(a) Payments considered as distributive share or guaranteed payment. — Payments made in liquidation of the interest of a retiring partner or a decedent partner shall, except as provided in subsection (b), be considered:(1) As a distributive share to the recipient of partnership income if the amount thereof is determined with regard to the income of the partnership, or(2) as a guaranteed payment described in § 30337(c) of this title if the amount thereof is determined without regard to the income of the partnership.(b) Payments for interest in partnership. —(1) General rule. — Payments made in liquidation of the interest of a retiring partner or a decedent partner, to the extent such payments (other than payments described in clause (2)) are determined, under regulations prescribed by the Secretary, to be made in exchange for the interest of such partner in partnership property, shall be considered as a distribution by the partnership and not as a distributive share or guaranteed payment under subsection (a).(2) Special rules. — For purposes of this subsection, payments in exchange for an interest in partnership property shall not include amounts paid for:(A) Unrealized receivables

t under subsection (a).(2) Special rules. — For purposes of this subsection, payments in exchange for an interest in partnership property shall not include amounts paid for:(A) Unrealized receivables of the partnership (as defined in § 30371(c) of this title), or(B) good will of the partnership, except to the extent that the partnership agreement provides for a payment with respect to good will.(3) Limitation on application of clause (2).— Clause (2) shall apply only if:(A) Capital is not a material income-producing factor for the partnership, and(B) the retiring or decedent partner was a general partner in the partnership. History —Jan. 31, 2011, No. 1, § 1073.06, retroactive to Jan. 1, 2011.