§755 — Rules for allocation of basis
6 cases·1 distinguished·1 criticized·4 cited
Statute Text — 26 U.S.C. §755
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—
in a manner which has the effect of reducing the difference between the fair market value and the adjusted basis of partnership properties, or
in any other manner permitted by regulations prescribed by the Secretary.
In 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—
capital assets and property described in section 1231(b), or
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.
In making an allocation under subsection (a) of any decrease in the adjusted basis of partnership property under section 734(b)—
no allocation may be made to stock in a corporation (or any person related (within the meaning of sections 267(b) and 707(b)(1)) to such corporation) which is a partner in the partnership, and
any amount not allocable to stock by reason of paragraph (1) shall be allocated under subsection (a) to other partnership property.
Gain shall be recognized to the partnership to the extent that the amount required to be allocated under paragraph (2) to other partnership property exceeds the aggregate adjusted basis of such other property immediately before the allocation required by paragraph (2).
Treasury Regulations
- Treas. Reg. §Treas. Reg. §1.755-1 Rules for allocation of basis
- Treas. Reg. §Treas. Reg. §1.755-1(a) In general—(1) Scope.
- Treas. Reg. §Treas. Reg. §1.755-1(b) Adjustments under section 743(b)—(1) Generally.
- Treas. Reg. §Treas. Reg. §1.755-1(c) Adjustments under section 734(b)—(1) Allocations between classes of property—(i) General rule.
- Treas. Reg. §Treas. Reg. §1.755-1(d) Required statements.
- Treas. Reg. §Treas. Reg. §1.755-1(e) Effective/applicability dates—(1) Generally.
6 Citing Cases
In 1988, section 1060(d) was added specifically to require the use of the residual method for distributions of partnership property to partners and for transfers of partnership interests for purposes of determining the value of goodwill or going concern value in applying section 755. The 1988 amendment included detailed provisions to enable section 1060 principles to be integrated into the generally self-contained provisions of subchapter K. The absence of express provisions in section 1056 to a
ds of the distributing entity immediately prior to such distribution, the distributing entity, if it has 20 [*20] a section 754 election in effect for the year of such distribution, shall increase the basis of its retained assets in accordance with section 755. In sum, EY reached nine separate conclusions as to the tax implications of these transactions. After reaching its conclusions EY’s opinion also addressed the IRS’s application of “the substance-over-form principles, the related sham trans
755 (West 1982) ("Real property within this State is governed by the law of this State, except where the title is in the United States."). The Bard property is located in California, and, consequently, we must look to California law to determine how it passed on decedent’s death. If the Bard property was decedent's separate property, then one-