Page:United States Statutes at Large Volume 101 Part 2.djvu/1201

 PUBLIC LAW 100-203—DEC. 22, 1987

101 STAT. 1330-407

(b) EFFECTIVE DATE.—The amendment made by subsection (a) 26 USC 512 note, shall apply to partnership interests acquired after December 17, 1987. SEC. 10214. TREATMENT OF CERTAIN PARTNERSHIP ALLOCATIONS.

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(a) GENERAL RULE.—Clause (vi) of section 514(c)(9)(B) is amended to read as follows: "(vi) the real property is held by a partnership unless the partnership meets the requirements of clauses (i) .* .: through (v) and unless— "(I) all of the partners of the partnership are qualified organizations, "(II) each allocation to a partner of the partners fc j;pno ik ship which is a qualified organization is a qualified allocation (within the meaning of section 168(h)(6)), o r "(III) such partnership meets the requirements of subparagraph (E)." (b) CERTAIN ALLOCATIONS PERMITTED.—Paragraph (9) of section
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514(c) is amended by adding at the end thereof the following new subparagraph: (E) CERTAIN ALLOCATIONS PERMITTED.—

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"(i) IN GENERAL.—A partnership meets the requirements of this subparagraph if— "(I) the allocation of items to any partner other than a qualified organization cannot result in such partner having a share of the overall partnership loss for any taxable year greater than such partner's share of the overall partnership income for the taxable year for which such partner's income share will be the smallest, "(II) the allocation of items to any partner which IS a qualified organization cannot result in such partner having a share of the overall partnership income for any taxable year greater than such partner's share of the overall partnership loss for the taxable year for which such partner's loss share will be the smallest, and "(III) each allocation with respect to the partnership has substantial economic effect within the meaning of section 704(b)(2). For purposes of this clause, items allocated under section 704(c) shall not be taken into account, "(ii) SPECIAL RULES.—

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"(I) CHARGEBACKS.—Except as provided in regulations, a partnership may without violating the requirements of this subparagraph provide for chargebacks with respect to disproportionate losses previously allocated to qualified organizations and disproportionate income previously allocated to other partners. Any chargeback rererred to in the preceding sentence shall not be at a ratio in excess of the ratio under which the loss or income (as the case may be) was allocated. "(II) PREFERRED RATES OF RETURN, ETC.—To the

extent provided in regulations, a partnership may without violating the requirements of this subpara-

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