§755 — Title 26 Internal Revenue Code | U.S. Code

§755 Rules for allocation of basis

Title 26 › Subtitle Subtitle A— - Income Taxes › Chapter CHAPTER 1— - NORMAL TAXES AND SURTAXES › Subchapter Subchapter K— - Partners and Partnerships › Part PART II— - CONTRIBUTIONS, DISTRIBUTIONS, AND TRANSFERS › Subpart Subpart D— - Provisions Common to Other Subparts › § 755

Last updated Apr 6, 2026|Official source

Summary

When a partnership’s property basis goes up or down under section 734(b) or 743(b), the partnership must spread that change among its properties. The spread should either cut down the gap between each property’s fair market value and its adjusted basis, or use another method the Secretary allows by regulation. These allocation rules cover changes from distributions or transfers tied to property that are capital assets (including property under section 1231(b)) or any other partnership property. If the change is a decrease under section 734(b), none of that decrease can be assigned to stock in a corporate partner (or persons related under sections 267(b) and 707(b)(1)); any part that can’t go to stock must be allocated to the other partnership property.

Title 26, §755

Internal Revenue Code — Source: USLM XML via OLRC

(a)Any increase or decrease in the adjusted basis of partnership property under section 734(b) (relating to the optional adjustment to the basis of undistributed partnership property) or section 743(b) (relating to the optional adjustment to the basis of partnership property in the case of a transfer of an interest in a partnership) shall, except as provided in subsection (b), be allocated—

(1)in a manner which has the effect of reducing the difference between the fair market value and the adjusted basis of partnership properties, or

(2)in any other manner permitted by regulations prescribed by the Secretary.

(b)In applying the allocation rules provided in subsection (a), increases or decreases in the adjusted basis of partnership property arising from a distribution of, or a transfer of an interest attributable to, property consisting of—

(1)capital assets and property described in section 1231(b), or

(2)any other property of the partnership,

(c)In making an allocation under subsection (a) of any decrease in the adjusted basis of partnership property under section 734(b)—

(1)no allocation may be made to stock in a corporation (or any person related (within the meaning of section 267(b) and 707(b)(1)) to such corporation) which is a partner in the partnership, and

(2)any amount not allocable to stock by reason of paragraph (1) shall be allocated under subsection (a) to other partnership property.

Notes & Related Subsidiaries

Editorial Notes

Amendments

2004—Subsec. (c). Pub. L. 108–357 added subsec. (c). 1976—Subsecs. (a), (b). Pub. L. 94–455 struck out “or his delegate” after “Secretary” wherever appearing.

Statutory Notes and Related Subsidiaries

Effective Date

of 2004 Amendment Pub. L. 108–357, title VIII, § 834(b), Oct. 22, 2004, 118 Stat. 1592, provided that: “The amendment made by this section [amending this section] shall apply to distributions after the date of the enactment of this Act [Oct. 22, 2004].”