# 26 U.S.C. § 721: Nonrecognition of gain or loss on contribution

Source: OLRC release point 119-134 <https://uscode.house.gov/us/usc/119-134/t26/s721>. Cite pinpoints as 26 U.S.C. § 721(a)(1).

## § 721(a) General rule

No gain or loss shall be recognized to a partnership or to any of its partners in the case of a contribution of property to the partnership in exchange for an interest in the partnership.

## § 721(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 company (within the meaning of section 351) if the partnership were incorporated.

## § 721(c) Regulations relating to certain transfers to partnerships

The Secretary may provide by regulations that subsection (a) shall not apply to gain realized on the transfer of property to a partnership if such gain, when recognized, will be includible in the gross income of a person other than a United States person.

## § 721(d) Transfers of intangibles

For regulatory authority to treat intangibles transferred to a partnership as sold, see section 367(d)(3).

## Regulations

- [Treas. Reg. § 1.721-1](/26/reg/1.721-1.md): Nonrecognition of gain or loss on contribution. (interprets § 721)
- [Treas. Reg. § 1.721(c)-1](/26/reg/1.721(c)-1.md): Overview, definitions, and rules of general application. (interprets § 721(c))
- [Treas. Reg. § 1.721(c)-2](/26/reg/1.721(c)-2.md): Recognition of gain on certain contributions of property to partnerships with related foreign partners. (interprets § 721(c))
- [Treas. Reg. § 1.721(c)-3](/26/reg/1.721(c)-3.md): Gain deferral method. (interprets § 721(c))
- [Treas. Reg. § 1.721(c)-4](/26/reg/1.721(c)-4.md): Acceleration events. (interprets § 721(c))
- [Treas. Reg. § 1.721(c)-5](/26/reg/1.721(c)-5.md): Acceleration event exceptions. (interprets § 721(c))
- [Treas. Reg. § 1.721(c)-6](/26/reg/1.721(c)-6.md): Procedural and reporting requirements. (interprets § 721(c))
- [Treas. Reg. § 1.721(c)-7](/26/reg/1.721(c)-7.md): Examples. (interprets § 721(c))
- [Treas. Reg. § 1.721-2](/26/reg/1.721-2.md): Noncompensatory options. (interprets § 721)

## Forms named in the regulations

- [Form 8865](https://www.irs.gov/pub/irs-pdf/f8865.pdf)
- [Form 1065](https://www.irs.gov/pub/irs-pdf/f1065.pdf)
- [Form 8838-P](https://www.irs.gov/pub/irs-pdf/f8838p.pdf)

## Final rules

- [85 FR 3833](https://www.federalregister.gov/documents/2020/01/23/2020-00383/transfers-of-certain-property-by-us-persons-to-partnerships-with-related-foreign-partners) (2020): Transfers of Certain Property by U.S. Persons to Partnerships With Related Foreign Partners
- [82 FR 7582](https://www.federalregister.gov/documents/2017/01/19/2017-01049/transfers-of-certain-property-by-us-persons-to-partnerships-with-related-foreign-partners) (2017): Transfers of Certain Property by U.S. Persons to Partnerships With Related Foreign Partners
- [78 FR 7997](https://www.federalregister.gov/documents/2013/02/05/2013-02259/noncompensatory-partnership-options) (2013): Noncompensatory Partnership Options
- [76 FR 71255](https://www.federalregister.gov/documents/2011/11/17/2011-29553/application-of-section-108e8-to-indebtedness-satisfied-by-a-partnership-interest) (2011): Application of Section 108(e)(8) to Indebtedness Satisfied by a Partnership Interest
- [61 FR 19188](https://www.federalregister.gov/documents/1996/05/01/96-10396/treatment-of-underwriters-in-section-351-and-section-721-transactions) (1996): Treatment of Underwriters in Section 351 and Section 721 Transactions

## Leading cases

- [Campbell v. Commissioner, 943 F.2d 815 (8th Cir. 1991)](https://www.courtlistener.com/opinion/567691/william-g-campbell-norma-t-campbell-v-commissioner-of-internal-revenue/)
- [Diamond v. Commissioner, 492 F.2d 286 (7th Cir. 1974)](https://www.courtlistener.com/opinion/317140/sol-diamond-and-muriel-diamond-v-commissioner-of-internal-revenue/)
- [Stafford v. United States, 611 F.2d 990 (5th Cir. 1980)](https://www.courtlistener.com/opinion/372927/d-n-stafford-and-flora-c-stafford-v-united-states/)

## Proposed regulations (not in force)

- [Prop. Treas. Reg. § 1.721-1](/26/prop/1.721-1_2014-30103.md): Nonrecognition of gain or loss on contribution. (REG-109187-11, proposed 2014-12-23)

## Connections

Cites: § 351 Transfer to corporation controlled by transferor; § 367 Foreign corporations

Cited by: § 447 Method of accounting for corporations engaged in farming; § 722 Basis of contributing partner’s interest; § 723 Basis of property contributed to partnership; § 6038B Notice of certain transfers to foreign persons

## Amendments

- 1954-08-16: [Act Aug. 16, 1954, ch. 736](/26/act/1954-ch736.md), 68A Stat. 245
- 1976-10-04: [Pub. L. 94-455](/26/act/94-455.md), 90 Stat. 1924
- 1997-08-05: [Pub. L. 105-34](/26/act/105-34.md), 111 Stat. 979