(a) General rule. — No gain or loss shall be recognized to a partnership or to any of its partners in the case of a contribution of money or other property to the partnership in exchange for an interest in the partnership, except as provided in subsections (b), (c), (d) and (e) of this section.(b) Flexibly depreciable property. — In the case of a contribution of flexibly depreciable property, no gain or loss shall be recognized to a partnership or its partners unless they elect otherwise. The election to recognize gain or loss in said contribution shall be irrevocable.(c) Property subject to obligation or lien. — In the case of a contribution of property subject to obligation or lien, which is assumed by the partnership, gain shall be recognized to the contributing partner to the extent that the portion of the obligation or lien from which it is released exceeds the adjusted basis, for the contributing partner, of the contributed property.(d) Special rule. — Subsection (a) shall not apply to a gain realized on a transfer of property to a partnership which would be treated as an investment company if the partnership were incorporated.

.(d) Special rule. — Subsection (a) shall not apply to a gain realized on a transfer of property to a partnership which would be treated as an investment company if the partnership were incorporated. For purposes of this section, determination of whether a company is an investment company shall be made:(1) By taking into account all stock and securities held by the company, and(2) by treating as stock and securities:(A) Money;(B) stocks and other equity interests in a corporation, evidences of indebtedness, options, forward or futures contracts, notional principal contracts and derivatives;(C) any foreign currency;(D) any interest in a real estate investment trust, a common trust fund, a regulated investment company, a publicly-traded partnership or any other equity interest (other than in a corporation) which pursuant to its terms or any other arrangement is readily convertible into, or exchangeable for, any asset described in paragraph (C), or paragraphs (E) or (H);(E) except to the extent provided in regulations prescribed by the Secretary, any interest in a precious metal, unless such metal is used or held in the active conduct of a trade or business after the contribution;(F)

extent provided in regulations prescribed by the Secretary, any interest in a precious metal, unless such metal is used or held in the active conduct of a trade or business after the contribution;(F) except as otherwise provided in regulations prescribed by the Secretary, interests in any entity if substantially all of the assets of such entity consist (directly or indirectly) of any assets described in any preceding paragraph or paragraph (H);(G) to the extent provided in regulations prescribed by the Secretary, any interest in any entity not described in paragraph (F), but only to the extent of the value of such interest that is attributable to assets listed in paragraphs (A)—(E) or paragraph (H), or(H) any other asset specified in regulations prescribed by the Secretary.The Secretary may prescribe regulations that, under appropriate circumstances, treat any asset described in paragraphs (A)—(E) as not listed in such paragraphs.(e) Regulations relating to certain transfers to partnerships. — The Secretary may provide by regulations that the provisions on nonrecognition of gain of subsection (a) shall not apply to gain realized on the transfer of property to a partnership if such

ships. — The Secretary may provide by regulations that the provisions on nonrecognition of gain of subsection (a) shall not apply to gain realized on the transfer of property to a partnership if such gain, when recognized, will be includible in the gross income of a person other than a resident of Puerto Rico or a nonresident United States citizen. History —Jan. 31, 2011, No. 1, § 1072.01, retroactive to Jan. 1, 2011.