§ 734 Adjustment to basis of undistributed partnership property where section 754 election or substantial basis reduction

OLRC 119-134 · eCFR 2026-10-19 · 2 regs · 3 amending Acts · cited by 3 sections

Enacted 1954 · Act Aug. 16, 1954, ch. 736 Amended · 3 Acts

1954198420042005(a) General rule(b) Method of adjustment(c) Allocation of basis(d) Substantial basis reduction(e) Exception for securitization partnerships
Connections Cited by 3 · Cites 5
§ 734 Adjustment to basis of undistributed partnership property where section 754 election or substantial basis reduction
§ 1.734-1 Optional adjustment to basis of undistributed partnership property.§ 1.734-2 Adjustment after distribution to transferee partner.Prop. § 1.734-1 Proposed 2014 · Adjustment to basis of undistributed partnership property where partnership has a section 754 election or there is a substantial basis reduction with respect to a distribution.Prop. § 1.734-2 Proposed 2014 · Adjustment after distribution to transferee partner or section 704(c)(1)(C) partner.
Amended 2004
  • 2004 Pub. L. 108-357 Pub. L. 108–357, § 833(c)(5)(A), substituted “Adjustment to basis of undistributed partnership property where section 754 election or substantial basis reduction” for “Optional adjustment to basis of undistributed partnership property” in section catchline.
Final rules 2

    (a) General rule The basis of partnership property shall not be adjusted as the result of a distribution of property to a partner unless the election, provided in section 754 (relating to optional adjustment to basis of partnership property), is in effect with respect to such partnership or unless there is a substantial basis reduction with respect to such distribution.

    Amended 2004, 2005
    • 2005 Pub. L. 109-135 Pub. L. 109–135, § 403(bb)(1), inserted “with respect to such distribution” before period at end.
    • 2004 Pub. L. 108-357 Pub. L. 108–357, § 833(c)(1), inserted “or unless there is a substantial basis reduction” before period at end.
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      (b) Method of adjustment In the case of a distribution of property to a partner by a partnership with respect to which the election provided in section 754 is in effect or with respect to which there is a substantial basis reduction, the partnership shall—

      Amended 1984, 2004, 2005
      • 2005 Pub. L. 109-135 Pub. L. 109–135, § 403(bb)(2), reenacted heading without change and amended introductory provisions generally. Prior to amendment, introductory provisions read as follows: “In the case of a distribution of property to a partner, a partnership, with respect to which the election provided in section 754 is in effect or unless there is a substantial basis reduction, shall—”.
      • 2004 Pub. L. 108-357 Pub. L. 108–357, § 833(c)(2), inserted “or unless there is a substantial basis reduction” after “section 754 is in effect” in introductory provisions.
      • 1984 Pub. L. 98-369 Pub. L. 98–369 inserted at end “Paragraph (1)(B) shall not apply to any distributed property which is an interest in another partnership with respect to which the election provided in section 754 is not in effect.”

      Cases: Countryside, L.P. v. Commissioner, T.C. Memo. 2008-3

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        (1) increase the adjusted basis of partnership property by—

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          (A) the amount of any gain recognized to the distributee partner with respect to such distribution under section 731(a)(1), and

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            (B) in the case of distributed property to which section 732(a)(2) or (b) applies, the excess of the adjusted basis of the distributed property to the partnership immediately before the distribution (as adjusted by section 732(d)) over the basis of the distributed property to the distributee, as determined under section 732, or

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              (2) decrease the adjusted basis of partnership property by—

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                (A) the amount of any loss recognized to the distributee partner with respect to such distribution under section 731(a)(2), and

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                  (B) in the case of distributed property to which section 732(b) applies, the excess of the basis of the distributed property to the distributee, as determined under section 732, over the adjusted basis of the distributed property to the partnership immediately before such distribution (as adjusted by section 732(d)).

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                    Paragraph (1)(B) shall not apply to any distributed property which is an interest in another partnership with respect to which the election provided in section 754 is not in effect.

                    (c) Allocation of basis The allocation of basis among partnership properties where subsection (b) is applicable shall be made in accordance with the rules provided in section 755.

                    (d) Substantial basis reduction

                    Amended 2004
                    Cited by 1

                      (1) In general For purposes of this section, there is a substantial basis reduction with respect to a distribution if the sum of the amounts described in subparagraphs (A) and (B) of subsection (b)(2) exceeds $250,000.

                      (2) Regulations For regulations to carry out this subsection, see section 743(d)(2).

                      (e) Exception for securitization partnerships For purposes of this section, a securitization partnership (as defined in section 743(f)) shall not be treated as having a substantial basis reduction with respect to any distribution of property to a partner.

                      Amended 2004