Property other than money is made with respect to the

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property (other than money) is made with respect to the transferred interest within 2 years after such transfer, may elect to treat as the adjusted partnership basis of such property the adjusted basis such property would have if the adjustment provided in section 743(b) were in effect with respect to the partnership property. § 732(d). The election only determines the basis to the distribute partner, but does not affect partnership depreciation or gain or loss on disposition. § 1.732-1(d)(1)(vi) ex. The Secretary may by regulations require the application of this subsection in the case of a distribution to a transferee partner, whether or not made within 2 years after the transfer, if at the time of the transfer the fair market value of the partnership property (other than money) exceeded 110 percent of its adjusted basis to the partnership, § 732(d), but such application is limited where a shift is basis from a non-depreciable to a depreciable asset would occur. § 1.732-1(d)(2)(ii). (v) Distributions of Marketable Securities The term “money” includes marketable securities (for §§ 731(a)(1) and 737), which are taken into account at their fair market value as of the date of the distribution. § 731(c). The basis of marketable securities is their basis determined under section 732, increased by the amount of such gain recognized under § 731. See § 1.731-2(j) ex. 1. Exceptions exist for distribution of a security to the contributing partner, from an investment partnership to a partner who only contributed money and securities. § 731(c)(3)(A). Gain under § 731(c) is limited to the difference between the partner’s distributive share of gain based on hypothetical liquidation of all marketable securities before and after distribution of the security(ies) in question. § 731(c)(3) (B). See § 1.731-2(j) ex. 2. (vi) Rev. Rul. 94-4 If a deemed distribution of money under § 752(b) of the Internal Revenue Code occurs as a result of a decrease in a partner's share of the liabilities of a partnership, is the deemed distribution taken into account at the time of the distribution or at the end of the partnership taxable year? Section 1.731-1(a)(1)(ii) provides that for purposes of §§ 731 and 705, advances or drawings of money or property against a partner's distributive share of income are treated as current distributions made on the last day of the partnership taxable year with respect to that partner. Rev. Rul. 92-97, 1992-2 C.B. 124, treats a deemed distribution of money to a partner resulting from a cancellation of debt as an advance or drawing under § 1.731-1(a)(1)(ii) against that partner's distributive share of cancellation of indebtedness income. HOLDING - A deemed distribution of money under § 752(b) resulting from a decrease in a partner's share of the liabilities of a partnership is treated as an advance or drawing of money under § 1.731-1(a)(1)(ii) to the extent of the partner's distributive share of income for the partnership taxable year. An amount treated as an advance or drawing of money is taken into account at the end of the partnership taxable year. (vii)Rev. Rul. 79-205

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