§707 — Transactions between partner and partnership
79 cases·9 followed·6 distinguished·2 criticized·3 overruled·59 cited—11% support
Statute Text — 26 U.S.C. §707
If a partner engages in a transaction with a partnership other than in his capacity as a member of such partnership, the transaction shall, except as otherwise provided in this section, be considered as occurring between the partnership and one who is not a partner.
Except as provided by the Secretary—
If—
a partner performs services for a partnership or transfers property to a partnership,
there is a related direct or indirect allocation and distribution to such partner, and
the performance of such services (or such transfer) and the allocation and distribution, when viewed together, are properly characterized as a transaction occurring between the partnership and a partner acting other than in his capacity as a member of the partnership,
such allocation and distribution shall be treated as a transaction described in paragraph (1).
If—
there is a direct or indirect transfer of money or other property by a partner to a partnership,
there is a related direct or indirect transfer of money or other property by the partnership to such partner (or another partner), and
the transfers described in clauses (i) and (ii), when viewed together, are properly characterized as a sale or exchange of property,
such transfers shall be treated either as a transaction described in paragraph (1) or as a transaction between 2 or more partners acting other than in their capacity as members of the partnership.
No deduction shall be allowed in respect of losses from sales or exchanges of property (other than an interest in the partnership), directly or indirectly, between—
a partnership and a person owning, directly or indirectly, more than 50 percent of the capital interest, or the profits interest, in such partnership, or
two partnerships in which the same persons own, directly or indirectly, more than 50 percent of the capital interests or profits interests.
In the case of a subsequent sale or exchange by a transferee described in this paragraph, section 267(d) shall be applicable as if the loss were disallowed under section 267(a)(1). For purposes of section 267(a)(2), partnerships described in subparagraph (B) of this paragraph shall be treated as persons specified in section 267(b).
In the case of a sale or exchange, directly or indirectly, of property, which in the hands of the transferee, is property other than a capital asset as defined in section 1221—
between a partnership and a person owning, directly or indirectly, more than 50 percent of the capital interest, or profits interest, in such partnership, or
between two partnerships in which the same persons own, directly or indirectly, more than 50 percent of the capital interests or profits interests,
any gain recognized shall be considered as ordinary income.
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.
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, subject to section 263, for purposes of section 162(a) (relating to trade or business expenses).
Treasury Regulations
- Treas. Reg. §Treas. Reg. §1.707-0 Table of contents
- Treas. Reg. §Treas. Reg. §1.707-0(a) Sections 1.
- Treas. Reg. §Treas. Reg. §1.707-0(b) Section 1.
- Treas. Reg. §Treas. Reg. §1.707-0(c) Disclosure by certain partnerships.
- Treas. Reg. §Treas. Reg. §1.707-0(d) Examples.
- Treas. Reg. §Treas. Reg. §1.707-0(e) Tiered partnerships and other related persons.
- Treas. Reg. §Treas. Reg. §1.707-0(f) Examples.
- Treas. Reg. §Treas. Reg. §1.707-0(i) In general.
- Treas. Reg. §Treas. Reg. §1.707-1 Transactions between partner and partnership
- Treas. Reg. §Treas. Reg. §1.707-1(a) Partner not acting in capacity as partner.
- Treas. Reg. §Treas. Reg. §1.707-1(b) Certain sales or exchanges of property with respect to controlled partnerships—(1) Losses disallowed.
- Treas. Reg. §Treas. Reg. §1.707-1(c) Guaranteed payments.
- Treas. Reg. §Treas. Reg. §1.707-3 Disguised sales of property to partnership; general rules
- Treas. Reg. §Treas. Reg. §1.707-3(a) Treatment of transfers as a sale—(1) In general.
- Treas. Reg. §Treas. Reg. §1.707-3(b) Transfers treated as a sale—(1) In general.
- Treas. Reg. §Treas. Reg. §1.707-3(c) Transfers made within two years presumed to be a sale—(1) In general.
- Treas. Reg. §Treas. Reg. §1.707-3(d) Transfers made more than two years apart presumed not to be a sale.
- Treas. Reg. §Treas. Reg. §1.707-3(e) Scope.
- Treas. Reg. §Treas. Reg. §1.707-3(f) Examples.
- Treas. Reg. §Treas. Reg. §1.707-3(i) §1.707-3(i)
- Treas. Reg. §Treas. Reg. §1.707-3(v) §1.707-3(v)
- Treas. Reg. §Treas. Reg. §1.707-3(x) That the partner has no obligation to return or repay the money or other consideration to the partnership, or has such an obligation but it is likely to become due at such a distant point in the future that the present value of that obligation is small in relation to the amount of money or other consideration transferred by the partnership to the partner.
- Treas. Reg. §Treas. Reg. §1.707-4 Disguised sales of property to partnership; special rules applicable to guaranteed payments, preferred returns, operating cash flow distributions, and reimbursements of preformation expenditures
- Treas. Reg. §Treas. Reg. §1.707-4(a) Guaranteed payments and preferred returns—(1) Guaranteed payment not treated as part of a sale—(i) In general.
- Treas. Reg. §Treas. Reg. §1.707-4(b) Presumption regarding operating cash flow distributions—(1) In general.
79 Citing Cases
In attempting to distinguish between abusive and nonabusive transactions, Congress recognized that debt frequently plays a valid role in both sale and business formation transactions and thus did not intend to 54Sec. 1.707-5(b)(2), Income Tax Regs.
1.707-1(a), Income Tax Regs. Section 707 applies even ifit is determined after the application ofthe rules that the purported partner is not a partner. Sec. 1.707-3(a)(3), Income Tax Regs.; see also sec. 1.707-6(a), Income Tax Regs.4 Therefore, the status ofa continuing partner-partnership relationship does not govern our decision in this case.
We disagree with both .of respondent's arguments .
707(a)(1). In those situations the transaction is recast as ifit occurred between the partnership and one who is not a partner. Sec. 707(a)(1). Section 707 "prevents use ofthe partnership provisions to render nontaxable what would in substance have been a taxable exchange ifit had not been 'run through' the partnership." Otey v. Commissioner, 70 T.C. 312, 317 (1978), aff'd, 634 F.2d 1046 (6th Cir. 1980). One such nonrecognition transaction is commonly referred to as a disguised sale and is gover
Pursuant to section 707, a partner shall include in his income for a taxable year guaranteed payments which are made to him in a partnership taxable year - 10 - ending with or within that taxable year.
Section 707 is not applicable to distributions of money or property by a partnership to a partner. Sec. 1.707-1(a), Income Tax Regs. Since we have determined that the payments petitioner received are guaranteed payments within the purview of section 707(c), the payments are not distributions within the meaning of section 731. Therefore, petitioner'
Section 707 is not applicable to distributions of money or property by a partnership to a partner. Sec. 1.707-1(a), Income Tax Regs. Since we have determined that the payments petitioner received are guaranteed payments within the purview of section 707(c), the payments are not distributions within the meaning of section 731. Therefore, petitioner'
Pursuant to section 707, a partner shall include in his taxable year guaranteed payments which are made to him in a partnership taxable year ending with or within that taxable year.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even ifwe were to fmd that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting oflosses away from a contributing partner, and the disguised sales rules ofsection 707 would also come into play.
We note that even if we were to find that the trust investor and Sugarloaf entered into a partnership, the AJCA would prevent the shifting of losses away from a contributing partner, and the disguised sales rules of section 707 would also come into play.
LTD paid salaries and fringe benefits to the three individuals, and as petitioner sees it, section 707 would operate to disallow LTD’s deduction of the payroll taxes paid on the salaries and to treat the fringe benefits as guaranteed payments, if the three individuals were in fact partners of LTD.