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TITLE 26-INTERNAL REVENUE CODE 721. Nonrecognition of gain or loss on contribution (a) General rule No gain or loss shall be recognized to a part- nership or to any of its partners in the case of a contribution of property to the partnership in exchange for an nterest in the partnership. (b) Special rule Subsection (a) shall not apply to gain realized on a transfer of property to a partnership which would be treated as an investment com- pany (within the meaning of section 351) if the partnership were incorporated. (Auh;. 16, 1954, ch. 736, 68A Stat. 245; Oct. 4, 1976, Pub. L. 94-455, title XXI, §2131(b), 90 Stat. 1924.) AMENDMENTS 1976-Subsec. (a). Pub. L. 94-455 designated existing provisions as subsec. (a) and added subsec. catchline "General rule". Subsec. (b). Pub. L. 94-455 added subsec. (b), EFFEcTivE DATE OF 1976 AMENDMENT Section 2131(f)(3) to (5) of Pub. L. 94-455 provided that: "(3) Except as provided in paragraph (4), the amend- ments made by subsections (b) and (c) [amending sec- tions 721, 722 and 723 of this title] shall apply to transfers made after February 17, 1976, in taxable years ending after such date. "(4) The amendments made by subsections (b) and (c) [amending sections 721, 722 and 723 of this title] shall not apply to transfers to a partnership made on or before the 90th day after the date of the enactment of this Act (Oct. 4, 1976] if- "(A) either- "(I) a ruling request with respect to such trans- fers was filed with the Internal Revenue Service before March 27, 1976, or "(ii) a registration statement with respect to such transfers was filed with the Securities and Exchange Commission before March 27, 1976, "(B) the securities transferred were deposited on or before the 60th day after the date of the enact- ment of this Act [Oct. 4, 1976], and "(C) either- "(1) the aggregate value (determined as of the close of the 60th day referred to in subparagraph (B), or, if earlier, the close of the deposit period) of the securities so transferred does not exceed $100,000,000, or "(i) the securities transferred were all on deposit on February 29, 1976, pursuant to a registration statement referred to in subparagraph (A)(lI). "(5) If no registration statement was required to be filed with the Securities and Exchange Commission with respect to the transfer of securities to any part- nership, then paragraph (4) shall be applied to such transfers- "(A) as if paragraph (4) did not contain subpara- graph (A)(ii) thereof, and "(B) by substituting '$25,000,000' for '$100,000,000' in subparagraph (C)(i) thereof." SECTION REEuiM TO IN OTHER SECrloNs This section is referred to in sections 48, 49, 1245, 1250, 1251 of this title. § 722. Basis of contributing partner's interest The basis of an interest in a partnership ac- quired by a contribution of property, including money, to the partnership shall be the amount of such money and the adjusted basis of such property to the contributing partner at the time of the contribution increased by the amount (if any) of gain recognized to the con- tributing partner at such time. (Aug. 16, 1954, ch. 736, 68A Stat. 245; Oct. 4, 1976, Pub. L. 94-455, title XXI, § 2131(c), 90 Stat. 1924.) AMENDMENTS 1976-Pub. L. 94-455 inserted "increased by the amount (if any) of gain recognized to the contributing partner at such time" following "at the time of the contribution". EmECTIvE DATE OF 1976 AMENDMENT For effective date of amendment of section by Pub. L. 94-455, see section 2131(f)(3) to (5) of Pub. L. 94- 455, set out as an Effective Date of 1976 Amendment note under section 721 of this title. CRoss REFEmcs Determination of basis of partner's interest, see sec- tion 705 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 705 of this title. § 723. Basis of property contributed to partnership The basis of property contributed to a part- nership by a partner shall be the adjusted basis of such property to the contributing partner at the time of the contribution increased by the amount (if any) of gain recognized to the con- tributing partner at such time. (Aug. 16, 1954, c. 736, 68A Stat. 245; Oct. 4, 1976, Pub. L. 94-455, title XXI, §2131(c), 90 Stat. 1924.) AMEmMENTs 1976-Pub. L. 94-455 inserted "increased by the amount (if any) of gain recognized to the contributing partner at such time" following "at the time of the contribution". EFFECTIVE DATE OF 1976 AMENDMENT For effective date of amendment of section by Pub. L. 94455, see section 2131(f)(3) to (5) of Pub. L. 94- 455, set out as an Effective Date of 1976 Amendment note under section 721 of this title. SUBPART B-DISTRIBUTIONS BY A PARTNERSHIP Sec. 731. Extent of recognition of gain or loss on distribu- tion. 732. Basis of distributed property other than money. 733. Basis of distributee partner's interest. 734. Optional adjustment to basis of undistributed partnership property. 735. Character of gain or loss on disposition of distrib- uted property. 736. Payments to a retiring partner or a deceased partner's successor in interest. § 731. Extent of recognition of gain or loss on distri- bution (a) Partners In the case of a distribution by a partnership to a partner- (1) gain shall not be recognized to such partner, except to the extent that any money distributed exceeds the adjusted basis of such partner's interest in the partnership immedi- ately before the distribution, and (2) loss shall not be recognized to such part- ner, except that upon a distribution in liqui- dation of a partner's interest in a partnership Page 488