CERTAIN PARTNERSHIP PROVISIONS.

SEC. 213. CERTAIN PARTNERSHIP PROVISIONS. (a) Dollar Limitation With Respect to Additional First-Year Deprecation Allowance.— Subsection (d) of section 179 (relating to additional first-year depreciation allowance for small business) is amended by redesignating paragraph (8) as paragraph (9) and by inserting after paragraph (7) the following new paragraph: “(8) Dollar limitation in case of partnerships.— In the case of a partnership, the dollar limitation contained in the first sentence of subsection (b) shall apply with respect to the partnership and with respect to each partner.” (b) Clarification of Treatment of Partnership Syndication Fees, Etc.— (1) In general.— Part I of subchapter K of chapter 1 (relating to determination of tax liability) is amended by adding at the end thereof the following new section: “SEC. 709. TREATMENT OF ORGANIZATION AND SYNDICATION FEES. “(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. “(b) Amortization of Organization Fees.— “(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 40 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. “(2) Organizational expenses defined.— The organizational expenses to which paragraph (1) applies, are expenditures which— “(A) are incident to the creation of the partnership; “(B) are chargeable to capital account; and “(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.” (2) Clerical amendment.—The table of sections for such part is amended by adding at the end thereof the following: “Sec. 709. Treatment of organization and syndication fees.” (3) Determination of amounts chargeable to capital account.— Section 707(c) (relating to guaranteed payments) is amended by striking out “and section 162(a)” and inserting in lieu thereof “and, subject to section 263, for purposes of section 162(a)”. (c) Items Must Be Allocated to Portion of Year Partner Held Interest.— (1) In general.— Subparagraph (B) of section 706(c)(2) (relating to disposition of less than entire interest) is amended 90 STAT. 1548by striking out “or with respect to a partner whose interest is reduced” and inserting in lieu thereof “or with respect to a partner whose interest is reduced (whether by entry of a new partner, partial liquidation of a partner’s interest, gift, or otherwise)”. (2) Certain provisions of subchapter k mat not be over-ridden by partnership agreement.— Subsection (a) of section 704 (relating to effect of partnership agreement) is amended by striking out “except as otherwise provided in this section” and inserting in lieu thereof “except as otherwise provided in this chapter”, (3) Cross references.— (A) Section 704 is amended by adding at the end thereof the following: “(f) Cross Reference.— “For rules in the case of the sale, exchange, liquidation, or reduction of a partner’s interest, see section 706(c)(2).” (B) Section 761 (relating to terms defined) is amended by adding at the end thereof the following: “(e) Cross Reference.— “For rules in the case of the sale, exchange, liquidation, or reduction of a partner’s interest, see sections 704(b) and 706(c)(2),” (d) Determination of Partner’s Distributive Share.— Subsection (b) of section 704 (relating to distributive share determined by income or loss ratio) is amended to read as follows: “(b) Determination of Distributive Share.— A partner’s distributive share of income, gain, loss, deduction, or credit (or item thereof) shall be determined in accordance with the partner’s interest in the partnership (determined by taking into account all facts and circumstances), if— “(1) the partnership agreement does not provide as to the partner’s distributive share of income, gain, loss, deduction, or credit (or item thereof), or “(2) the allocation to a partner under the agreement of income, gain, loss, deduction, or credit (or item thereof) does not have substantial economic effect.” (e) Treatment of Partnership Liabilities With Respect to Which the Partner Is Not Personally Liable.— Section 704(d) (relating to limitation on allowance of losses) is amended by adding at the end thereof the following new sentences: “For purposes of this subsection, the adjusted basis of any partner’s interest in the partnership shall not include any portion of any partnership liability with respect to which the partner has no personal liability. The preceding sentence, shall not apply with respect to any activity to the extent that section 465 (relating to limiting deductions to amounts at risk in case of certain activities) applies, nor shall it apply to any partnership the principal activity of which is investing in real property (other than mineral property). ” (f) Effective Dates.— (1) In general.—Except as otherwise provided in this subsection, the amendments made by this section shall apply in the case of partnership taxable years beginning after December 31, 1975. (2) Subsection (e).— The amendment made by subsection (e) shall apply to liabilities incurred after December 31, 1976. 90 STAT. 1549 (3) Section 709(b) of the code.— Section 709(b) of the Internal Revenue Code of 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.