TREATMENT OF CERTAIN PAYMENTS TO RETIRED OR DECEASED PARTNER.

SEC. 13262. TREATMENT OF CERTAIN PAYMENTS TO RETIRED OR DECEASED PARTNER. (a) Section 736(b) Not To Apply in Certain Cases.— Subsection (b) of section 736 (relating to payments for interest in partnership) is amended by adding at the end thereof the following new paragraph: “(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.” (b) Limitation on Definition of Unrealized Receivables.— (1) In general.— Subsection (c) of section 751 (defining unrealized receivables) is amended— (A) by striking “sections 731, 736, and 741” each place they appear and inserting “, sections 731 and 741 (but not for purposes of section 736)”, and (B) by striking “section 731, 736, or 741” each place it appears and inserting “section 731 or 741”. (2) Technical amendments.— (A) Subsection (e) of section 751 is amended by striking “sections 731, 736, and 741” and inserting “sections 731 and 741”. (B) Section 736 is amended by striking subsection (c). (c) Effective Date.—2 (1) In general.— The amendments made by this section 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.