Page:United States Statutes at Large Volume 68A.djvu/284

 244

INTERNAL REVENUE CODE OF 1954

(B) between two partnerships in which the same persons own, directly or indirectly, more than 80 percent of the capital interests or profits interests, any gain recognized shall be considered as gain from the sale or exchange of property other than a capital asset. (3) O W N E R S H I P OF A CAPITAL OR PROFITS INTEREST.—For purposes of paragraphs (1) and (2) of this subsection, the ownership of a capital or profits interest in a partnership shall be determined in accordance with the rules for constructive ownership of stock provided in section 267(c) other than paragraph (3) of such section. (c) GUARANTEED PAYMENTS.—To the extent determined without regard to the income of the partnership, payments to a partner for services or the use of capital shall be considered as made to one who is not a member of the partnership, but only for the purposes of section 61(a) (relating to gross income) and section 162(a) (relating to trade or business expenses). SEC. 708. CONTINUATION OF PARTNERSHIP. (a) GENERAL RULE. — For purposes of this subchapter, an existing partnership shall be considered as continuing if it is not terminated. (b)

TERMINATION.—

(1) GENERAL RULE.—For purposes of subsection (a), a partnership shall be considered as terminated only if— (A) no part of any business, financial operation, or venture of the partnership continues to be carried on by any of its partners in a partnership, or (B) within a 12-month period there is a sale or exchange of 50 percent or more of the total interest in partnership capital and profits. (2) SPECIAL RULES.— (A) M E R G E R OR CONSOLIDATION.—In

the case of the merger or consolidation of two or more partnerships, the resulting partnership shall, for purposes of this section, be considered the continuation of any merging or consolidating partnership whose members own an interest of more than 50 percent in the capital and profits of the resulting partnership. (B) D IV I S I O N OP A PARTNERSHIP.—In the case of a division of a partnership into two or more partnerships, the resulting partnerships (other than any resulting partnership the members of which had an interest of 50 percent or less in the capital and profits of the prior partnership) shall, for purposes of this section, be considered a continuation of the prior partnership.

§ 707(b)(2)(B)

�