If any property described in subsection (a), (b), or (c) 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 non-recognition transactions.
26 U.S. Code § 724 - Character of gain or loss on contributed unrealized receivables, inventory items, and capital loss property
prev | next
(a) Contributions of unrealized receivablesIn the case of any property which—
(b) Contributions of inventory itemsIn the case of any property which—
(c) Contributions of capital loss propertyIn the case of any property which—
any loss recognized by the partnership on the disposition of such property during the 5-year period beginning on the date of such contribution shall be treated as a loss from the sale of a capital asset to the extent that, immediately before such contribution, the adjusted basis of such property in the hands of the partner exceeded the fair market value of such property.
(d) DefinitionsFor purposes of this section—
(1) Unrealized receivable
(2) Inventory item
(3) Substituted basis property
(A) In general
1997—Subsec. (d)(2). Pub. L. 105–34 substituted “section 751(d)” for “section 751(d)(2)”.
1996—Subsec. (d)(3)(B). Pub. L. 104–188 substituted “Subparagraph” for “Subparagaph”.
Effective Date of 1997 Amendment