# Prop. Treas. Reg. § 1.737-1: Recognition of precontribution gain.

Proposed regulation, not in force. REG-144468-05, 79 FR 3042, published 2014-01-16 <https://www.federalregister.gov/documents/2014/01/16/2014-00649/disallowance-of-partnership-loss-transfers-mandatory-basis-adjustments-basis-reduction-in-stock-of-a>. Interprets 26 U.S.C. § 737.

Par. 7. Section 1.737-1 is amended by revising paragraph (c)(1) and adding paragraphs (c)(3) and (4) to read as follows:

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(c) Net precontribution gain —(1) General rule. The distributee partner's net precontribution gain is the net gain (if any) that would have been recognized by the distributee partner under section 704(c)(1)(B) and § 1.704-4 if all property that had been contributed to the partnership by the distributee partner within seven years of the distribution and is held by the partnership immediately before the distribution had been distributed by the partnership to another partner other than the partner who owns, directly or indirectly, more than 50 percent of the capital or profits interest in the partnership.

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(3) Determination of seven-year period —(i) General rule. The seven-year period specified in paragraph (c)(1) of this section begins on, and includes, the date of contribution and ends on, and includes, the last date that is within seven years of the contribution. For example, if a partner contributes 704(c) property to a partnership on May 15, 2016, the seven-year period with respect to the section 704(c) property ends on, and includes, May 14, 2023.

(ii) Section 708(b)(1)(B) terminations. A termination of the partnership under section 708(b)(1)(B) does not begin a new seven-year period for each partner with respect to built-in gain and built-in loss property that the terminated partnership is deemed to contribute to the new partnership under § 1.708-1(b)(4). See § 1.704-3(a)(3)(ii) for the definitions of built-in gain and built-in loss on section 704(c) property.

(4) Effective/applicability date. The provisions of paragraph (c)(1) and (3) of this section relating to the seven-year period for determining the applicability of section 737(b) apply for partnership contributions occurring on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register .

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