USC Subpart A

26 U.S.C. § 721 Nonrecognition of gain or loss on contribution

(a) General ruleNo gain or loss shall be recognized to a partnership or to any of its partners in the case of a contribution of property to the partnership in exchange for an interest in the partnership. (b) Special ruleSubsection (a) shall not apply to gain realized on a transfer of property to a partnership which would be treated as an investment company (within the meaning of section 351) if the partnership were incorporated. (c) Regulations relating to certain transfers to partnershipsThe Secretary may provide by regulations that subsection (a) shall not apply to gain realized on the transfer of property to a partnership if such gain, when recognized, will be includible in the gross income of a person other than a United States person. (d) Transfers of intangiblesFor regulatory authority to treat intangibles transferred to a partnership as sold, see section 367(d)(3).

26 U.S.C. § 722 Basis of contributing partner’s interest

The basis of an interest in a partnership acquired by a contribution of property, including money, to the partnership shall be the amount of such money and the adjusted basis of such property to the contributing partner at the time of the contribution increased by the amount (if any) of gain recognized under section 721(b) to the contributing partner at such time.

26 U.S.C. § 723 Basis of property contributed to partnership

The basis of property contributed to a partnership by a partner shall be the adjusted basis of such property to the contributing partner at the time of the contribution increased by the amount (if any) of gain recognized under section 721(b) to the contributing partner at such time.

26 U.S.C. § 724 Character of gain or loss on contributed unrealized receivables, inventory items, and capital loss property

(a) Contributions of unrealized receivablesIn the case of any property which—(1) was contributed to the partnership by a partner, and (2) was an unrealized receivable in the hands of such partner immediately before such contribution, any gain or loss recognized by the partnership on the disposition of such property shall be treated as ordinary income or ordinary loss, as the case may be. (b) Contributions of inventory itemsIn the case of any property which—(1) was contributed to the partnership by a partner, and (2) was an inventory item in the hands of such partner immediately before such contribution, any gain or loss recognized by the partnership on the disposition of such property during the 5-year period beginning on the date of such contribution shall be treated as ordinary income or ordinary loss, as the case may be. (c) Contributions of capital loss propertyIn the case of any property which—(1) was contributed by a partner to the partnership, and (2) was a capital asset in the hands of such partner immediately before such contribution, any loss recognized by the partnership on the disposition of such property during the 5-year period beginning on the date of such contribution shall be treated as a loss from the sale of a capital asset to the extent that, immediately before such contribution, the adjusted basis of such property in the hands of the partner exceeded the fair market value of such property. (d) DefinitionsFor purposes of this section—(1) Unrealized receivableThe term “unrealized receivable” has the meaning given such term by section 751(c) (determined by treating any reference to the partnership as referring to the partner). (2) Inventory itemThe term “inventory item” has the meaning given such term by section 751(d) (determined by treating any reference to the partnership as referring to the partner and by applying section 1231 without regard to any holding period therein provided). (3) Substituted basis property(A) In generalIf any property described in subsection (a), (b), or (c) 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 non-recognition transactions. (B) Exception for stock in C corporationSubparagraph (A) shall not apply to any stock in a C corporation received in an exchange described in section 351.