§ 751. Unrealized receivables and inventory items
(a)
Sale or exchange of interest in partnership
The amount of any money, or the fair market value of any property, received by a transferor partner in exchange for all or a part of his interest in the partnership attributable to—
shall be considered as an amount realized from the sale or exchange of property other than a capital asset.
(b)
Certain distributions treated as sales or exchanges
(1)
General rule
To the extent a partner receives in a distribution—
(A)
partnership property which is—
in exchange for all or a part of his interest in other partnership property (including money), or
(B)
partnership property (including money) other than property described in subparagraph (A)(i) or (ii) in exchange for all or a part of his interest in partnership property described in subparagraph (A)(i) or (ii),
such transactions shall, under regulations prescribed by the Secretary, be considered as a sale or exchange of such property between the distributee and the partnership (as constituted after the distribution).
(c)
Unrealized receivables
For purposes of this subchapter, the term “unrealized receivables” includes, to the extent not previously includible in income under the method of accounting used by the partnership, any rights (contractual or otherwise) to payment for—
(1)
goods delivered, or to be delivered, to the extent the proceeds therefrom would be treated as amounts received from the sale or exchange of property other than a capital asset, or
(2)
services rendered, or to be rendered.
For purposes of this section and,[1] sections
731,
732, and
741 (but not for purposes of section
736), such term also includes mining property (as defined in section
617
(f)(2)), stock in a DISC (as described in section
992
(a)), section
1245 property (as defined in section
1245
(a)(3)), stock in certain foreign corporations (as described in section
1248), section
1250 property (as defined in section
1250
(c)), farm land (as defined in section
1252
(a)), franchises, trademarks, or trade names (referred to in section
1253
(a)), and an oil, gas, or geothermal property (described in section
1254) but only to the extent of the amount which would be treated as gain to which section
617
(d)(1),
995
(c),
1245
(a),
1248
(a),
1250
(a),
1252
(a),
1253
(a), or
1254
(a) would apply if (at the time of the transaction described in this section or section
731,
732, or
741, as the case may be) such property had been sold by the partnership at its fair market value. For purposes of this section and,[1] sections
731,
732, and
741 (but not for purposes of section
736), such term also includes any market discount bond (as defined in section
1278) and any short-term obligation (as defined in section
1283) but only to the extent of the amount which would be treated as ordinary income if (at the time of the transaction described in this section or section
731,
732, or
741, as the case may be) such property had been sold by the partnership.
(d)
Inventory items
For purposes of this subchapter, the term “inventory items” means—
(2)
any other property of the partnership which, on sale or exchange by the partnership, would be considered property other than a capital asset and other than property described in section
1231, and
(e)
Limitation on tax attributable to deemed sales of section
1248 stock
For purposes of applying this section and sections
731 and
741 to any amount resulting from the reference to section
1248
(a) in the second sentence of subsection (c), in the case of an individual, the tax attributable to such amount shall be limited in the manner provided by subsection (b) of section
1248 (relating to gain from certain sales or exchanges of stock in certain foreign corporation).
(f)
Special rules in the case of tiered partnerships, etc.
In determining whether property of a partnership is—
such partnership shall be treated as owning its proportionate share of the property of any other partnership in which it is a partner. Under regulations, rules similar to the rules of the preceding sentence shall also apply in the case of interests in trusts.
[1] So in original. The comma probably should not appear.