26 U.S.C. § 735
Gain or loss on the disposition by a distributee partner of unrealized receivables (as defined in section 751(c)) distributed by a partnership, shall be considered as ordinary income or as ordinary loss, as the case may be.
Gain or loss on the sale or exchange by a distributee partner of inventory items (as defined in section 751(d)) distributed by a partnership shall, if sold or exchanged within 5 years from the date of the distribution, be considered as ordinary income or as ordinary loss, as the case may be.
In determining the period for which a partner has held property received in a distribution from a partnership (other than for purposes of subsection (a)(2)), there shall be included the holding period of the partnership, as determined under section 1223, with respect to such property.
For purposes of this section, section 751(d) (defining inventory item) shall be applied without regard to any holding period in section 1231(b).
If any property described in subsection (a) is disposed of in a nonrecognition transaction, the tax treatment which applies to such property under such subsection shall also apply to any substituted basis property resulting from such transaction. A similar rule shall also apply in the case of a series of nonrecognition transactions.
Subparagraph (A) shall not apply to any stock in a C corporation received in an exchange described in section 351.
26 U.S.C. § 735
EDITORIAL NOTES
AMENDMENTS1997-Subsecs. (a)(2), (c)(1). Pub. L. 105-34 substituted "section 751(d)" for "section 751(d)(2)". 1984-Subsec. (c). Pub. L. 98-369 added subsec. (c).1976-Subsec. (a)(1), (2). Pub. L. 94-455 substituted "as ordinary income or as ordinary loss, as the case may be" for "gain or loss from the sale or exchange of property other than a capital asset".
STATUTORY NOTES AND RELATED SUBSIDIARIES
EFFECTIVE DATE OF 1997 AMENDMENT Amendment by Pub. L. 105-34 applicable to sales, exchanges, and distributions after Aug. 5, 1997, but not applicable to any sale or exchange pursuant to a written binding contract in effect on June 8, 1997, and at all times thereafter before such sale or exchange, see section 1062(c) of Pub. L. 105-34, set out as a note under section 724 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT Pub. L. 98-369, div. A, title I, §74(d)(2), July 18, 1984, 98 Stat. 594, provided that: "The amendment made by subsection (b) [amending this section] shall apply to property distributed after March 31, 1984, in taxable years ending after such date."
EFFECTIVE DATE OF 1976 AMENDMENT Amendment by 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.
- corporation
- The term "corporation" includes associations, joint-stock companies, and insurance companies.
- nonrecognition transaction
- The term "nonrecognition transaction" means any disposition of property in a transaction in which gain or loss is not recognized in whole or in part for purposes of subtitle A.
- stock
- The term "stock" includes shares in an association, joint-stock company, or insurance company.
- substituted basis property
- The term "substituted basis property" means property which is-(A) transferred basis property, or(B) exchanged basis property.
- transaction
- The term "transaction" includes a series of transactions.