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Origins And Evolution Of Section 751(B), Karen C. Burke

UF Law Faculty Publications

Section 751(b), reputedly one of the most widely ignored provisions of Subchapter K of the Internal Revenue Code, reserves its most daunting complexity for nonprorata current distributions of property other than cash. While partnership tax has been revolutionized by increasingly sophisticated capital-accounting rules, the 1956 regulations implementing section 751(b) have never been updated to reflect the modern concept of revaluations and section 704(c) special allocations. Recently, the Treasury Department has requested comments concerning alternative approaches that would simplify and rationalize accounting for shifts of ordinary income and capital gain among partners.

This article considers proposals to replace the imputed exchange …