(a) Partner not acting in capacity as partner. —(1) In general. — If a partner engages in a transaction with a partnership other than in his/her 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.(2) Treatment of payments to partners for property or services. — Under regulations prescribed by the Secretary:(A) Treatment of certain services and transfers of property. — If:(i) A partner performs services for a partnership or transfers property to a partnership;(ii) there is a related direct or indirect allocation and distribution to such partner, and(iii) 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/her capacity as a member of the partnership, such allocation and distribution shall be treated as a transaction described in clause (1).(B) Treatment of certain property transfers.

other than in his/her capacity as a member of the partnership, such allocation and distribution shall be treated as a transaction described in clause (1).(B) Treatment of certain property transfers. — If:(i) There is a direct or indirect transfer of money or other property by a partner to a partnership;(ii) there is a related direct or indirect transfer of money or other property by the partnership to such partner (or another partner), and(iii) the transfers described in subparagraphs (i) and (ii) of clause (2)(A), when viewed together, are properly characterized as a sale or exchange of property, such transfers shall be treated either as a transaction described in clause (1) or as a transaction between two (2) or more partners acting other than in their capacity as members of the partnership.(3) Other transactions. — If:(A) A corporation ('the transferor corporation') transfers property ('the transferred property') to a partnership ('the transferee') in exchange for interest in such partnership or as a contribution to the capital of the same;(B) when the transfer of property occurs, the fair market value of the property exceeds the its basis in the hands of the transferor

n such partnership or as a contribution to the capital of the same;(B) when the transfer of property occurs, the fair market value of the property exceeds the its basis in the hands of the transferor corporation, and(C) during the 'applicable period' (as defined in this subsection) the transferee or any partnership controlled directly or indirectly by the transferee, distributes the transferred property to a person, who at the time of the transfer described in paragraph (A) of this clause, was a shareholder of the transferor corporation, then, the transfers and distributions described in paragraph (B) of this clause and in this subsection shall be treated as if they never occurred between the persons indicated therein, and the transferred property shall be treated as distributed by the transferor corporation to the shareholder described in this paragraph, at the time in which the transfer described in paragraph (A) of this clause occurred.For purposes of this clause, the term 'applicable period' means a period of sixty (60) months beginning with the first month of the first taxable year of the transferor corporation that begun after the transfer.

of this clause, the term 'applicable period' means a period of sixty (60) months beginning with the first month of the first taxable year of the transferor corporation that begun after the transfer. The prescriptive period for the assessment and collection of deficiencies provided in §§ 33001 et seq. of this title in connection with the provisions of this paragraph shall not begin to elapse until the filing of the income tax return of the transferor corporation corresponding to the last taxable year within which the last month of the applicable period shall end.(b) Certain sales or exchanges of property with respect to controlled partnerships. —(1) Losses disallowed. — 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, in transactions described in § 30137(b) of this title.(2) Ownership rules. — For purposes of clause (1), the ownership of the capital or profits interest of a partnership shall be determined pursuant to the ownership rules provided in § 30137(b) of this title.(c) Gains treated as ordinary income.

e (1), the ownership of the capital or profits interest of a partnership shall be determined pursuant to the ownership rules provided in § 30137(b) of this title.(c) Gains treated as ordinary income. — 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 § 30141(a)(1) of this title:(1) Between a partnership and a person owning, directly or indirectly, more than fifty percent (50%) of the capital interest, or profits interest, in such partnership, or(2) between two partnerships in which the same persons own, directly or indirectly, more than fifty percent (50%) of the capital interest or profits interests, any gain recognized shall be considered as ordinary income.(d) Ownership of a capital or profits interest. — For purposes of clauses (1) and (2) of subsection (c), 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 § 30137(b)(2) of this title.(e) Guaranteed payments. — To the extent determined without regard to the income of the partnership, payments to a partner

for constructive ownership of stock provided in § 30137(b)(2) of this title.(e) Guaranteed payments. — 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 purposes of §§ 30101(a) and 30121(a) of this title, subject to the limitation of § 30137 of this title. History —Jan. 31, 2011, No. 1, § 1071.07, retroactive to Jan. 1, 2011.