Partnership interests transferred in connection with performance of services

(a) Modification to election To include partnership interest in gross income in year of transfer Subsection (c) of section 83 is amended by redesignating paragraph (4) as paragraph (5) and by inserting after paragraph (3) the following new paragraph: (4) Partnership interests Except as provided by the Secretary— (A) In general In the case of any transfer of an interest in a partnership in connection with the provision of services to (or for the benefit of) such partnership— (i) the fair market value of such interest shall be treated for purposes of this section as being equal to the amount of the distribution which the partner would receive if the partnership sold (at the time of the transfer) all of its assets at fair market value and distributed the proceeds of such sale (reduced by the liabilities of the partnership) to its partners in liquidation of the partnership, and (ii) the person receiving such interest shall be treated as having made the election under subsection (b)(1) unless such person makes an election under this paragraph to have such subsection not apply. (B) Election The election under subparagraph (A)(ii) shall be made under rules similar to the rules of subsection (b)(2).. (b) Effective date The amendments made by this section shall apply to interests in partnerships transferred after the date of the enactment of this Act.