§743 — Special rules where section 754 election or substantial built-in loss
42 cases·7 followed·4 distinguished·1 criticized·3 overruled·27 cited—17% support
Statute Text — 26 U.S.C. §743
The basis of partnership property shall not be adjusted as the result of a transfer of an interest in a partnership by sale or exchange or on the death of a partner unless the election provided by section 754 (relating to optional adjustment to basis of partnership property) is in effect with respect to such partnership or unless the partnership has a substantial built-in loss immediately after such transfer.
In the case of a transfer of an interest in a partnership by sale or exchange or upon the death of a partner, a partnership with respect to which the election provided in section 754 is in effect or which has a substantial built-in loss immediately after such transfer shall—
increase the adjusted basis of the partnership property by the excess of the basis to the transferee partner of his interest in the partnership over his proportionate share of the adjusted basis of the partnership property, or
decrease the adjusted basis of the partnership property by the excess of the transferee partner’s proportionate share of the adjusted basis of the partnership property over the basis of his interest in the partnership.
Under regulations prescribed by the Secretary, such increase or decrease shall constitute an adjustment to the basis of partnership property with respect to the transferee partner only. A partner’s proportionate share of the adjusted basis of partnership property shall be determined in accordance with his interest in partnership capital and, in the case of property contributed to the partnership by a partner, section 704(c) (relating to contributed property) shall apply in determining such share. In the case of an adjustment under this subsection to the basis of partnership property subject to depletion, any depletion allowable shall be determined separately for the transferee partner with respect to his interest in such property.
The allocation of basis among partnership properties where subsection (b) is applicable shall be made in accordance with the rules provided in section 755.
For purposes of this section, a partnership has a substantial built-in loss with respect to a transfer of an interest in the partnership if—
the partnership’s adjusted basis in the partnership property exceeds by more than $250,000 the fair market value of such property, or
the transferee partner would be allocated a loss of more than $250,000 if the partnership assets were sold for cash equal to their fair market value immediately after such transfer.
The Secretary shall prescribe such regulations as may be appropriate to carry out the purposes of paragraph (1) and section 734(d), including regulations aggregating related partnerships and disregarding property acquired by the partnership in an attempt to avoid such purposes.
For purposes of this section, an electing investment partnership shall not be treated as having a substantial built-in loss with respect to any transfer occurring while the election under paragraph (6)(A) is in effect.
In the case of a transfer of an interest in an electing investment partnership, the transferee partner’s distributive share of losses (without regard to gains) from the sale or exchange of partnership property shall not be allowed except to the extent that it is established that such losses exceed the loss (if any) recognized by the transferor (or any prior transferor to the extent not fully offset by a prior disallowance under this paragraph) on the transfer of the partnership interest.
Losses disallowed under paragraph (2) shall not decrease the transferee partner’s basis in the partnership interest.
In the case of a transferee partner whose basis in property distributed by the partnership is reduced under section 732(a)(2), the amount of the loss recognized by the transferor on the transfer of the partnership interest which is taken into account under paragraph (2) shall be reduced by the amount of such basis reduction.
For purposes of this subsection, the term “electing investment partnership” means any partnership if—
the partnership makes an election to have this subsection apply,
the partnership would be an investment company under section 3(a)(1)(A) of the Investment Company Act of 1940 but for an exemption under paragraph (1) or (7) of section 3(c) of such Act,
such partnership has never been engaged in a trade or business,
substantially all of the assets of such partnership are held for investment,
at least 95 percent of the assets contributed to such partnership consist of money,
no assets contributed to such partnership had an adjusted basis in excess of fair market value at the time of contribution,
all partnership interests of such partnership are issued by such partnership pursuant to a private offering before the date which is 24 months after the date of the first capital contribution to such partnership,
the partnership agreement of such partnership has substantive restrictions on each partner’s ability to cause a redemption of the partner’s interest, and
the partnership agreement of such partnership provides for a term that is not in excess of 15 years.
The election described in subparagraph (A), once made, shall be irrevocable except with the consent of the Secretary.
The Secretary shall prescribe such regulations as may be appropriate to carry out the purposes of this subsection, including regulations for applying this subsection to tiered partnerships.
For purposes of this section, a securitization partnership shall not be treated as having a substantial built-in loss with respect to any transfer.
For purposes of paragraph (1), the term “securitization partnership” means any partnership the sole business activity of which is to issue securities which provide for a fixed principal (or similar) amount and which are primarily serviced by the cash flows of a discrete pool (either fixed or revolving) of receivables or other financial assets that by their terms convert into cash in a finite period, but only if the sponsor of the pool reasonably believes that the receivables and other financial assets comprising the pool are not acquired so as to be disposed of.
Treasury Regulations
- Treas. Reg. §Treas. Reg. §1.743-1 Optional adjustment to basis of partnership property
- Treas. Reg. §Treas. Reg. §1.743-1(a) Generally.
- Treas. Reg. §Treas. Reg. §1.743-1(b) Determination of adjustment.
- Treas. Reg. §Treas. Reg. §1.743-1(c) Determination of transferee's basis in the transferred partnership interest.
- Treas. Reg. §Treas. Reg. §1.743-1(d) Determination of transferee's share of the adjusted basis to the partnership of the partnership's property—(1) Generally.
- Treas. Reg. §Treas. Reg. §1.743-1(e) Allocation of basis adjustment.
- Treas. Reg. §Treas. Reg. §1.743-1(f) Subsequent transfers.
- Treas. Reg. §Treas. Reg. §1.743-1(g) Distributions—(1) Distribution of adjusted property to the transferee—(i) Coordination with section 732.
- Treas. Reg. §Treas. Reg. §1.743-1(h) Contributions of adjusted property—(1) Section 721(a) transactions.
- Treas. Reg. §Treas. Reg. §1.743-1(i) §1.743-1(i)
- Treas. Reg. §Treas. Reg. §1.743-1(j) Effect of basis adjustment—(1) In general.
- Treas. Reg. §Treas. Reg. §1.743-1(k) Returns—(1) Statement of adjustments—(i) In general.
- Treas. Reg. §Treas. Reg. §1.743-1(l) Effective/applicability date.
42 Citing Cases
Petitioners' argume barred from pursuing is c - 12 - [*12] should overrule G_usstafso;1or create some sort ofequitable exception--are unpersuasive.
They repeatedly refer to the "partnership" and its "partners" and to adjustments made pursuant to section 743 ofsubchapter K.
Petitioner seeks attorney's fees, SERVED Dec 11 2014 - 2 - [*2] accounting fees, and other professional fees under section 7430 and Rule 231.' We hold that he is not entitledto such an award.
MEMO NDUM OPINION KROUPA, Judge : This case is )efore the Court on petitioners' motion for liti ation costs including attorney's fees pursuant to section 743 ' and Rule 231 .
BEP made an election under section 754 to adjust the basis of the partnership assets ( the inside .basis ) to equal BRLLC's basis on its newly acquired BEP partnership interest (th e outside basis) pursuant to section 743(b) .
Attached to both returns was the following statement, signed by Oriole23 − as general partner of OPLP: Otay Project LP hereby elects under Section 754 of the Internal Revenue Code to apply the provision of § 734 (b) and § 743 (b) in adjusting the basis of the partnership 23 The first statement attached to the March 2007 Form 1065 was signed by Al as general partner, and the second statement attached to the April 2007 Form 1065 was signed by Jim as VP of Oriole.
The'sanctioning statutes do not distinguish between winners and losers or between the Government and the opposing party or the taxpayer and the Commissioner . See Roadway Express, Inc. v . Piper, 447 U .S . at 762 (discussing 28 U .S .C . sec . 1927) . Neither section 6673(a)(2) nor 28 U .S .C . sec . 1927 requires that the fees have been incurred by the other party . The sanctioning statutes merely require that the excess fees be incurred because of the misconduct of the opponent's attorney . I
. . . . . . . .., . . . . . . . . . 28 2. Hours Reasonably Expended . . . . . . . . . . 29 a. The Limited Success Factor . . . . . . . 29 b. Hours Relating to the Issue of Attorney's Fees . . . . . . . . . . . . . 30 3. Reasonable Hourly Rate Under Section 743 . . 31 C. Hours Reasonably Expended--Izen Fee Request . . . . 31 1. Preliminary Issues . . . . . . . . . . . . . . 31 a. Scope of Representation We May Consider . 31 b. Discrepancies Between Fee Request and Alleged Invoice . . . . . . . .
ocated to the contributing partner; in determining the amount of items allocated to other partners, the partnership’s basis in partnership property shall be treated as being equal to its fair market value at the time of contribution. With respect to sec. 743, AJCA 2004 sec. 833(b) (continued...) -112- B. Claimed Application of Partnership Tax Rules Petitioner’s position is that when the banks contributed the high-basis, low-value properties (the receivables and SMHC stock) to SMP in exchange for
e total excess losses were $3,308,767. For 2016 Surk’s Outerknown loss was $3,001,009. During 2016 Surk made a cash distribution that increased its basis in its capital assets including a $3,812,500 increase in its outside basis in Outerknown.3 See § 743. When it prepared its 2016 return, Surk did not 2 For simplicity, we refer to Surk’s distributive share of loss from Outerknown as an Outerknown loss. 3 Surk made a section 754 election for 2016. The parties stipulated the amount of the outside
743 (providing rules for the adjustment of basis in partnership propertyto account for transfers ofpartnership interest ifthe partnership has made an election under sec. 754). -10- contribution, the upper tierpartnership+wouldhold, a(cid:0)54a1ssetsralmost all ofthe partnership interests-in the lowettier partnership.. The upper tieripartnersh
743 (providing rules for the adjustment of basis in partnership property to account for transfers of partnership interest if the partnership has made an election under sec. 754). JSRMC and RMC each filed a Form 2553, Election by a Small Business Corporation. Respondent issued notices of acceptance as S corporations to JSRMC and RMC. Mr. Rawls
Similarly, the basis adjustment rules of section 743 are made mandatory to a transfer of a partnership interest with a substantial built-in loss.
Similarly, the basis adjustment rules of section 743 are made mandatory to a transfer of a partnership interest with a substantial built-in loss.
Similarly, the basis adjustment rules of section 743 are made mandatory to a transfer of a partnership interest with a substantial built-in loss.
Similarly, the basis adjustment rules of section 743 are made mandatory to a transfer of a partnership interest with a substantial built-in loss.
Similarly, the basis adjustment rules of section 743 are made mandatory to a transfer of a partnership interest with a substantial built-in loss.
Similarly, the basis adjustment rules of section 743 are made mandatory to a transfer of a partnership interest with a substantial built-in loss.
Similarly, the basis adjustment rules of section 743 are made mandatory to a transfer of a partnership interest with a substantial built-in loss.
Similarly, the basis adjustment rules of section 743 are made mandatory to a transfer of a partnership interest with a substantial built-in loss.
However, Holdings 2 didn’t actually distribute the proceeds from the sale until 2000, when it distributed both the cash proceeds and the remaining shares of 12 Section 754 allows a partnership to adjust the basis of its property under section 743, which provides in subsection (b): SEC.
Section 754 allows a partnership to adjust the basis of its property under section 743, which provides in subsection (b): SEC.
743.07 (West 1997). Thereafter, Henry lived with petitioner until he enlisted in the U.S. Army on November 4, 1997, after graduating from high school earlier in the year. The record 4 Exceptions to the general rule of sec. 152(e)(1) are not applicable in the present cases. See sec. 152(e)(2), (3), and (4). - 10 - demonstrates that petitioner
743.07 (West 1997). Thereafter, Henry lived with petitioner until he enlisted in the U.S. Army on November 4, 1997, after graduating from high school earlier in the year. The record 4 Exceptions to the general rule of sec. 152(e)(1) are not applicable in the present cases. See sec. 152(e)(2), (3), and (4). - 10 - demonstrates that petitioner
743.07 (West 1997). Thereafter, Henry lived with petitioner until he enlisted in the U.S. Army on November 4, 1997, after graduating from high school earlier in the year. The record 4 Exceptions to the general rule of sec. 152(e)(1) are not applicable in the present cases. See sec. 152(e)(2), (3), and (4). - 10 - demonstrates that petitioner
areas, the aggregate approach predominates. See sec. 701 (Partners, Not Partnership, Subject to Tax), sec. 702 (Income and Credits of Partner). In other areas, the entity approach predominates. See sec. 742 (Basis of Transferee Partner’s Interest), sec. 743 (Optional Adjustment to Basis of Partnership Property). Outside of subchapter K, whether the aggregate or the entity approach is to be applied depends upon which approach more appropriately serves the Code provision at issue. See Holiday Vil
the aggregate approach predominates. See sec. 701 (Partners, Not Partnership, Subject to Tax) and sec. 702 (Income and Credits of Partner). In other areas, the entity approach predominates. See sec. 742 (Basis of Transferee Partner’s Interest) and sec. 743 (Optional Adjustment to Basis of Partnership Property). Outside of subchapter K, whether the aggregate or the entity approach is to be applied depends upon which approach more appropriately serves the Code provision at issue. See Holiday Vill