[Code of Federal Regulations]
[Title 26, Volume 8]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.709-1]

[Page 497-498]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Determination of Tax Liability--Table of Contents
 
Sec. 1.709-1  Treatment of organization and syndication costs.

    (a) General rule. Except as provided in paragraph (b) of this 
section, no deduction shall be allowed under chapter 1 of the Code to a 
partnership or to any partner for any amounts paid or incurred, directly 
or indirectly, in partnership taxable years beginning after December 31, 
1975, to organize a partnership, or to promote the sale of, or to sell, 
an interest in the partnership.
    (b) Amortization of organization expenses. (1) Under section 709(b) 
of the Code, a partnership may elect to treat its organizational 
expenses (as defined in section 709(b)(2) and in Sec. 1.709-2(a)) paid 
or incurred in partnership taxable years beginning after December 31, 
1976, as deferred expenses. If a partnership elects to amortize 
organizational expenses, it must select a period of not less than 60 
months, over which the

[[Page 498]]

partnership will amortize all such expenses on a straight line basis. 
This period must begin with the month in which the partnership begins 
business (as determined under Sec. 1.709-2(c)). However, in the case of 
a partnership on the cash receipts and disbursements method of 
accounting, no deduction shall be allowed for a taxable year with 
respect to any such expenses that have not been paid by the end of that 
taxable year. Portions of such expenses which would have been deductible 
under section 709(b) in a prior taxable year if the expenses had been 
paid are deductible in the year of payment. The election is irrevocable 
and the period selected by the partnership in making its election may 
not be subsequently changed.
    (2) If there is a winding up and complete liquidation of the 
partnership prior to the end of the amortization period, the unamortized 
amount of organizational expenses is a partnership deduction in its 
final taxable year to the extent provided under section 165 (relating to 
losses). However, there is no partnership deduction with respect to its 
capitalized syndication expenses.
    (c) Time and manner of making election. The election to amortize 
organizational expenses provided by section 709(b) shall be made by 
attaching a statement to the partnership's return of income for the 
taxable year in which the partnership begins business. The statement 
shall set forth a description of each organizational expense incurred 
(whether or not paid) with the amount of the expense, the date each 
expense was incurred, the month in which the partnership began business, 
and the number of months (not less than 60) over which the expenses are 
to be amortized. A taxpayer on the cash receipts and disbursements 
method of accounting shall also indicate the amount paid before the end 
of the taxable year with respect to each such expense. Expenses less 
than $10 need not be separately listed, provided the total amount of 
these expenses is listed with the dates on which the first and last of 
such expenses were incurred, and, in the case of a taxpayer on the cash 
receipts and disbursements method of accounting, the aggregate amount of 
such expenses that was paid by the end of the taxable year is stated. In 
the case of a partnership which begins business in a taxable year that 
ends after March 31, 1983, the original return and statement must be 
filed (and the election made) not later than the date prescribed by law 
for filing the return (including any extensions of time) for that 
taxable year. Once an election has been made, an amended return (or 
returns) and statement (or statements) may be filed to include any 
organizational expenses not included in the partnership's original 
return and statement.

[T.D. 7891, 48 FR 20048, May 4, 1983]