I.R.C. § 709(a) General Rule —
Except as provided in subsection (b), no deduction shall be allowed under this chapter
to the partnership or to any partner for any amounts paid or incurred to organize
a partnership or to promote the sale of (or to sell) an interest in such partnership.
I.R.C. § 709(b) Deduction Of Organization Fees
I.R.C. § 709(b)(1) Allowance Of Deduction —
If a partnership elects the application of this subsection (in accordance with
regulations prescribed by the Secretary)
with respect to any organizational expenses—
I.R.C. § 709(b)(1)(A) —
the partnership shall be allowed a deduction for the taxable year in which the
partnership begins business in an amount equal to the lesser of—
I.R.C. § 709(b)(1)(A)(i) —
the amount of organizational expenses with respect to the partnership, or
I.R.C. § 709(b)(1)(A)(ii) —
$5,000, reduced (but not below zero)
by the amount by which such organizational expenses exceed $50,000, and
I.R.C. § 709(b)(1)(B) —
the remainder of such organizational expenses shall be allowed as a deduction ratably
over the 180-month period beginning with the month in which the partnership begins
business.
I.R.C. § 709(b)(2) Dispositions Before Close Of Amortization Period —
In any case in which a partnership is liquidated before the end of the period to
which paragraph (1)(B) applies, any deferred expenses attributable to the partnership
which were not allowed as a deduction by reason of this section may be deducted to
the extent allowable under section 165.
I.R.C. § 709(b)(3) Organizational Expenses Defined —
The organizational expenses to which paragraph (1)
applies, are expenditures which—
I.R.C. § 709(b)(3)(A) —
are incident to the creation of the partnership;
I.R.C. § 709(b)(3)(B) —
are chargeable to capital account;
and
I.R.C. § 709(b)(3)(C) —
are of a character which, if expended incident to the creation of a partnership
having an ascertainable life, would be amortized over such life.
(Added Pub. L. 94-455, title II, 213(b)(1), Oct. 4, 1976, 90 Stat. 1547; Amended by Pub. L. 108-357, title IX, 902(c), Oct.
22, 2004, 118 Stat. 1418; Pub. L. 109-135, title IV, 403(ll), Dec. 21, 2005, 119 Stat. 2577.)
BACKGROUND Notes
AMENDMENTS
2005 - Subsec. (b)(1). Pub. L. 109-135, Sec. 403(ll), amended par. (1) by substituting “partnership” for “taxpayer” each place it appeared.
2004 - Subsec. (b). Pub. L. 108-357, Sec. 902(c), amended subsec. (b) by substituting “DEDUCTION” for “AMORTIZATION” in the heading;
by amending par. (1); and by redesignating par. (2) as par.
(3) and adding a par. (2). Prior to being amended, par. (1) read as follows:
“(1) Deduction.--Amounts paid or incurred to organize a partnership may, at the election
of the partnership (made in accordance with regulations prescribed by the Secretary),
be treated as deferred expenses. Such deferred expenses shall be allowed as a deduction
ratably over such period of not less than 60 months as may be selected by the partnership
(beginning with the month in which the partnership begins business), or if the partnership
is liquidated before the end of such 60-month period, such deferred expenses (to the
extent not deducted under this section) may be deducted to the extent provided in
section 165.”
EFFECTIVE DATE OF 2005 AMENDMENTS
Amendment by Sec. 403(ll) of Pub. L. 1091-135 effective as if included in the provisions of the American Jobs Creation Act of 2004
[Pub. L. 108-357, Sec. 902] to which it relates.
EFFECTIVE DATE OF 2004 AMENDMENTS
Amendments by Sec. 902(c) of Pub. L. 108-357 effective for amounts paid or incurred after the date of the enactment of this Act
[Enacted:
Oct. 22, 2004].
EFFECTIVE DATE
Section 213(f) of Pub. L. 94-455, as amended by Pub. L. 99-514, 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
“(1) In general.--Except as otherwise provided in this subsection, the amendments
made by this section [enacting section 709 of this title and amending sections 179,
704, 706, 707, and 761 of this title] shall apply in the case of partnership taxable
years beginning after December 31, 1975.
“(2) Subsection (e).--The amendment made by subsection
(e) [amending section 704 of this title] shall apply to liabilities incurred after
December 31, 1976.
“(3) Section 709(b) of the code.--Section 709(b) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]
(as added by the amendment made by subsection (b)(1) of this section)
shall apply in the case of amounts paid or incurred in taxable years beginning after
December 31, 1976.”
