(a) The sale or exchange of an interest in a partnership shall, except to the extent section 751(a) applies, be treated as the sale or exchange of a capital asset, resulting in capital gain or loss measured by the difference between the amount realized and the adjusted basis of the partnership interest, as determined under section 705. For treatment of selling partner's distributive share up to date of sale, see section 706(c)(2). Where the provisions of section 751 require the recognition of ordinary income or loss with respect to a portion of the amount realized from such sale or exchange, the amount realized shall be reduced by the amount attributable under section 751 to unrealized receivables and substantially appreciated inventory items, and the adjusted basis of the transferor partner's interest in the partnership shall be reduced by the portion of such basis attributable to such unrealized receivables and substantially appreciated inventory items. See section 751 and § 1.751-1.
(b) Section 741 shall apply whether the partnership interest is sold to one or more members of the partnership or to one or more persons who are not members of the partnership. Section 741 shall also apply even though the sale of the partnership interest results in a termination of the partnership under section 708(b). Thus, the provisions of section 741 shall be applicable (1) to the transferor partner in a 2-man partnership when he sells his interest to the other partner, and (2) to all the members of a partnership when they sell their interests to one or more persons outside the partnership.
(c) See section 351 for nonrecognition of gain or loss upon transfer of a partnership interest to a corporation controlled by the transferor.
(d) For rules relating to the treatment of liabilities on the sale or exchange of interests in a partnership see §§ 1.752-1 and 1.1001-2.
(e) For rules relating to the capital gain or loss recognized when a partner sells or exchanges an interest in a partnership that holds appreciated collectibles or section 1250 property with section 1250 capital gain, see § 1.1(h)-1. This paragraph (e) applies to transfers of interests in partnerships that occur on or after September 21, 2000.
(f) For rules relating to dividing the holding period of an interest in a partnership, see § 1.1223-3. This paragraph (f) applies to transfers of partnership interests and distributions of property from a partnership that occur on or after September 21, 2000.
[T.D. 6500, 25 FR 11814, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 7741, 45 FR 81745, Dec. 12, 1980; T.D. 8902, 65 FR 57099, Sept. 21, 2000]
Notes of Decisions
Cited in
15
cases, 1964–2016 · leading case:
Tufts v. Comm'r, 70 T.C. 756 (Tax Ct. 1978).
Tufts v. Comm'r, 70 T.C. 756 (Tax Ct. 1978).
· cites it 4× “10 *86 The petitioners' position is that nonrecourse liabilities are included in the amount realized only to the extent of the fair market value of the partnership property securing the indebtedness.”
Colonnade Condo., Inc. v. Comm'r, 91 T.C. 793 (Tax Ct. 1988).
· cites it 4× “Section 721(a) states the general rule that gain or loss is not recognized through contributions of property to a partnership in exchange for partnership interests.”
Pollack v. Comm'r, 69 T.C. 142 (Tax Ct. 1977).
· cites it 4× “" Similarly, the regulations provide that "The sale or exchange of an interest in a partnership shall * * * *145 be treated as the sale or exchange of a capital asset.”
Harris v. Comm'r, 61 T.C. 770 (Tax Ct. 1974).
· cites it 2× “The general rule is that an interest in a *780 partnership is a capital asset, and a sale of part or all of such an interest, subject to exceptions (unrealized receivables and inventory substantially appreciated in value) not material here, produces *160 capital gain or loss.…”
Stilwell v. Comm'r, 46 T.C. 247 (Tax Ct. 1966).
· cites it 2× “Respondent's own regulations under section 741 do not go this far; they simply provide that the section is applicable "to the transferor partner in a 2-man partnership when he sells his interest *110 to the other partner.”
RB Alden Corp. v. Commonwealth, 142 A.3d 169 (Pa. Commw. Ct. 2016).
“Taxpayer did not pay any federal income tax on the taxable gain from the sale for the 45% limited Partnership interest because it had federal net operating loss carryovers to offset the gain.”
Baker v. Comm'r, 1997 T.C. Memo. 442 (Tax Ct. 1997).
· cites it 4× “The gain or loss of a partner on the sale of a partnership interest is the difference between the amount realized and the partner's adjusted basis in the partnership interest.”
Slavin v. Comm'r, 57 T.C.M. 343 (Tax Ct. 1989).
· cites it 2× “Section 741 specifies that when an interest in a partnership is sold or exchanged, gain or loss is recognized by the transferor partner and is considered as gain or loss from the sale or exchange of a capital asset. Gain or loss from the sale or exchange of a partnership…”
Champlin v. Comm'r, 36 T.C.M. 802 (Tax Ct. 1977).
· cites it 2× “The agreement does not, in any way, evidence an intention on the part of petitioner to sell his partnership interest to Moak, Hunsaker and Rouse, as individuals.”
Hirsch v. Comm'r, 47 T.C.M. 1006 (Tax Ct. 1984).
· cites it 2× “9 The capital gain or loss is measured by the difference between the amount realized and the adjusted basis of the partnership interest, as determined under section 705 . Section 1.741-1(a), Income Tax Regs.”
Fixel v. Comm'r, 33 T.C.M. 857 (Tax Ct. 1974).
· cites it 2× “[*] (May 15, 1974). This computation does not appear to follow the statutory formula, but neither party has questioned the manner in which petitioner's gain was calculated.”
Jackson v. Comm'r, 42 T.C.M. 1413 (Tax Ct. 1981).
· cites it 4× “Gain is recognized to the extent the amount realized exceeds the adjusted basis of the partnership interest, as determined under section 705 .”
Annotations are extracted automatically from the opinions in the
Syfert caselaw corpus and ranked by authority, recency, and
treatment. Dots show Syfertize treatment of the citing case itself.