(a) Payments considered as distributive share or guaranteed payment
Payments made in liquidation of the interest of a retiring partner or a deceased partner shall, except as provided in subsection (b), be considered—
(1)as a distributive share to the recipient of partnership income if the amount thereof is determined with regard to the income of the partnership, or
(2)as a guaranteed payment described in section
707(c) if the amount thereof is determined without regard to the income of the partnership.
(b) Payments for interest in partnership
(1) General rule
Payments made in liquidation of the interest of a retiring partner or a deceased partner shall, to the extent such payments (other than payments described in paragraph (2)) are determined, under regulations prescribed by the Secretary, to be made in exchange for the interest of such partner in partnership property, be considered as a distribution by the partnership and not as a distributive share or guaranteed payment under subsection (a).
(2) Special rules
For purposes of this subsection, payments in exchange for an interest in partnership property shall not include amounts paid for—
(A)unrealized receivables of the partnership (as defined in section
(B)good will of the partnership, except to the extent that the partnership agreement provides for a payment with respect to good will.
(3) Limitation on application of paragraph (2)
Paragraph (2) shall apply only if—
(A)capital is not a material income-producing factor for the partnership, and
(B)the retiring or deceased partner was a general partner in the partnership.
Subsec. (c). Pub. L. 103–66, § 13262(b)(2)(B), struck out heading and text of subsec. (c). Text read as follows: “For limitation on the tax attributable to certain gain connected with section
1248 stock, see section
“(1) In general.—The amendments made by this section [amending this section and section
751 of this title] shall apply in the case of partners retiring or dying on or after January 5, 1993.
“(2) Binding contract exception.—The amendments made by this section shall not apply to any partner retiring on or after January 5, 1993, if a written contract to purchase such partner’s interest in the partnership was binding on January 4, 1993, and at all times thereafter before such purchase.”
Effective Date of 1978 Amendment
Amendment by Pub. L. 95–600applicable to transfers beginning after Oct. 9, 1975, and to sales, exchanges, and distributions taking place after Oct. 9, 1975, see section 701(u)(13)(C) ofPub. L. 95–600, set out as a note under section
751 of this title.
The table below lists the classification updates, since Jan. 3, 2012, for this section. Updates to a broader range of sections may be found at the update page for containing chapter, title, etc.
The most recent Classification Table update that we have noticed was Tuesday, August 13, 2013
An empty table indicates that we see no relevant changes listed in the classification tables. If you suspect that our system may be missing something, please double-check with the Office of the Law Revision Counsel.
Description of Change
Statutes at Large
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