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Title 26 — Internal Revenue CodeRelease 119-73not60

§709 Treatment of Organization and Syndication Fees

Title 26 › Subtitle Subtitle A— Income Taxes › Chapter 1— NORMAL TAXES AND SURTAXES › Subchapter K— Partners and Partnerships › Part I— DETERMINATION OF TAX LIABILITY › § 709

Last updated Apr 5, 2026|Official source

Summary

Partnerships and their partners may not deduct costs to form the partnership or to sell interests in it, except when the partnership chooses a special option under rules set by the Secretary. If chosen, the partnership can deduct in the year it starts business the smaller of the actual organizational costs or $5,000 reduced (but not below zero) by how much those costs exceed $50,000. Any remaining costs are spread out and deducted evenly over 180 months starting the month the business begins. If the partnership ends before the 180 months finish, leftover deferred costs may be deducted if allowed under section 165. "Organizational expenses" here means costs tied to creating the partnership, costs put on the capital account, and costs that would be written off over the partnership’s life.

Full Legal Text

Title 26, §709

Internal Revenue Code — Source: USLM XML via OLRC

(a)Except as provided in subsection (b), no deduction shall be allowed under this chapter to the partnership or to any partner for any amounts paid or incurred to organize a partnership or to promote the sale of (or to sell) an interest in such partnership.
(b)(1)If a partnership elects the application of this subsection (in accordance with regulations prescribed by the Secretary) with respect to any organizational expenses—
(A)the partnership shall be allowed a deduction for the taxable year in which the partnership begins business in an amount equal to the lesser of—
(i)the amount of organizational expenses with respect to the partnership, or
(ii)$5,000, reduced (but not below zero) by the amount by which such organizational expenses exceed $50,000, and
(B)the remainder of such organizational expenses shall be allowed as a deduction ratably over the 180-month period beginning with the month in which the partnership begins business.
(2)In any case in which a partnership is liquidated before the end of the period to which paragraph (1)(B) applies, any deferred expenses attributable to the partnership which were not allowed as a deduction by reason of this section may be deducted to the extent allowable under section 165.
(3)The organizational expenses to which paragraph (1) applies, are expenditures which—
(A)are incident to the creation of the partnership;
(B)are chargeable to capital account; and
(C)are of a character which, if expended incident to the creation of a partnership having an ascertainable life, would be amortized over such life.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Amendments

2005—Subsec. (b)(1). Pub. L. 109–135 substituted “partnership” for “taxpayer” in introductory provisions and before “shall be allowed” in subpar. (A). 2004—Subsec. (b). Pub. L. 108–357 substituted “Deduction” for “Amortization” in heading, added par. (2), redesignated former par. (2) as (3), and amended heading and text of par. (1) generally. Prior to amendment, text of par. (1) read as follows: “Amounts paid or incurred to organize a partnership may, at the election of the partnership (made in accordance with

Regulations

prescribed by the Secretary), be treated as deferred expenses. Such deferred expenses shall be allowed as a deduction ratably over such period of not less than 60 months as may be selected by the partnership (beginning with the month in which the partnership begins business), or if the partnership is liquidated before the end of such 60-month period, such deferred expenses (to the extent not deducted under this section) may be deducted to the extent provided in section 165.”

Statutory Notes and Related Subsidiaries

Effective Date

of 2005 AmendmentAmendment by Pub. L. 109–135 effective as if included in the provision of the American Jobs Creation Act of 2004, Pub. L. 108–357, to which such amendment relates, see section 403(nn) of Pub. L. 109–135, set out as a note under section 26 of this title.

Effective Date

of 2004 AmendmentAmendment by Pub. L. 108–357 applicable to amounts paid or incurred after Oct. 22, 2004, see section 902(d) of Pub. L. 108–357, set out as a note under section 195 of this title.

Effective Date

Pub. L. 94–455, title II, § 213(f), Oct. 4, 1976, 90 Stat. 1548, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: “(1) In general.—Except as otherwise provided in this subsection, the

Amendments

made by this section [enacting this section and amending section 179, 704, 706, 707, and 761 of this title] shall apply in the case of partnership taxable years beginning after
December 31, 1975. “(2) Subsection (e).—The amendment made by subsection (e) [amending section 704 of this title] shall apply to liabilities incurred after
December 31, 1976. “(3) section 709(b) of the code.—section 709(b) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by the amendment made by subsection (b)(1) of this section) shall apply in the case of amounts paid or incurred in taxable years beginning after
December 31, 1976.”

Reference

Citations & Metadata

Citation

26 U.S.C. § 709

Title 26 — Internal Revenue Code

Last Updated

Apr 5, 2026

Release point: 119-73not60