Sale or exchange of certain distributed property
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 as ordinary income or as ordinary loss, as the case may be.
Inventory items
Gain or loss on the sale or exchange by a distributee partner of inventory items (as defined in section 751(d)) distributed by a partnership shall, if sold or exchanged within 5 years from the date of the distribution, be considered as ordinary income or as ordinary loss, as the case may be.
Holding period for distributed property
In determining the period for which a partner has held property received in a distribution from a partnership (other than for purposes of subsection (a)(2)), there shall be included the holding period of the partnership, as determined under section 1223, with respect to such property.
Special rules
Waiver of holding periods contained in section 1231
For purposes of this section, section 751(d) (defining inventory item) shall be applied without regard to any holding period in section 1231(b).
Substituted basis property
In general
If any property described in subsection (a) is disposed of in a nonrecognition transaction, the tax treatment which applies to such property under such subsection shall also apply to any substituted basis property resulting from such transaction. A similar rule shall also apply in the case of a series of nonrecognition transactions.
Exception for stock in C corporation
Subparagraph (A) shall not apply to any stock in a C corporation received in an exchange described in section 351.
Aug. 16, 1954, ch. 763 68A Stat. 247 Pub. L. 94–455, title XIX, § 1901(b)(3)(D)90 Stat. 1792 Pub. L. 98–369, div. A, title I, § 74(b)98 Stat. 593 Pub. L. 105–34, title X, § 1062(b)(3)111 Stat. 947 (, ; , , ; , , ; , , .)
Editorial Notes
Amendments
Pub. L. 105–341997—Subsecs. (a)(2), (c)(1). substituted “section 751(d)” for “section 751(d)(2)”.
Pub. L. 98–3691984—Subsec. (c). added subsec. (c).
Pub. L. 94–4551976—Subsec. (a)(1), (2). substituted “as ordinary income or as ordinary loss, as the case may be” for “gain or loss from the sale or exchange of property other than a capital asset”.
Statutory Notes and Related Subsidiaries
Effective Date of 1997 Amendment
Pub. L. 105–34section 1062(c) of Pub. L. 105–34section 724 of this titleAmendment by applicable to sales, exchanges, and distributions after , but not applicable to any sale or exchange pursuant to a written binding contract in effect on , and at all times thereafter before such sale or exchange, see , set out as a note under .
Effective Date of 1984 Amendment
Pub. L. 98–369, div. A, title I, § 74(d)(2)98 Stat. 594
Effective Date of 1976 Amendment
Pub. L. 94–455section 1901(d) of Pub. L. 94–455section 2 of this titleAmendment by effective for taxable years beginning after , see , set out as a note under .