Internal Revenue Code · 26 U.S.C.
§ 707. Transactions between partner and partnership
Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).
Cite as 26 U.S.C. § 707
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Enacted
- October 4, 1976 by Pub. L. 94–455
- Last amended
- July 4, 2025 by Pub. L. 119–21
- Amendments
- 3 dated changes in the source credit
- Length
- 3 subsections · 707 words · about 3 min to read
- Cross-references
- cites 5; cited by 17 Code sections and 109 other regulations
- Regulations
- 8 issued under this section
If a partner engages in a transaction with a partnership other than in his capacity as a member of such partnership, the transaction shall, except as otherwise provided in this section, be considered as occurring between the partnership and one who is not a partner.
For purposes of paragraphs (1) and (2) of this subsection, the ownership of a capital or profits interest in a partnership shall be determined in accordance with the rules for constructive ownership of stock provided in section 267(c) other than paragraph (3) of such section.
To the extent determined without regard to the income of the partnership, payments to a partner for services or the use of capital shall be considered as made to one who is not a member of the partnership, but only for the purposes of section 61(a) (relating to gross income) and, subject to section 263, for purposes of section 162(a) (relating to trade or business expenses).
(Aug. 16, 1954, ch. 736, 68A Stat. 243; Pub. L. 94–455, title II, § 213(b)(3), title XIX, § 1901(b)(3)(C), Oct. 4, 1976, 90 Stat. 1547, 1792; Pub. L. 98–369, div. A, title I, § 73(a), July 18, 1984, 98 Stat. 591; Pub. L. 99–514, title VI, § 642(a)(2), title XVIII, §§ 1805(b), 1812(c)(3)(A), (B), Oct. 22, 1986, 100 Stat. 2284, 2810, 2834; Pub. L. 119–21, title VII, § 70602(a), July 4, 2025, 139 Stat. 284.)
Regulations under this section
Treasury regulations (26 CFR) issued under § 707
- § 1.707-0 Table of contents.
- § 1.707-1 Transactions between partner and partnership.
- § 1.707-3 Disguised sales of property to partnership; general rules.
- § 1.707-4 Disguised sales of property to partnership; special rules applicable to guaranteed payments, preferred returns, operating cash flow distributions, and reimbursements of preformation expenditures.
- § 1.707-5 Disguised sales of property to partnership; special rules relating to liabilities.
- § 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.
From our articles, not part of the law
Articles that cite this section
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 5 other sections
- § 267(d) Losses, expenses, and interest with respect to transactions between related taxpayers
- § 1221 Capital asset defined
- § 61(a) Gross income defined
- § 263 Capital expenditures
- § 162(a) Trade or business expenses
Cited by 17 Code sections
- § 108(e)(4)(B) Income from discharge of indebtedness
- § 197(f)(9)(C)(i)(I) Amortization of goodwill and certain other intangibles
- § 199A(c)(4)(B) Qualified business income
- § 267(e)(1)(D) Losses, expenses, and interest with respect to transactions between related taxpayers
- § 453(g)(3) Installment method
- § 465(b)(3)(C)(i) Deductions limited to amount at risk
- § 469(g)(1)(B) Passive activity losses and credits limited
- § 512(b)(19)(J)(i) Unrelated business taxable income
- § 706(a) Taxable years of partner and partnership
- § 736(a)(2) Payments to a retiring partner or a deceased partner’s successor in interest
- § 755(c)(1) Rules for allocation of basis
- § 988(c)(1)(E)(vi)(I) Treatment of certain foreign currency transactions
- § 1033(i)(2)(B) Involuntary conversions
- § 1235(c) Sale or exchange of patents
- § 1402(a)(13) Definitions
- § 7519(d)(5)(B) Required payments for entities electing not to have required taxable year
- § 7701(a)(51)(I)(vi) Definitions
Cited in 109 regulations not issued under it
- § 1.42-18 Qualified contracts.
- § 1.44-5 Definitions.
- § 1.45D-1 New markets tax credit.
- § 1.48-12 Qualified rehabilitated building; expenditures incurred after December 31, 1981.
- § 1.48E(h)-1 Clean Electricity Low-Income Communities Bonus Credit Amount Program.
- § 1.59A-7 Application of base erosion and anti-abuse tax to partnerships.
- § 1.61-6 Gains derived from dealings in property.
- § 1.103-10 Exemption for certain small issues of industrial development bonds.
- § 1.108-8 Indebtedness satisfied by partnership interest.
- § 1.108(i)-2 Application of section 108(i) to partnerships and S corporations.
- § 1.162-33 Certain employee remuneration in excess of $1,000,000 not deductible for taxable years beginning after December 31, 2017.
- § 1.163(j)-1 Definitions.
- § 1.167(l)-1 Limitations on reasonable allowance in case of property of certain public utilities.
- § 1.168(h)-1 Like-kind exchanges involving tax-exempt use property.
- § 1.168(j)-1T Questions and answers concerning tax-exempt entity leasing rules (temporary).
- § 1.168(k)-2 Additional first year depreciation deduction for property acquired and placed in service after September 27, 2017.
- § 1.170A-14 Qualified conservation contributions.
- § 1.179-2 Limitations on amount subject to section 179 election.
- § 1.197-2 Amortization of goodwill and certain other intangibles.
- § 1.199A-3 Qualified business income, qualified REIT dividends, and qualified PTP income.
- § 1.199A-9 Domestic production gross receipts.
- § 1.263A-3 Rules relating to property acquired for resale.
- § 1.263A-9 The avoided cost method.
- § 1.267(b)-1 Relationships.
Show 85 more
- § 1.274-9 Entertainment provided to specified individuals.
- § 1.274-10 Special rules for aircraft used for entertainment.
- § 1.336-3 Aggregate deemed asset disposition price; various aspects of taxation of the deemed asset disposition.
- § 1.337(d)-3 Gain recognition upon certain partnership transactions involving a partner's stock.
- § 1.338-1 General principles; status of old target and new target.
- § 1.367(d)-1T Transfers of intangible property to foreign corporations (temporary).
- § 1.385-3 Certain distributions of debt instruments and similar transactions.
- § 1.401-10 Definitions relating to plans covering self-employed individuals.
- § 1.441-2 Election of taxable year consisting of 52-53 weeks.
- § 1.444-2T Tiered structure (temporary).
- § 1.460-1 Long-term contracts.
- § 1.467-1 Treatment of lessors and lessees generally.
- § 1.468A-8 Special transfers to qualified funds pursuant to section 468A(f).
- § 1.469-0 Table of contents.
- § 1.469-1T General rules (temporary).
- § 1.469-2 Passive activity loss.
- § 1.469-2T Passive activity loss (temporary).
- § 1.469-4T Definition of activity (temporary).
- § 1.469-7 Treatment of self-charged items of interest income and deduction.
- § 1.475(b)-1 Scope of exemptions from mark-to-market requirement.
- § 1.501(r)-1 Definitions.
- § 1.643(h)-1 Distributions by certain foreign trusts through intermediaries.
- § 1.679-3 Transfers.
- § 1.701-2 Anti-abuse rule.
- § 1.702-3T 4-Year spread (temporary).
- § 1.704-1 Partner's distributive share.
- § 1.704-3 Contributed property.
- § 1.704-4 Distribution of contributed property.
- § 1.706-1 Taxable years of partner and partnership.
- § 1.721-1 Nonrecognition of gain or loss on contribution.
- § 1.731-1 Extent of recognition of gain or loss on distribution.
- § 1.736-1 Payments to a retiring partner or a deceased partner's successor in interest.
- § 1.751-1 Unrealized receivables and inventory items.
- § 1.861-9 Allocation and apportionment of interest expense and rules for asset-based apportionment.
- § 1.861-18 Classification of, and source of gross income from, digital content transactions.
- § 1.864-2 Trade or business within the United States.
- § 1.864(c)(8)-1 Gain or loss by foreign persons on the disposition of certain partnership interests.
- § 1.871-15 Treatment of dividend equivalents.
- § 1.881-3 Conduit financing arrangements.
- § 1.892-3 Income of foreign governments.
- § 1.892-4 Commercial activities.
- § 1.892-5 Controlled commercial entity.
- § 1.897-1 Taxation of foreign investment in United States real property interests, definition of terms.
- § 1.897(l)-1 Exception for interests held by foreign pension funds.
- § 1.904-5 Look-through rules as applied to controlled foreign corporations and other entities.
- § 1.907(c)-1 Definitions relating to FOGEI and FORI (for taxable years beginning after December 31, 1982).
- § 1.954-2 Foreign personal holding company income.
- § 1.956-1 Shareholder's pro rata share of the average of the amounts of United States property held by a controlled foreign corporation.
- § 1.965-4 Disregard of certain transactions.
- § 1.985-3 United States dollar approximate separate transactions method.
- § 1.987-1 Scope, definitions, and special rules.
- § 1.987-1T Scope, definitions, and special rules (temporary).
- § 1.987-2 Attribution of items to eligible QBUs; definition of a transfer and related rules.
- § 1.987-7 Application of the section 987 regulations to partnerships and S corporations.
- § 1.988-2T Recognition and computation of exchange gain or loss (temporary).
- § 1.988-5 Section 988(d) hedging transactions.
- § 1.993-1 Definition of qualified export receipts.
- § 1.1001-3 Modifications of debt instruments.
- § 1.1001-6 Transition from certain interbank offered rates.
- § 1.1031(k)-1 Treatment of deferred exchanges.
- § 1.1061-1 Section 1061 definitions.
- § 1.1254-1 Treatment of gain from disposition of natural resource recapture property.
- § 1.1275-2 Special rules relating to debt instruments.
- § 1.1400Z2(a)-1 Deferring tax on capital gains by investing in opportunity zones.
- § 1.1400Z2(d)-1 Qualified opportunity funds and qualified opportunity zone businesses.
- § 1.1400Z2(d)-2 Qualified opportunity zone business property.
- § 1.1402(a)-1 Definition of net earnings from self-employment.
- § 1.1402(a)-15 Options available to farmers in computing net earnings from self-employment for taxable years ending on or after December 31, 1956.
- § 1.1411-0 Table of contents of provisions applicable to section 1411.
- § 1.1411-4 Definition of net investment income.
- § 1.1441-1 Requirement for the deduction and withholding of tax on payments to foreign persons.
- § 1.1446(f)-1 General rules.
- § 1.1502-13 Intercompany transactions.
- § 1.6011-18 Certain partnership related-party basis adjustment transactions as transactions of interest.
- § 1.6038B-2 Reporting of certain transfers to foreign partnerships.
- § 1.6050H-1 Information reporting of mortgage interest received in a trade or business from an individual.
- § 1.6050W-1 Information reporting for payments made in settlement of payment card and third party network transactions.
- § 1.6654-2 Exceptions to imposition of the addition to the tax in the case of individuals.
- § 1.7519-1T Required payments for entities electing not to have required year (temporary).
- § 25.2701-2 Special valuation rules for applicable retained interests.
- § 31.3511-1 Certified professional employer organization.
- § 53.4946-1 Definitions and special rules.
- § 54.4980G-3 Failure of employer to make comparable health savings account contributions.
- § 301.6231(a)(3)-1 Partnership items.
- § 301.6404-2 Abatement of interest.
Amendment history
From the source credit and the official notes, newest first.
Where it sits in the Code
- Subtitle A Income Taxes
- Chapter 1 NORMAL TAXES AND SURTAXES
- Subchapter K Partners and Partnerships
- Part I DETERMINATION OF TAX LIABILITY
Nearby sections
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
Amendments
2025—Subsec. (a)(2). Pub. L. 119–21 substituted “Except as provided” for “Under regulations prescribed” in introductory provisions.
1986—Subsec. (a)(2)(B)(iii). Pub. L. 99–514, § 1805(b), substituted “sale or exchange of property” for “sale of property”.
Subsec. (b)(1). Pub. L. 99–514, § 1812(c)(3)(B), inserted at end “For purposes of section 267(a)(2), partnerships described in subparagraph (B) of this paragraph shall be treated as persons specified in section 267(b).”
Subsec. (b)(1)(A). Pub. L. 99–514, § 1812(c)(3)(A), substituted “a person” for “a partner”.
Subsec. (b)(2)(A). Pub. L. 99–514, § 1812(c)(3)(A), substituted “a person” for “a partner”.
Pub. L. 99–514, § 642(a)(2), substituted “50 percent” for “80 percent”.
Subsec. (b)(2)(B). Pub. L. 99–514, § 642(a)(2), substituted “50 percent” for “80 percent”.
1984—Subsec. (a). Pub. L. 98–369 designated existing provisions as par. (1) and added par. (2).
1976—Subsec. (b)(2). Pub. L. 94–455, § 1901(b)(3)(C), substituted “as ordinary income” for “as gain from the sale or exchange of property other than a capital asset”.
Subsec. (c). Pub. L. 94–455, § 213(b)(3), substituted “and, subject to section 263, for purposes of section 162(a)” for “and section 162(a)”.
Statutory Notes and Related Subsidiaries
Effective Date of 2025 Amendment
Pub. L. 119–21, title VII, § 70602(b), July 4, 2025, 139 Stat. 284, provided that: “The amendment made by this section [amending this section] shall apply to services performed, and property transferred, after the date of the enactment of this Act [July 4, 2025].”
Effective Date of 1986 Amendment
Amendment by section 642(a)(2) of Pub. L. 99–514 applicable to sales after Oct. 22, 1986, in taxable years ending after such date, but not applicable to sales made after Aug. 14, 1986, which are made pursuant to a binding contract in effect on Aug. 14, 1986, and at all times thereafter, see section 642(c) of Pub. L. 99–514, set out as a note under section 1239 of this title.
Amendment by sections 1805(b) and 1812(c)(3)(B) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.
Pub. L. 99–514, title XVIII, § 1812(c)(3)(A), Oct. 22, 1986, 100 Stat. 2834, provided that the amendment made by that section is effective with respect to sales or exchanges after Sept. 27, 1985.
Effective Date of 1984 Amendment
Pub. L. 98–369, div. A, title I, § 73(b), July 18, 1984, 98 Stat. 592, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
“(1) In general.— The amendment made by subsection (a) [amending this section] shall apply—“(A) in the case of arrangements described in section 707(a)(2)(A) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as amended by subsection (a)), to services performed or property transferred after February 29, 1984, and“(B) in the case of transfers described in section 707(a)(2)(B) of such Code (as so amended), to property transferred after March 31, 1984.“(2) Binding contract exception.— The amendment made by subsection (a) shall not apply to a transfer of property described in section 707(a)(2)(B)(i) if such transfer is pursuant to a binding contract in effect on March 31, 1984, and at all times thereafter before the transfer.“(3) Exception for certain transfers.— The amendment made by subsection (a) shall not apply to a transfer of property described in section 707(a)(2)(B)(i) that is made before December 31, 1984, if—“(A) such transfer was proposed in a written private offering memorandum circulated before February 28, 1984;“(B) the out-of-pocket costs incurred with respect to such offering exceeded $250,000 as of February 28, 1984;“(C) the encumbrances placed on such property in anticipation of such transfer all constitute obligations for which neither the partnership nor any partner is liable; and“(D) the transferor of such property is the sole general partner of the partnership.”
Effective Date of 1976 Amendment
Amendment by section 213(b)(3) of Pub. L. 94–455 applicable in the case of partnership taxable years beginning after Dec. 31, 1975, see section 213(f)(1) of Pub. L. 94–455, set out as an Effective Date note under section 709 of this title.
Amendment by section 1901(b)(3)(C) of Pub. L. 94–455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.
Rule of Construction
Pub. L. 119–21, title VII, § 70602(c), July 4, 2025, 139 Stat. 284, provided that: “Nothing in this section [amending this section and enacting provisions set out as a note above], or the amendments made by this section, shall be construed to create any inference with respect to the proper treatment under section 707(a) of the Internal Revenue Code of 1986 with respect to payments from a partnership to a partner for services performed, or property transferred, on or before the date of the enactment of this Act [July 4, 2025].”
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.