Treasury Regulations · 26 CFR

§ 1.709-1. Treatment of organization and syndication costs.

In effect eCFR current as of October 15, 2026

Regulation text, no changes From the eCFR, current as of October 15, 2026. The eCFR is an authoritative but unofficial editorial compilation of the Code of Federal Regulations; the official text is the annual CFR on govinfo. Compare it with this section on ecfr.gov (external site) or the official annual CFR on govinfo (external site).

Regulation under 26 U.S.C. § 709

Cite as 26 CFR § 1.709-1

At a glance

Read from the text and its source citation. Not part of the regulation.

Status: In the current eCFR
Issued: May 4, 1983 by T.D. 7891
Last amended: July 23, 2014 by T.D. 9681
Issued under: 26 U.S.C. § 709
Length: 1,352 words · about 6 min to read
Cross-references: cites 5 Code sections and 3 regulations; cited by 1

¶(a) General rule. Except as provided in paragraph (b) of this section, no deduction shall be allowed under chapter 1 of the Code to a partnership or to any partner for any amounts paid or incurred, directly or indirectly, in partnership taxable years beginning after December 31, 1975, to organize a partnership, or to promote the sale of, or to sell, an interest in the partnership.

¶(b) Election to amortize organizational expenses—

¶(1) In general. Under section 709(b), a partnership may elect to amortize organizational expenses as defined in section 709(b)(3) and § 1.709-2(a). In the taxable year in which a partnership begins business, an electing partnership may deduct an amount equal to the lesser of the amount of the organizational expenses of the partnership, or $5,000 (reduced (but not below zero) by the amount by which the organizational expenses exceed $50,000). The remainder of the organizational expenses is deductible ratably over the 180-month period beginning with the month in which the partnership begins business. All organizational expenses of the partnership are considered in determining whether the organizational expenses exceed $50,000, including expenses incurred on or before October 22, 2004.

¶(2) Time and manner of making election. A partnership is deemed to have made an election under section 709(b) to amortize organizational expenses as defined in section 709(b)(3) and § 1.709-2(a) for the taxable year in which the partnership begins business. A partnership may choose to forgo the deemed election by affirmatively electing to capitalize its organizational expenses on a timely filed Federal income tax return (including extensions) for the taxable year in which the partnership begins business. The election either to amortize organizational expenses under section 709(b) or to capitalize organizational expenses is irrevocable and applies to all organizational expenses of the partnership. A change in the characterization of an item as an organizational expense is a change in method of accounting to which sections 446 and 481(a) apply if the partnership treated the item consistently for two or more taxable years. A change in the determination of the taxable year in which the partnership begins business also is treated as a change in method of accounting if the partnership amortized organizational expenses for two or more taxable years.

¶(3) Liquidation of partnership—

¶(i)In general. If there is a winding up and complete liquidation of the partnership prior to the end of the amortization period, the unamortized amount of organizational expenses is a partnership deduction in its final taxable year to the extent provided under section 165 (relating to losses). However, there is no partnership deduction with respect to its capitalized syndication expenses.

¶(ii) Technical termination of a partnership. If a partnership that has elected to amortize organizational costs under section 709(b) terminates in a transaction (or a series of transactions) described in section 708(b)(1)(B) or § 1.708-1(b)(2), the termination shall not be treated as resulting in a liquidation of the partnership for purposes of section 709(b)(2). See § 1.708-1(b)(6) for rules concerning the treatment of these organizational costs by the new partnership.

¶(4) Examples. The following examples illustrate the application of this section:

¶Example 1. Expenditures of $5,000 or less.

Partnership X, a calendar year taxpayer, incurs $3,000 of organizational expenses after October 22, 2004, and begins business on July 1, 2011. Under paragraph (b)(2) of this section, Partnership X is deemed to have elected to amortize organizational expenses under section 709(b) in 2011. Therefore, Partnership X may deduct the entire amount of the organizational expenses in 2011, the taxable year in which Partnership X begins business.

¶Example 2. Expenditures of more than $5,000 but less than or equal to $50,000.

The facts are the same as in Example 1 except that Partnership X incurs organizational expenses of $41,000. Under paragraph (b)(2) of this section, Partnership X is deemed to have elected to amortize organizational expenses under section 709(b) in 2011. Therefore, Partnership X may deduct $5,000 and the portion of the remaining $36,000 that is allocable to July through December of 2011 ($36,000/180 × 6 = $1,200) in 2011, the taxable year in which Partnership X begins business. Partnership X may amortize the remaining $34,800 ($36,000 − $1,200 = $34,800) ratably over the remaining 174 months.

¶Example 3. Subsequent change in the characterization of an item.

The facts are the same as in Example 2 except that Partnership X realizes in 2013 that Partnership X incurred $10,000 for an additional organizational expense erroneously deducted in 2011 under section 162 as a business expense. Under paragraph (b)(2) of this section, Partnership X is deemed to have elected to amortize organizational expenses under section 709(b) in 2011, including the additional $10,000 of organizational expenses. Partnership X is using an impermissible method of accounting for the additional $10,000 of organizational expenses and must change its method under § 1.446-1(e) and the applicable general administrative procedures in effect in 2013.

¶Example 4. Subsequent redetermination of year in which business begins.

The facts are the same as in Example 2 except that, in 2012, Partnership X deducted the organizational expenses allocable to January through December of 2012 ($36,000/180 × 12 = $2,400). In addition, in 2013 it is determined that Partnership X actually began business in 2012. Under paragraph (b)(2) of this section, Partnership X is deemed to have elected to amortize organizational expenses under section 709(b) in 2012. Partnership X impermissibly deducted organizational expenses in 2011, and incorrectly determined the amount of organizational expenses deducted in 2012. Therefore, Partnership X is using an impermissible method of accounting for the organizational expenses and must change its method under § 1.446-1(e) and the applicable general administrative procedures in effect in 2013.

¶Example 5. Expenditures of more than $50,000 but less than or equal to $55,000.

The facts are the same as in Example 1 except that Partnership X incurs organizational expenses of $54,500. Under paragraph (b)(2) of this section, Partnership X is deemed to have elected to amortize organizational expenses under section 709(b) in 2011. Therefore, Partnership X may deduct $500 ($5,000−$4,500) and the portion of the remaining $54,000 that is allocable to July through December of 2011 ($54,000/180 × 6 = $1,800) in 2011, the taxable year in which Partnership X begins business. Partnership X may amortize the remaining $52,200 ($54,000 − $1,800 = $ 52,200) ratably over the remaining 174 months.

¶Example 6. Expenditures of more than $55,000.

The facts are the same as in Example 1 except that Partnership X incurs organizational expenses of $450,000. Under paragraph (b)(2) of this section, Partnership X is deemed to have elected to amortize organizational expenses under section 709(b) in 2011. Therefore, Partnership X may deduct the amounts allocable to July through December of 2011 ($450,000/180 × 6 = $15,000) in 2011, the taxable year in which Partnership X begins business. Partnership X may amortize the remaining $435,000 ($450,000 − $15,000 = $435,000) ratably over the remaining 174 months.

¶(5) Effective/applicability date. This section applies to organizational expenses paid or incurred after August 16, 2011. However, taxpayers may apply all the provisions of this section to organizational expenses paid or incurred after October 22, 2004, provided that the period of limitations on assessment of tax for the year the election under paragraph (b)(2) of this section is deemed made has not expired. For organizational expenses paid or incurred on or before September 8, 2008, taxpayers may instead apply § 1.709-1, as in effect prior to that date (§ 1.709-1 as contained in 26 CFR part 1 edition revised as of April 1, 2008). Paragraph (b)(3)(ii) of this section applies to a technical termination of a partnership under section 708(b)(1)(B) that occurs on or after December 9, 2013.

[T.D. 7891, 48 FR 20048, May 4, 1983, as amended by T.D. 9411, 73 FR 38914, July 8, 2008; T.D. 9542, 76 FR 50890, Aug. 17, 2011; 76 FR 56973, Sept. 15, 2011; T.D. 9681, 79 FR 42679, July 23, 2014]

Cross-references

Computed from the citations in the text of 26 CFR.

Code sections it cites

Regulations it cites

Cited by 1 other regulation

§ 1.708-1 Continuation of partnership.

Amendment history

From the source citation at the end of the section, newest first. T.D. is a Treasury decision; FR is the Federal Register.

July 23, 2014Amended by T.D. 9681 (79 FR 42679)
September 15, 2011Amended (76 FR 56973)
August 17, 2011Amended by T.D. 9542 (76 FR 50890)
July 8, 2008Amended by T.D. 9411 (73 FR 38914)
May 4, 1983Issued by T.D. 7891 (48 FR 20048)

Where it sits in 26 CFR

Nearby sections

§ 1.707-6 Disguised sales of property by partnership to partner; general rules.
§ 1.707-8 Disclosure of certain information.
§ 1.707-9 Effective dates and transitional rules.
§ 1.708-1 Continuation of partnership.
§ 1.709-1 Treatment of organization and syndication costs.
§ 1.709-2 Definitions.