Page:United States Statutes at Large Volume 68A.djvu/292

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INTERNAL REVENUE CODE OF 1954

SEC. 755. RULES FOR ALLOCATION OF BASIS. (a) GENERAL RULE. — Any increase or decrease in the

adjusted

basis of partnership property under section 734(b) (relating to the optional adjustment to the basis of undistributed partnership property) or section 743(b) (relating to the optional adjustment to the basis of partnership property in the case of a transfer of an interest in a partnership) shall, except as provided in subsection (b), be allocated— (1) in a manner which has the effect of reducing the difference between the fair market value and the adjusted basis of partnership properties, or (2) in any other manner permitted by regulations prescribed by the Secretary or his delegate. (b) SPECIAL RULE. — I n applying the allocation rules provided in subsection (a), increases or decreases in the adjusted basis of partnership property arising from a distribution of, or a transfer of an interest attributable to, property consisting of— (1) capital assets and property described in section 1231(b), or (2) any other property of the partnership, shall be allocated to partnership property of a like character except that the basis of any such partnership property shall not be reduced below zero. If, in the case of a distribution, the adjustment to basis of property described in paragraph (1) or (2) is prevented by the absence of such property or by insufficient adjusted basis for such property, such adjustment shall be applied to subsequently acquired property of a like character in accordance with regulations prescribed by the Secretary or his delegate. PART III—DEFINITIONS Sec. 761. Terms defined. SEC. 761. TERMS DEFINED.

(a) PARTNERSHIP.—For purposes of this subtitle, the term "partnership" includes a syndicate, group, pool, joint venture, or other unincorporated organization through or by means of which any business, financial operationj or venture is carried on, and which is not, within the meaning of this title, a corporation or a trust or estate. Under regulations the Secretary or his delegate may, a t the election of all the members of an unincorporated organization, exclude such organization from the application of all or part of this subchapter, if it is availed of— (1) for investment purposes only and not for the active conduct of a business, or (2) for the joint production, extraction, or use of property, b u t not for the purpose of selling services or property produced or extracted, if the income of the members of the organization may be adequately determined without the computation of partnership taxable income. (b) PARTNER.—For purposes of this subtitle, the term "partner" means a member of a partnership. (c) PARTNERSHIP AGREEMENT.—For purposes of this subchapter, a partnership agreement includes any modifications of the partnership §755

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