§ 724. Character of gain or loss on contributed unrealized receivables, inventory items, and capital loss property
(a)
Contributions of unrealized receivables
In the case of any property which—
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 items
In the case of any property which—
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 property
In the case of any property which—
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)
Definitions
For purposes of this section—
(3)
Substituted basis property
(A)
In general
If 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 corporation
Subparagraph (A) shall not apply to any stock in a C corporation received in an exchange described in section
351.