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

Summary

Defines key words used in this part of the tax code and says when an unincorporated group counts as a partnership. A partnership is an unincorporated group (like a syndicate, pool, or joint venture) that runs a business or financial activity and is not a corporation, trust, or estate. The Secretary can let all members elect to keep some groups out of these rules if the group is only for investment, for joint use or extraction of property without selling what’s made, or used briefly by securities dealers for underwriting. Partner: a member of a partnership; a capital interest that produces income counts as a partnership interest even if received as a gift. Partnership agreement: includes changes all partners agree to before or at the partnership tax return filing deadline (no extensions). Liquidation of a partner’s interest: ending a partner’s whole stake by one or more distributions. Special rules apply under sections 708 and 743 and any others the Secretary names. Husband-and-wife joint ventures: if only the spouses are members, both materially take part, file jointly, and both elect this rule, the venture is not treated as a partnership; items are split by their interests and each reports their share as a sole proprietor. For sale, exchange, liquidation, or reduction of a partner’s interest, see sections 704(b) and 706(c)(2).

Title 26, §761

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(a)For purposes of this subtitle, the term “partnership” includes a syndicate, group, pool, joint venture, or other unincorporated organization through or by means of which any business, financial operation, or venture is carried on, and which is not, within the meaning of this title, a corporation or a trust or estate. Under regulations the Secretary may, at the election of all the members of an unincorporated organization, exclude such organization from the application of all or part of this subchapter, if it is availed of—

(1)for investment purposes only and not for the active conduct of a business,

(2)for the joint production, extraction, or use of property, but not for the purpose of selling services or property produced or extracted, or

(3)by dealers in securities for a short period for the purpose of underwriting, selling, or distributing a particular issue of securities,

(b)For purposes of this subtitle, the term “partner” means a member of a partnership. In the case of a capital interest in a partnership in which capital is a material income-producing factor, whether a person is a partner with respect to such interest shall be determined without regard to whether such interest was derived by gift from any other person.

(c)For purposes of this subchapter, a partnership agreement includes any modifications of the partnership agreement made prior to, or at, the time prescribed by law for the filing of the partnership return for the taxable year (not including extensions) which are agreed to by all the partners, or which are adopted in such other manner as may be provided by the partnership agreement.

(d)For purposes of this subchapter, the term “liquidation of a partner’s interest” means the termination of a partner’s entire interest in a partnership by means of a distribution, or a series of distributions, to the partner by the partnership.

(e)Except as otherwise provided in regulations, for purposes of—

(1)section 708 (relating to continuation of partnership),

(2)section 743 (relating to optional adjustment to basis of partnership property), and

(3)any other provision of this subchapter specified in regulations prescribed by the Secretary,

(f)(1)In the case of a qualified joint venture conducted by a husband and wife who file a joint return for the taxable year, for purposes of this title—

(A)such joint venture shall not be treated as a partnership,

(B)all items of income, gain, loss, deduction, and credit shall be divided between the spouses in accordance with their respective interests in the venture, and

(C)each spouse shall take into account such spouse’s respective share of such items as if they were attributable to a trade or business conducted by such spouse as a sole proprietor.

(2)For purposes of paragraph (1), the term “qualified joint venture” means any joint venture involving the conduct of a trade or business if—

(A)the only members of such joint venture are a husband and wife,

(B)both spouses materially participate (within the meaning of section 469(h) without regard to paragraph (5) thereof) in such trade or business, and

(C)both spouses elect the application of this subsection.

(g)For rules in the case of the sale, exchange, liquidation, or reduction of a partner’s interest, see section 704(b) and 706(c)(2).

Notes & Related Subsidiaries

Editorial Notes

Amendments

2015—Subsec. (b). Pub. L. 114–74 inserted at end “In the case of a capital interest in a partnership in which capital is a material income-producing factor, whether a person is a partner with respect to such interest shall be determined without regard to whether such interest was derived by gift from any other person.” 2007—Subsecs. (f), (g). Pub. L. 110–28 added subsec. (f) and redesignated former subsec. (f) as (g). 1986—Subsec. (e). Pub. L. 99–514 substituted “Distributions of partnership interests” for “Distributions” in heading, substituted “Except as otherwise provided in

Regulations

, for purposes of” for “For purposes of” in introductory provision, and “any distribution of an interest in a partnership” for “any distribution” in closing provisions. 1984—Subsecs. (e), (f). Pub. L. 98–369 added subsec. (e) and redesignated former subsec. (e) as (f). 1980—Subsec. (a)(3). Pub. L. 96–222 added par. (3). 1976—Subsec. (a). Pub. L. 94–455, § 1906(b)(13)(A), struck out “or his delegate” after “Secretary”. Subsec. (e). Pub. L. 94–455, § 213(c)(3)(B), added subsec. (e).

Statutory Notes and Related Subsidiaries

Effective Date

of 2015 AmendmentAmendment by Pub. L. 114–74 applicable to partnership taxable years beginning after Dec. 31, 2015, see section 1102(c) of Pub. L. 114–74, set out as a note under section 704 of this title.

Effective Date

of 2007 Amendment Pub. L. 110–28, title VIII, § 8215(c), May 25, 2007, 121 Stat. 194, provided that: “The

Amendments

made by this section [amending this section, section 1402 of this title, and section 411 of Title 42, The Public Health and Welfare] shall apply to taxable years beginning after December 31, 2006.”

Effective Date

of 1986 AmendmentAmendment by Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.

Effective Date

of 1984 AmendmentAmendment by Pub. L. 98–369 applicable to distributions, sales, and exchanges made after Mar. 31, 1984, in taxable years ending after such date, see section 75(e) of Pub. L. 98–369, set out as an

Effective Date

note under section 386 of this title.

Effective Date

of 1980 AmendmentAmendment by Pub. L. 96–222 effective, except as otherwise provided, as if it had been included in the provisions of the Revenue Act of 1978, Pub. L. 95–600, to which such amendment relates, see section 201 of Pub. L. 96–222, set out as a note under section 32 of this title.

Effective Date

of 1976 AmendmentAmendment by section 213(c)(3)(B) of Pub. L. 94–455 applicable in the case of partnership taxable years beginning after Dec. 31, 1975, see section 213(f)(1) of Pub. L. 94–455, set out as a note under section 709 of this title. Plan

Amendments

Not Required Until January 1, 1989For provisions directing that if any

Amendments

made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.

§761 Terms defined

Summary

Title 26, §761

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