distribution shall be treated as a transaction described in paragraph (1).
If-
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.
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-
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).
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-
any gain recognized shall be considered as ordinary income.
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.
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).
26 U.S.C. § 707
EDITORIAL NOTES
AMENDMENTS1986-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)".
STATUTORY NOTES AND RELATED SUBSIDIARIES
EFFECTIVE DATE OF 1986 AMENDMENT Amendment by section 642(a)(2) of Pub. L. 99-514 applicable to sales after Oct. 22, 1986, in taxable years ending after such date, but not applicable to sales made after Aug. 14, 1986, which are made pursuant to a binding contract in effect on Aug. 14, 1986, and at all times thereafter, see section 642(c) of Pub. L. 99-514, set out as a note under section 1239 of this title.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), Oct. 22, 1986, 100 Stat. 2834, provided that the amendment made by that section is effective with respect to sales or exchanges after Sept. 27, 1985.
EFFECTIVE DATE OF 1984 AMENDMENT Pub. L. 98-369, div. A, title I, §73(b), July 18, 1984, 98 Stat. 592, as amended by Pub. L. 99-514, §2, Oct. 22, 1986, 100 Stat. 2095, provided that:"(1) IN GENERAL.-The amendment made by subsection (a) [amending this section] shall apply-"(A) in the case of arrangements described in section 707(a)(2)(A) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as amended by subsection (a)), to services performed or property transferred after February 29, 1984, and"(B) in the case of transfers described in section 707(a)(2)(B) of such Code (as so amended), to property transferred after March 31, 1984."(2) BINDING CONTRACT EXCEPTION.-The amendment made by subsection (a) shall not apply to a transfer of property described in section 707(a)(2)(B)(i) if such transfer is pursuant to a binding contract in effect on March 31, 1984, and at all times thereafter before the transfer."(3) EXCEPTION FOR CERTAIN TRANSFERS.-The amendment made by subsection (a) shall not apply to a transfer of property described in section 707(a)(2)(B)(i) that is made before December 31, 1984, if- "(A) such transfer was proposed in a written private offering memorandum circulated before February 28, 1984;"(B) the out-of-pocket costs incurred with respect to such offering exceeded $250,000 as of February 28, 1984;"(C) the encumbrances placed on such property in anticipation of such transfer all constitute obligations for which neither the partnership nor any partner is liable; and"(D) the transferor of such property is the sole general partner of the partnership."
EFFECTIVE DATE OF 1976 AMENDMENT Amendment by section 213(b)(3) of Pub. L. 94-455 applicable in the case of partnership taxable years beginning after Dec. 31, 1975, see section 213(f)(1) of Pub. L. 94-455, set out as an Effective Date note under section 709 of this title.Amendment by section 1901(b)(3)(C) of Pub. L. 94-455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as a note under section 2 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989For 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 Jan. 1, 1989, see section 1140 of Pub. L. 99-514, as amended, set out as a note under section 401 of this title.
- Internal Revenue Code of 1986
- The term "Internal Revenue Code of 1986" means this title, and the term "Internal Revenue Code of 1939" means the Internal Revenue Code enacted February 10, 1939, as amended.
- Secretary
- The term "Secretary" means the Secretary of the Treasury or his delegate.
- person
- The term "person" shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation.
- stock
- The term "stock" includes shares in an association, joint-stock company, or insurance company.
- trade or business
- The term "trade or business" includes the performance of the functions of a public office.
- transaction
- The term "transaction" includes a series of transactions.