Cases: Virginia Historic Tax Credit Fund 2001 LP v. Commissioner, 639 F.3d 129 (4th Cir. 2011)
Forms: Form 8275
Final rules 3
(a) Partner not acting in capacity as partner
Amended 1984
- 1984 Pub. L. 98-369 Pub. L. 98–369 designated existing provisions as par. (1) and added par. (2).
Cases: Pratt v. Commissioner, 550 F.2d 1023 (5th Cir. 1977)
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(1) In general If a partner engages in a transaction with a partnership other than in his capacity as a member of such partnership, the transaction shall, except as otherwise provided in this section, be considered as occurring between the partnership and one who is not a partner.
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(2) Treatment of payments to partners for property or services Except as provided by the Secretary—
Amended 2025
- 2025 Pub. L. 119-21 Pub. L. 119–21 substituted “Except as provided” for “Under regulations prescribed” in introductory provisions.
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(A) Treatment of certain services and transfers of property If—
(i) a partner performs services for a partnership or transfers property to a partnership,
(ii) there is a related direct or indirect allocation and distribution to such partner, and
(iii) the performance of such services (or such transfer) and the allocation and distribution, when viewed together, are properly characterized as a transaction occurring between the partnership and a partner acting other than in his capacity as a member of the partnership,
such allocation and distribution shall be treated as a transaction described in paragraph (1).
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(B) Treatment of certain property transfers If—
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(i) there is a direct or indirect transfer of money or other property by a partner to a partnership,
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(ii) there is a related direct or indirect transfer of money or other property by the partnership to such partner (or another partner), and
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(iii) the transfers described in clauses (i) and (ii), when viewed together, are properly characterized as a sale or exchange of property,
Amended 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1805(b), substituted “sale or exchange of property” for “sale of property”.
such transfers shall be treated either as a transaction described in paragraph (1) or as a transaction between 2 or more partners acting other than in their capacity as members of the partnership.
(b) Certain sales or exchanges of property with respect to controlled partnerships
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(1) Losses disallowed No deduction shall be allowed in respect of losses from sales or exchanges of property (other than an interest in the partnership), directly or indirectly, between—
Amended 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1812(c)(3)(B), inserted at end “For purposes of section 267(a)(2), partnerships described in subparagraph (B) of this paragraph shall be treated as persons specified in section 267(b).”
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(A) a partnership and a person owning, directly or indirectly, more than 50 percent of the capital interest, or the profits interest, in such partnership, or
Amended 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1812(c)(3)(A), substituted “a person” for “a partner”.
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(B) two partnerships in which the same persons own, directly or indirectly, more than 50 percent of the capital interests or profits interests.
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In the case of a subsequent sale or exchange by a transferee described in this paragraph, section 267(d) shall be applicable as if the loss were disallowed under section 267(a)(1). For purposes of section 267(a)(2), partnerships described in subparagraph (B) of this paragraph shall be treated as persons specified in section 267(b).
(2) Gains treated as ordinary income In the case of a sale or exchange, directly or indirectly, of property, which in the hands of the transferee, is property other than a capital asset as defined in section 1221—
Amended 1976
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 1901(b)(3)(C), substituted “as ordinary income” for “as gain from the sale or exchange of property other than a capital asset”.
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(A) between a partnership and a person owning, directly or indirectly, more than 50 percent of the capital interest, or profits interest, in such partnership, or
Amended 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1812(c)(3)(A), substituted “a person” for “a partner”.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 642(a)(2), substituted “50 percent” for “80 percent”.
(B) between two partnerships in which the same persons own, directly or indirectly, more than 50 percent of the capital interests or profits interests,
Amended 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 642(a)(2), substituted “50 percent” for “80 percent”.
any gain recognized shall be considered as ordinary income.
(3) Ownership of a capital or profits interest For purposes of paragraphs (1) and (2) of this subsection, the ownership of a capital or profits interest in a partnership shall be determined in accordance with the rules for constructive ownership of stock provided in section 267(c) other than paragraph (3) of such section.
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(c) Guaranteed payments To the extent determined without regard to the income of the partnership, payments to a partner for services or the use of capital shall be considered as made to one who is not a member of the partnership, but only for the purposes of section 61(a) (relating to gross income) and, subject to section 263, for purposes of section 162(a) (relating to trade or business expenses).
Amended 1976
- 1976 Pub. L. 94-455 Pub. L. 94–455, § 213(b)(3), substituted “and, subject to section 263, for purposes of section 162(a)” for “and section 162(a)”.
Cases: Kampel v. Commissioner, 634 F.2d 708 (2d Cir. 1980)