Page 489

TITLE 26-INTERNAL REVENUE CODE where no property other than that described in subparagraph (A) or (B) is distributed to such partner, loss shall be recognized to the extent of the excess of the adjusted basis of such partner's interest in the partnership over the sum of- (A) any money distributed, and (B) the basis to the distributee, as deter- mined under section 732, of any unrealized receivables (as defined in section 751(c)) and inventory (as defined in section 751(d)(2)). Any gain or loss recognized under this subsec- tion shall be considered as gain or loss from the sale or exchange of the partnership interest of the distributee partner. (b) Partnerships No gain or loss shall be recognized to a part- nership on a distribution to a partner of proper- ty, Including money. (c) Exceptions This section shall not apply to the extent otherwise provided by section 736 (relating to payments to a retiring partner or a deceased partner's successor in interest) and section 751 (relating to unrealized receivables and inven- tory items). (Aug. 16, 1954, ch. 736, 68A Stat. 245.) CROSS REFERENCES Effective date, see section 771 of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 48, 49, 734, 751, 1245, 1250 of this title. § 732. Basis of distributed property other than money (a) Distributions other than in liquidation of a part- ner's interest (1) General rule The basis of property (other than money) distributed by a partnership to a partner other than in liquidation of the partner's in- terest shall, except as provided in paragraph (2), be its adjusted basis to the partnership immediately before such distribution. (2) Limitation The basis to the distributee partner of prop- erty to which paragraph (1) is applicable shall not exceed the adjusted basis of such partner's interest in the partnership reduced by any money distributed in the same trans- action. (b) Distributions in liquidation The basis of property (other than money) dis- tributed by a partnership to a partner in liqui- dation of the partner's interest shall be an amount equal to the adjusted basis of such partner's interest in the partnership reduced by any money distributed in the same transaction. (c) Allocation of basis The basis of distributed properties to which subsection (a)(2) or subsection (b) is applicable shall be allocated- (1) first to any unrealized receivables (as de- fined in section 751(c)) and inventory items (as defined in section 751(d)(2)) in an amount equal to the adjusted basis of each such prop- erty'to the partnership (or if the basis to be allocated is less than the sum of the adjusted bases of such properties to the partnership, in proportion to such bases), and (2) to the extent of any remaining basis, to any other distributed properties in proportion to their adjusted bases to the partnership. (d) Special partnership basis to transferee For purposes of subsections (a), (b), and (c), a partner who acquired all or a part of his Inter- est by a transfer with respect to which the elec- tion provided in section 754 is not in effect, and to whom a distribution of property (other than money) is made with respect to the transferred interest within 2 years after such transfer, may elect, under regulations prescribed by the Sec- retary, to treat as the adjusted partnership basis of such property the adjusted basis such property would have if the adjustment pro- vided in section 743(b) were in effect with re- spect to the partnership property. The Secre- tary may by regulations require the application of this subsection in the case of a distribution to a transferee partner, whether or not made within 2 years after the transfer, If at the time of the transfer the fair market value of the partnership property (other than money) ex- ceeded 110 percent of its adjusted basis to the partnership. (e) Exception This section shall not apply to the extent that a distribution is treated as a sale or ex- change of property under section 751(b) (relat- ing to unrealized receivables and inventory items). (Aug. 16, 1954, ch. 736, 68A Stat. 246; Oct. 4, 1976, Pub. L. 94-455, title XIX, § 1906(b)(13)(A), 90 Stat. 1834.) AMENDMENTS 1976-Subsec. (d). Pub. L. 94-455 struck out "or his delegate" following "Secretary", in two instances. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 613A, 731, 733, 734 of this title. § 733. Basis of distributee partner's interest In the case of a distribution by a partnership to a partner other than in liquidation of a part- ner's Interest, the adjusted basis to such part- ner of his Interest in the partnership shall be reduced (but not below zero) by- (1) the amount of any money distributed to such partner, and (2) the amount of the basis to such partner of distributed property other than money, as determined under section 732. (Aug. 16, 1954, ch. 736, 68A Stat. 247.) CROSS REFERENCES 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. § 734. Optional adjustment to basis of undistributed partnership property (a) General rule The basis of partnership property shall not be adjusted as the result of a distribution of Page 489 § 734