§ 47:213 — Basis of distributed property other than money

A. Distributions other than in liquidation of a partner's interest.
(1) General rule. The basis of property (other than money) distributed by a partnership to a partner other than in liquidation of the partner's interest shall, except as provided in Subsection A(2) of this Section be its adjusted basis to the partnership immediately before such distribution.
(2) Limitation. The basis to the distributee partner of property to which Subsection A(1) of this Section is applicable shall not exceed the adjusted basis of such partner's interest in the partnership reduced by any money distributed in the same transaction.
B. Distributions in liquidation. The basis of property (other than money) distributed by a partnership to a partner in liquidation of the partner's interest shall be an amount equal to the adjusted basis of such partner's interest in the partnership reduced by any money distributed in the same transaction.
C. Allocation of basis. The basis of distributed properties to which Subsection A(2) or Subsection B of this Section is applicable shall be allocated:
(1) first to any unrealized receivables (as defined in Subsection E of this Section) and inventory items (as defined in Subsection F of this Section) in an amount equal to the adjusted basis of each such property to the partnership (or if the basis to be allocated is less than the sum of the adjusted bases of such properties to the partnership, in proportion to such bases), and
(2) to the extent of any remaining basis to any other distributed properties in proportion to their adjusted basis to the partnership.
D. Special partnership basis to transferee. For purposes of Subsections A, B, and C of this Section, a partner who acquired all or a part of his interest by a transfer with respect to which the election provided in R.S. 47:220.1 is not in effect, and to whom a distribution of property (other than money) is made with respect to the transferred interest within 2 years after such transfer, may elect, under regulations prescribed by the collector, to treat as the adjusted partnership basis of such property the adjusted basis such property would have if the adjustment provided in R.S. 47:219 B were in effect with respect to the partnership property. The collector may by regulations require the application of this subsection in the case of a distribution to a transferee partner, whether or not made within 2 years after the transfer, if at the time of the transfer the fair market value of the partnership property (other than money) exceeded 110 per cent of its adjusted basis to the partnership.
E. Unrealized receivables. For purposes of this Sub-Part, the term "unrealized receivables" includes, to the extent not previously includible in income under the method of accounting used by the partnership, any rights (contractual or otherwise) to payment for:
(1) goods delivered, or to be delivered, to the extent the proceeds therefrom would be treated as amounts received from the sale or exchange of property other than a capital asset, or
(2) services rendered, or to be rendered.
F. Inventory items. For purposes of this Sub-Part, the term "inventory items" means:
(1) stock in trade of the partnership or other property of a kind which would properly be included in the inventory of the partnership if on hand at the close of the taxable year, and
(2) property held by the partnership primarily for sale to customers in the ordinary course of business.

Legislative History

Added by Acts 1958, No. 441, §2.