U.S. Code » Title 26 » Subtitle Subtitle A— Income Taxes › Chapter CHAPTER 1— NORMAL TAXES AND SURTAXES › Subchapter Subchapter K— Partners and Partnerships › Part PART II— CONTRIBUTIONS, DISTRIBUTIONS, AND TRANSFERS › Subpart Subpart B— Distributions by a Partnership

26 U.S.C. § 735

Character of gain or loss on disposition of distributed property

Read at: OLRCuscode.house.gov CornellLII GovInfogovinfo.gov JustiaTitle 26 CasesGoogle Scholar
(a) Sale or exchange of certain distributed property(1) Unrealized receivables

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.

(2) Inventory items

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.

(b) Holding period for distributed property

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.

(c) Special rules(1) Waiver of holding periods contained in section 1231

For purposes of this section, section 751(d) (defining inventory item) shall be applied without regard to any holding period in section 1231(b).

(2) Substituted basis property(A) In general

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.

(B) Exception for stock in C corporation

Subparagraph (A) shall not apply to any stock in a C corporation received in an exchange described in section 351.

(Aug. 16, 1954, ch. 763, 68A Stat. 247; Pub. L. 94–455, title XIX, § 1901(b)(3)(D), Oct. 4, 1976, 90 Stat. 1792; Pub. L. 98–369, div. A, title I, § 74(b), July 18, 1984, 98 Stat. 593; Pub. L. 105–34, title X, § 1062(b)(3), Aug. 5, 1997, 111 Stat. 947.)Editorial NotesAmendments

1997—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 SubsidiariesEffective 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.

Notes of Decisions
Cited in 4 cases, 1928–1961 · leading case: Clark v. McNeill
Sort: Relevance Newest Treatment
Clark v. McNeill (1928) ca6 ““all orders for the purchase Snd sale of any commodity are received and executed with the distinct understanding that the actual delivery is contemplated, and that the party giving the orders so understands and agrees,” as also that the transaction was “subject in all respects…”
Commissioner of Internal Revenue v. Gifford-Hill & Co., Inc (1950) ca5 “The question in the case here involves assessed deficiencies in excess profits taxes for the years 1942 and 1943, the solution to which must be found in the interpretation to be given subsection 735(a) (6) of the Internal Revenue Code, 26 U.S. C.A. § 735(a) (6), as applied to…”
Fenner & Beane v. Olive (1933) ala “25 ), and the above noted federal statute, with particular reference to section 5 thereof (26 USCA § 735). Defendant, therefore, sought by independent proof to show a “pernicious intention” (Gettys v.”
Estate of Bryan v. Commissioner (1961) ca4 “That case involved the application of the excess profit tax statutes ( 26 U.S.C. §§ 735 and 736 in connection with §§ 711(a) (1) (I) and 711(a) (2) (K), Internal Revenue Code, Excess Profit Taxes), to the income of a corporation, engaged during the war years 1942 and 1943 in the…”
— 26 U.S.C. § 735(a) — 1 case
Commissioner of Internal Revenue v. Gifford-Hill & Co., Inc (1950) ca5 “The question in the case here involves assessed deficiencies in excess profits taxes for the years 1942 and 1943, the solution to which must be found in the interpretation to be given subsection 735(a) (6) of the Internal Revenue Code, 26 U.S. C.A. § 735(a) (6), as applied to…”
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.