(a) Sale or exchange of certain distributed property
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(1) Unrealized receivables Gain or loss on the disposition by a distributee partner of unrealized receivables (as defined in section 751(c)) distributed by a partnership, shall be considered as ordinary income or as ordinary loss, as the case may be.
Amended 1976
- 1976 Pub. L. 94-455 Pub. L. 94–455 substituted “as ordinary income or as ordinary loss, as the case may be” for “gain or loss from the sale or exchange of property other than a capital asset”.
Cases: Wilmont Fleming Engineering Co. v. Commissioner, 65 T.C. 847 (1976)
(2) Inventory items Gain or loss on the sale or exchange by a distributee partner of inventory items (as defined in section 751(d)) distributed by a partnership shall, if sold or exchanged within 5 years from the date of the distribution, be considered as ordinary income or as ordinary loss, as the case may be.
Amended 1976, 1997
- 1997 Pub. L. 105-34 Pub. L. 105–34 substituted “section 751(d)” for “section 751(d)(2)”.
- 1976 Pub. L. 94-455 Pub. L. 94–455 substituted “as ordinary income or as ordinary loss, as the case may be” for “gain or loss from the sale or exchange of property other than a capital asset”.
Cases: Requard v. Commissioner, T.C. Memo. 1966-141
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(b) Holding period for distributed property In determining the period for which a partner has held property received in a distribution from a partnership (other than for purposes of subsection (a)(2)), there shall be included the holding period of the partnership, as determined under section 1223, with respect to such property.
Cases: McCauslen v. Commissioner, 45 T.C. 588 (1966)
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(c) Special rules
Amended 1984
- 1984 Pub. L. 98-369 Pub. L. 98–369 added subsec. (c).
(1) Waiver of holding periods contained in section 1231 For purposes of this section, section 751(d) (defining inventory item) shall be applied without regard to any holding period in section 1231(b).
Amended 1997
- 1997 Pub. L. 105-34 Pub. L. 105–34 substituted “section 751(d)” for “section 751(d)(2)”.
(2) Substituted basis property
(A) In general If any property described in subsection (a) is disposed of in a nonrecognition transaction, the tax treatment which applies to such property under such subsection shall also apply to any substituted basis property resulting from such transaction. A similar rule shall also apply in the case of a series of nonrecognition transactions.
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(B) Exception for stock in C corporation Subparagraph (A) shall not apply to any stock in a C corporation received in an exchange described in section 351.