§ 751. Unrealized receivables and inventory items

• (a) The amount of any money, or the fair market value of any property, received by a transferor partner in exchange for all or a part of his interest in the partnership attributable to—
  • (1) unrealized receivables of the partnership, or
  • (2) inventory items of the partnership,
• (b)
  • (1) To the extent a partner receives in a distribution—
    • (A) partnership property which is—
      • (i) unrealized receivables, or
      • (ii) inventory items which have appreciated substantially in value,
    • (B) partnership property (including money) other than property described in subparagraph (A)(i) or (ii) in exchange for all or a part of his interest in partnership property described in subparagraph (A)(i) or (ii),
  • (2) Paragraph (1) shall not apply to—
    • (A) a distribution of property which the distributee contributed to the partnership, or
    • (B) payments, described in section 736(a), to a retiring partner or successor in interest of a deceased partner.
  • (3) For purposes of paragraph (1)—
    • (A) Inventory items of the partnership shall be considered to have appreciated substantially in value if their fair market value exceeds 120 percent of the adjusted basis to the partnership of such property.
    • (B) For purposes of subparagraph (A), there shall be excluded any inventory property if a principal purpose for acquiring such property was to avoid the provisions of this subsection relating to inventory items.
• (c) For purposes of this subchapter, 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.
• (d) For purposes of this subchapter, the term “inventory items” means—
  • (1) property of the partnership of the kind described in section 1221(a)(1),
  • (2) any other property of the partnership which, on sale or exchange by the partnership, would be considered property other than a capital asset and other than property described in section 1231, and
  • (3) any other property held by the partnership which, if held by the selling or distributee partner, would be considered property of the type described in paragraph (1) or (2).
• (e) For purposes of applying this section and sections 731 and 741 to any amount resulting from the reference to section 1248(a) in the second sentence of subsection (c), in the case of an individual, the tax attributable to such amount shall be limited in the manner provided by subsection (b) of section 1248 (relating to gain from certain sales or exchanges of stock in certain foreign corporation).
• (f) In determining whether property of a partnership is—
  • (1) an unrealized receivable, or
  • (2) an inventory item,