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Internal Revenue Code · 26 U.S.C.

§ 736. Payments to a retiring partner or a deceased partner’s successor in interest

In force Text current through Public Law 119-121 (October 9, 2026) release point 119-121

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. § 736

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
August 10, 1993 by Pub. L. 103–66
Amendments
2 dated changes in the source credit
Length
2 subsections · 304 words · about 1 min to read
Cross-references
cites 2; cited by 4 Code sections and 15 other regulations
Regulations
1 issued under this section
(a) Payments considered as distributive share or guaranteed payment Payments made in liquidation of the interest of a retiring partner or a deceased partner shall, except as provided in subsection (b), be considered—
(1) as a distributive share to the recipient of partnership income if the amount thereof is determined with regard to the income of the partnership, or
(2) as a guaranteed payment described in section 707(c) if the amount thereof is determined without regard to the income of the partnership.
(b) Payments for interest in partnership
(1) General rule

Payments made in liquidation of the interest of a retiring partner or a deceased partner shall, to the extent such payments (other than payments described in paragraph (2)) are determined, under regulations prescribed by the Secretary, to be made in exchange for the interest of such partner in partnership property, be considered as a distribution by the partnership and not as a distributive share or guaranteed payment under subsection (a).

(2) Special rules For purposes of this subsection, payments in exchange for an interest in partnership property shall not include amounts paid for—
(A) unrealized receivables of the partnership (as defined in section 751(c)), or
(B) good will of the partnership, except to the extent that the partnership agreement provides for a payment with respect to good will.
(3) Limitation on application of paragraph (2) Paragraph (2) shall apply only if—
(A) capital is not a material income-producing factor for the partnership, and
(B) the retiring or deceased partner was a general partner in the partnership.

(Aug. 16, 1954, ch. 736, 68A Stat. 248; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 95–600, title VII, § 701(u)(13)(B), Nov. 6, 1978, 92 Stat. 2918; Pub. L. 103–66, title XIII, § 13262(a), (b)(2)(B), Aug. 10, 1993, 107 Stat. 541.)

Regulations under this section

Treasury regulations (26 CFR) issued under § 736

Cross-references

Computed from the citations in the text of Title 26 and 26 CFR.

This section cites 2 other sections

Cited by 4 Code sections

Cited in 15 regulations not issued under it

Amendment history

From the source credit and the official notes, newest first.

  1. Amended by Pub. L. 103–66Parts changed in 1993: (b)(3) (c)
  2. Amended by Pub. L. 95–600Parts changed in 1978: (c)
  3. Enacted by Pub. L. 94–455Parts changed in 1976: (b)(1)

Where it sits in the Code

  1. Subtitle A Income Taxes
  2. Chapter 1 NORMAL TAXES AND SURTAXES
  3. Subchapter K Partners and Partnerships
  4. Part II CONTRIBUTIONS, DISTRIBUTIONS, AND TRANSFERS
  5. Subpart B Distributions by a Partnership

Nearby sections

Official notes

Show the Law Revision Counsel's notes (amendments, effective dates)

Editorial Notes

Amendments

1993—Subsec. (b)(3). Pub. L. 103–66, § 13262(a), added par. (3).

Subsec. (c). Pub. L. 103–66, § 13262(b)(2)(B), struck out heading and text of subsec. (c). Text read as follows: “For limitation on the tax attributable to certain gain connected with section 1248 stock, see section 751(e).”

1978—Subsec. (c). Pub. L. 95–600 added subsec. (c).

1976—Subsec. (b)(1). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.

Statutory Notes and Related Subsidiaries

Effective Date of 1993 Amendment

Pub. L. 103–66, title XIII, § 13262(c), Aug. 10, 1993, 107 Stat. 541, provided that:

“(1) In general.— The amendments made by this section [amending this section and section 751 of this title] shall apply in the case of partners retiring or dying on or after January 5, 1993.
“(2) Binding contract exception.— The amendments made by this section shall not apply to any partner retiring on or after January 5, 1993, if a written contract to purchase such partner’s interest in the partnership was binding on January 4, 1993, and at all times thereafter before such purchase.”

Effective Date of 1978 Amendment

Amendment by Pub. L. 95–600 applicable to transfers beginning after Oct. 9, 1975, and to sales, exchanges, and distributions taking place after Oct. 9, 1975, see section 701(u)(13)(C) of Pub. L. 95–600, set out as a note under section 751 of this title.