§ 737. Recognition of precontribution gain in case of certain distributions to contributing partner

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

1. 1992

   Energy Policy Act of 1992

   Pub. L. 102–486 title XIX § 1937(a) · 106 Stat. 2776

   Enacted · 26 U.S.C. § 737

   Added Pub. L. 102–486, title XIX, § 1937(a), Oct. 24, 1992, 106 Stat. 3032

   Source evidence

   Code source credit
   Added Pub. L. 102–486, title XIX, § 1937(a), Oct. 24, 1992, 106 Stat. 3032

   Enacted provision · exact public law section
   (a) General Rule.— Subpart C of part II of subchapter K of chapter 1 (relating to distributions by a partnership) is amended by adding at the end thereof the following new section: “SEC. 737. RECOGNITION OF PRECONTRIBUTION GAIN IN CASE OF CERTAIN DISTRIBUTIONS TO CONTRIBUTING PARTNER. “(a) General Rule.— In the case of any distribution by a partnership to a partner, such partner shall be treated as recognizing gain in an amount equal to the lesser of— “(1) the excess (if any) of (A) the fair market value of property (other than money) received in the distribution over (B) the adjusted basis of such partner’s interest in the partnership immediately before the distribution reduced (but not below zero) by the amount of money received in the distribution, or “(2) the net precontribution gain of the partner. Gain recognized under the preceding sentence shall be in addition to any gain recognized under section 731. The character of such gain shall be determined by reference to the proportionate character of the net precontribution gain. “(b) Net Precontribution Gain.— For purposes of this section, the term ‘net precontribution gain’ means the net gain (if any) which would have been recognized by the distributee partner under section 704(c)(1)(B) if all property which— “(1) had been contributed to the partnership by the distributee partner within 5 years of the distribution, and “(2) is held by such partnership immediately before the distribution, had been distributed by such partnership to another partner. “(c) Basis Rules.— “(1) Partner’s interest.— The adjusted basis of a partner’s interest in a partnership shall be increased by the amount of any gain recognized by such partner under subsection (a). Except for purposes of determining the amount recognized under subsection (a), such increase shall be treated as occurring immediately before the distribution. “(2) Partnership’s basis in contributed property.— Appropriate adjustments shall be made to the adjusted basis of the partnership in the contributed property referred to in subsection (b) to reflect gain recognized under subsection (a). “(d) Exceptions.— “(1) Distributions of previously contributed property.— If any portion of the property distributed consists of property which had been contributed by the distributee partner to the partnership, such property shall not be taken into account under subsection (a)(1) and shall not be taken into account in determining the amount of the net precontribution gain. If the property distributed consists of an interest in an entity, the preceding sentence shall not apply to the extent that the value of such interest is attributable to property contributed to such entity after such interest had been contributed to the partnership. “(2) Coordination with section 751.— This section shall not apply to the extent section 751(b) applies to such distribution.”

2. 1994

   Pub. L. 103–465 § 741(b)(1) · 108 Stat. 4809

   Amended · 26 U.S.C. § 737(c)(1)

   Pub. L. 103–465, § 741(b)(1), amended last sentence generally. Prior to amendment, last sentence read as follows: “Except for purposes of determining the amount recognized under subsection (a), such increase shall be treated as occurring immediately before the distribution.”

   Source evidence

   Code amendment note
   Subsec. (c)(1). Pub. L. 103–465, § 741(b)(1), amended last sentence generally. Prior to amendment, last sentence read as follows: “Except for purposes of determining the amount recognized under subsection (a), such increase shall be treated as occurring immediately before the distribution.”

   Enacted provision · exact public law section
   (1) The last sentence of section 737(c)(1) is amended to 26 USC 737. read as follows: “For purposes of determining the basis of the distributed property (other than money), such increase shall be treated as occurring immediately before the distribution.”

3. 1994

   Pub. L. 103–465 § 741(b)(2) · 108 Stat. 4809

   Added · 26 U.S.C. § 737(e)

   Pub. L. 103–465, § 741(b)(2), added subsec. (e)

   Source evidence

   Code amendment note
   Subsec. (e). Pub. L. 103–465, § 741(b)(2), added subsec. (e).

   Enacted provision · exact public law section
   (2) Section 737 is amended by adding at the end the following new subsection: “(e) Marketable Securities Treated as Money.— “For treatment of marketable securities as money for purposes of this section, see section 731(c).”

4. 1996

   Small Business Job Protection Act of 1996

   Pub. L. 104–188 title I § 1704(j)(8) · 110 Stat. 1755

   Added · 26 U.S.C. § 737

   Pub. L. 104–188 provided that section 1937(a) of Pub. L. 102–486, shall be applied as if “Subpart B” appeared instead of “Subpart C”. Section 1937(a) of Pub. L. 102–486 directed amendment of subpart C of this part by adding this section at the end thereof

   Source evidence

   Code amendment note
   Pub. L. 104–188 provided that section 1937(a) of Pub. L. 102–486, shall be applied as if “Subpart B” appeared instead of “Subpart C”. Section 1937(a) of Pub. L. 102–486 directed amendment of subpart C of this part by adding this section at the end thereof.

   Enacted provision · exact public law section
   (8) Subsection (a) of section 1937 of the Energy Policy Act of 1992 shall be applied as if “Subpart B” appeared instead of “Subpart C”.

5. 1997

   Pub. L. 105–34 title X § 1063(a) · 111 Stat. 788

   Substituted · 26 U.S.C. § 737(b)(1)

   Pub. L. 105–34 substituted “7 years” for “5 years”

   Source evidence

   Code amendment note
   Subsec. (b)(1). Pub. L. 105–34 substituted “7 years” for “5 years”.

   Enacted provision · exact public law section
   (a) In General.— Sections 704(c)(1)(B) and 737(b)(1) are each amended by striking “5 years” and inserting “7 years”.

   Effective date note
   Amendment by Pub. L. 105–34 applicable to property contributed to a partnership after June 8, 1997, but not applicable to any property contributed pursuant to a written binding contract in effect on June 8, 1997, and at all times thereafter before such contribution if such contract provides for the contribution of a fixed amount of property, see section 1063(b) of Pub. L. 105–34, set out as a note under section 704 of this title.

5 of 5 references resolved to an enrolled provision