26 U.S. Code § 736 - Payments to a retiring partner or a deceased partner’s successor in interest
(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
(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—
Source(Aug. 16, 1954, ch. 736, 68A Stat. 248; Pub. L. 94–455, title XIX, § 1906(b)(13)(A),Oct. 4, 1976, 90 Stat. 1834; Pub. L. 95–600, title VII, § 701(u)(13)(B),Nov. 6, 1978, 92 Stat. 2918; Pub. L. 103–66, title XIII, § 13262(a), (b)(2)(B),Aug. 10, 1993, 107 Stat. 541.)
1993—Subsec. (b)(3). Pub. L. 103–66, § 13262(a), added par. (3).
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 751 (e).”
1978—Subsec. (c). Pub. L. 95–600added subsec. (c).
1976—Subsec. (b)(1). Pub. L. 94–455struck out “or his delegate” after “Secretary”.
Effective Date of 1993 Amendment
“(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