118 STAT. 1589 PUBLIC LAW 108–357—OCT. 22, 2004 SEC. 833. DISALLOWANCE OF CERTAIN PARTNERSHIP LOSS TRANS FERS. (a) TREATMENT OF CONTRIBUTED PROPERTY WITH BUILT IN LOSS.—Paragraph (1) of section 704(c) is amended by striking ‘‘and’’ at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting ‘‘, and’’, and by adding at the end the following: ‘‘(C) if any property so contributed has a built in loss— ‘‘(i) such built in loss shall be taken into account only in determining the amount of items allocated to the contributing partner, and ‘‘(ii) except as provided in regulations, in deter mining the amount of items allocated to other partners, the basis of the contributed property in the hands of the partnership shall be treated as being equal to its fair market value at the time of contribution. For purposes of subparagraph (C), the term ‘built in loss’ means the excess of the adjusted basis of the property (determined without regard to subparagraph (C)(ii)) over its fair market value at the time of contribution.’’. (b) SPECIAL RULES FOR TRANSFERS OF PARTNERSHIP INTEREST IF THERE IS SUBSTANTIAL BUILT IN LOSS.— (1) ADJUSTMENT OF PARTNERSHIP BASIS REQUIRED.—Sub section (a) of section 743 (relating to optional adjustment to basis of partnership property) is amended by inserting before the period ‘‘or unless the partnership has a substantial built in loss immediately after such transfer’’. (2) ADJUSTMENT.—Subsection (b) of section 743 is amended by inserting ‘‘or which has a substantial built in loss imme diately after such transfer’’ after ‘‘section 754 is in effect’’. (3) SUBSTANTIAL BUILT IN LOSS.—Section 743 is amended by adding at the end the following new subsection: ‘‘(d) SUBSTANTIAL BUILT IN LOSS.— ‘‘(1) IN GENERAL.—For purposes of this section, a partner ship has a substantial built in loss with respect to a transfer of an interest in a partnership if the partnership’s adjusted basis in the partnership property exceeds by more than $250,000 the fair market value of such property. ‘‘(2) REGULATIONS.—The Secretary shall prescribe such regulations as may be appropriate to carry out the purposes of paragraph (1) and section 734(d), including regulations aggre gating related partnerships and disregarding property acquired by the partnership in an attempt to avoid such purposes.’’. (4) ALTERNATIVE RULES FOR ELECTING INVESTMENT PART NERSHIPS.— (A) IN GENERAL.—Section 743 is amended by adding after subsection (d) the following new subsection: ‘‘(e) ALTERNATIVE RULES FOR ELECTING INVESTMENT PARTNER SHIPS.— ‘‘(1) NO ADJUSTMENT OF PARTNERSHIP BASIS.—For purposes of this section, an electing investment partnership shall not be treated as having a substantial built in loss with respect to any transfer occurring while the election under paragraph (6)(A) is in effect.
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