26 CFR § 1.732-2 - Special partnership basis of distributed property.

---
identifier: "/us/cfr/t26/s1.732-2"
source: "ecfr"
legal_status: "authoritative_unofficial"
title: "26 CFR § 1.732-2 - Special partnership basis of distributed property."
title_number: 26
title_name: "Internal Revenue"
section_number: "1.732-2"
section_name: "Special partnership basis of distributed property."
chapter_name: "INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY"
subchapter_number: "A"
subchapter_name: "INCOME TAX"
part_number: "1"
part_name: "INCOME TAXES"
positive_law: false
currency: "2026-04-05"
last_updated: "2026-04-05"
format_version: "1.1.0"
generator: "[email protected]"
authority: "26 U.S.C. 7805, unless otherwise noted."
regulatory_source: "T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 21, 1960; T.D. 9989, 89 FR 17606, Mar. 11, 2024, unless otherwise noted."
cfr_part: "1"
---


# 1.732-2 Special partnership basis of distributed property.

(a) *Adjustments under section 734(b).* In the case of a distribution of property to a partner, the partnership bases of the distributed properties shall reflect any increases or decreases to the basis of partnership property which have been made previously under section 734(b) (relating to the optional adjustment to basis of undistributed partnership property) in connection with previous distributions.

(b) *Adjustments under section 743(b).* In the case of a distribution of property to a partner who acquired any part of his interest in a transfer as to which an election under section 754 was in effect, then, for the purposes of section 732 (other than subsection (d) thereof), the adjusted partnership bases of the distributed property shall take into account, in addition to any adjustments under section 734(b), the transferee's special basis adjustment for the distributed property under section 743(b). The application of this paragraph may be illustrated by the following example:

(c) *Adjustments to basis of distributed inventory and unrealized receivables.* Under section 732, the basis to be allocated to distributed properties shall be allocated first to any unrealized receivables and inventory items. If the distributee partner is a transferee of a partnership interest and has a special basis adjustment for unrealized receivables or inventory items under either section 743(b) or section 732(d), then the partnership adjusted basis immediately prior to distribution of any unrealized receivables or inventory items distributed to such partner shall be determined as follows: If the distributee partner receives his entire share of the fair market value of the inventory items or unrealized receivables of the partnership, the adjusted basis of such distributed property to the partnership, for the purposes of section 732, shall take into account the entire amount of any special basis adjustment which the distributee partner may have for such assets. If the distributee partner receives less than his entire share of the fair market value of partnership inventory items or unrealized receivables, then, for purposes of section 732, the adjusted basis of such distributed property to the partnership shall take into account the same proportion of the distributee's special basis adjustment for unrealized receivables or inventory items as the value of such items distributed to him bears to his entire share of the total value of all such items of the partnership. The provisions of this paragraph may be illustrated by the following example:

[T.D. 6500, 25 FR 11814, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 8847, 64 FR 69908, Dec. 15, 1999]