[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: 26CFR1.752-6T]

[Page 566-567]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Determination of Tax Liability--Table of Contents
 
Sec. 1.752-6T  Partnership assumption of partner's section 358(h)(3) liability 
after October 18, 1999, and before June 24, 2003 (temporary).

    (a) In general. If, in a transaction described in section 721(a), a 
partnership assumes a liability (defined in section 358(h)(3)) of a 
partner (other than a liability to which section 752(a) and (b) apply), 
then, after application of section 752(a) and (b), the partner's basis 
in the partnership is reduced (but not below the adjusted value of such 
interest) by the amount (determined as of

[[Page 567]]

the date of the exchange) of the liability. For purposes of this 
section, the adjusted value of a partner's interest in a partnership is 
the fair market value of that interest increased by the partner's share 
of partnership liabilities under Sec. Sec. 1.752-1 through 1.752-5.
    (b) Exceptions--(1) In general. Except as provided in paragraph 
(b)(2) of this section, the exceptions contained in section 358(h)(2)(A) 
and (B) apply to this section.
    (2) Transactions described in Notice 2000-44. The exception 
contained in section 358(h)(2)(B) does not apply to an assumption of a 
liability (defined in section 358(h)(3)) by a partnership as part of a 
transaction described in, or a transaction that is substantially similar 
to the transactions described in, Notice 2000-44 (2000-2 C.B. 255). See 
Sec. 601.601(d)(2) of this chapter.
    (c) Example. The following example illustrates the principles of 
paragraph (a) of this section:

    Example. In 1999, A and B form partnership PRS. A contributes 
property with a value and basis of $200, subject to a nonrecourse debt 
obligation of $50 and a fixed or contingent obligation of $100 that is 
not a liability to which section 752(a) and (b) applies, in exchange for 
a 50% interest in PRS. Assume that, after the contribution, A's share of 
partnership liabilities under Sec. Sec. 1.752-1 through 1.752-5 is $25. 
Also assume that the $100 liability is not associated with a trade or 
business contributed by A to PRS or with assets contributed by A to PRS. 
After the contribution, A's basis in PRS is $175 (A's basis in the 
contributed land ($200) reduced by the nonrecourse debt assumed by PRS 
($50), increased by A's share of partnership liabilities under 
Sec. Sec. 1.752-1 through 1.752-5 ($25)). Because A's basis in the PRS 
interest is greater than the adjusted value of A's interest, $75 (the 
fair market value of A's interest ($50) increased by A's share of 
partnership liabilities ($25)), paragraph (a) of this section operates 
to reduce A's basis in the PRS interest (but not below the adjusted 
value of that interest) by the amount of liabilities described in 
section 358(h)(3) (other than liabilities to which section 752(a) and 
(b) apply) assumed by PRS. Therefore, A's basis in PRS is reduced to 
$75.

    (d) Effective dates--(1) In general. This section applies to 
assumptions of liabilities occurring after October 18, 1999 and before 
June 24, 2003.
    (2) Election to apply Sec. 1.752-7. The partnership may elect, 
under provisions of REG-106736-00 in 2003-28 I.R.B. (see Sec. 
601.601(d)(2) of this chapter) to apply those provisions and related 
Income Tax Regulations to all assumptions of liabilities by the 
partnership occurring after October 18, 1999, and before June 24, 2003. 
Provisions of REG-106736-00 in 2003-28 I.R.B. (see Sec. 601.601(d)(2) 
of this chapter) describe the manner in which the election is made.

[T.D. 9062, 68 FR 37416, June 24, 2003]