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131 STAT. 2131 PUBLIC LAW 115–97—DEC. 22, 2017 ‘‘(4) EXCEPTIONS.—The term ‘applicable partnership interest’ shall not include— ‘‘(A) any interest in a partnership directly or indirectly held by a corporation, or ‘‘(B) any capital interest in the partnership which pro- vides the taxpayer with a right to share in partnership capital commensurate with— ‘‘(i) the amount of capital contributed (determined at the time of receipt of such partnership interest), or ‘‘(ii) the value of such interest subject to tax under section 83 upon the receipt or vesting of such interest. ‘‘(5) THIRD PARTY INVESTOR.—The term ‘third party investor’ means a person who— ‘‘(A) holds an interest in the partnership which does not constitute property held in connection with an applicable trade or business; and ‘‘(B) is not (and has not been) actively engaged, and is (and was) not related to a person so engaged, in (directly or indirectly) providing substantial services described in paragraph (1) for such partnership or any applicable trade or business. ‘‘(d) TRANSFER OF APPLICABLE PARTNERSHIP INTEREST TO RELATED PERSON.— ‘‘(1) IN GENERAL.—If a taxpayer transfers any applicable partnership interest, directly or indirectly, to a person related to the taxpayer, the taxpayer shall include in gross income (as short term capital gain) the excess (if any) of— ‘‘(A) so much of the taxpayer’s long-term capital gains with respect to such interest for such taxable year attrib- utable to the sale or exchange of any asset held for not more than 3 years as is allocable to such interest, over ‘‘(B) any amount treated as short term capital gain under subsection (a) with respect to the transfer of such interest. ‘‘(2) RELATED PERSON.—For purposes of this paragraph, a person is related to the taxpayer if— ‘‘(A) the person is a member of the taxpayer’s family within the meaning of section 318(a)(1), or ‘‘(B) the person performed a service within the current calendar year or the preceding three calendar years in any applicable trade or business in which or for which the taxpayer performed a service. ‘‘(e) REPORTING.—The Secretary shall require such reporting (at the time and in the manner prescribed by the Secretary) as is necessary to carry out the purposes of this section. ‘‘(f) REGULATIONS.—The Secretary shall issue such regulations or other guidance as is necessary or appropriate to carry out the purposes of this section’’. (b) CLERICAL AMENDMENT.—The table of sections for part IV of subchapter O of chapter 1 is amended by striking the item relating to 1061 and inserting the following new items: ‘‘Sec. 1061. Partnership interests held in connection with performance of services. ‘‘Sec. 1062. Cross references.’’. (c) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 2017. 26 USC 1061 note. 16 USC prec. 1051. VerDate Sep 11 2014 10:09 Oct 18, 2018 Jkt 079139 PO 00097 Frm 00079 Fmt 6580 Sfmt 6581 E:\PUBLAW\PUBL097.115 PUBL097 dkrause on DSKBC28HB2PROD with PUBLAWS