Page:United States Statutes at Large Volume 68A.djvu/287

 CH. 1—NORMAL TAXES AND SURTAXES

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market value of the partnership property (other than money) exceeded 110 percent of its adjusted basis to the partnership. (e) EXCEPTION.—This section shall not apply to the extent that a distribution is treated as a sale or exchange of property under section 751 (b) (relating to unrealized receivables and inventory items). SEC. 733. BASIS OF DISTRIBUTEE PARTNER'S

INTEREST.

In the case of a distribution by a partnership to a partner other than in liquidation of a partner's interest, the adjusted basis to such partner of his interest in the partnership shall be reduced (but not below zero) by— (1) the amount of any money distributed to such partner, and (2) the amount of the basis to such partner of distributed property other than money, as determined under section 732. SEC. 734. OPTIONAL ADJUSTMENT TO BASIS OF UNDISTRIBUTED PARTNERSHIP PROPERTY. (a) GENERAL RULE. — The basis of partnership property shall not be

adjusted as the result of a distribution of property to a partner unless the election, provided in section 754 (relating to optional adjustment to basis of partnership property), is in effect with respect to such partnership. (b) M E T H O D OF ADJUSTMENT.—In the case of a distribution of property to a partner, a partnership, with respect to which the election provided in section 754 is in effect, shall— (1) increase the adjusted basis of partnership property by— (A) the amount of any gain recognized to the distributee partner with respect to such distribution under section 731(a)(1), and (B) in the case of distributed property to which section 732 (a)(2) or (b) applies, the excess of the adjusted basis of the distributed property to the partnership immediately before the distribution (as adjusted by section 732(d)) over the basis of the distributed property to the distributee, as determined under section 732, or (2) decrease the adjusted basis of partnership property by— (A) the amount of any loss recognized to the distributee partner with respect to such distribution under section 731(a) (2), and (B) in the case of distributed property to which section 732(b) applies, the excess of the basis of the distributed property to the distributee, as determined under section 732, over the adjusted basis of the distributed property to the partnership immediately before such distribution (as adjusted by section 732(d)). (c) ALLOCATION OF BASIS.—The allocation of basis among partnership properties where subsection (b) is applicable shall be made in accordance with the rules provided in section 755. SEC. 735. CHARACTER OF GAIN OR LOSS ON DISPOSITION OF DISTRIBUTED PROPERTY. (a) SALE OR EXCHANGE OF CERTAIN DISTRIBUTED PROPERTY.—• (1) UNREALIZED RECEIVABLES.—Gain or loss on the disposition

by a distributee partner of unrealized receivables (as defined in section 751(c)) distributed by a partnership, shall be considered § 735(a)(1)

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