Treatment of revalued property

(a) In general Section 704, as amended by section 2, is amended by redesignating subsections (f) and (g) as subsections (g) and (h), respectively, and by inserting after subsection (e) the following new subsection: (f) Revalued property (1) In general Under regulations prescribed by the Secretary, rules similar to the rules of paragraphs (1)(A) and (1)(C) of subsection (c) shall apply to any property held by a partnership at the time of a revaluation event. (2) Exception Paragraph (1) shall not apply to any revaluation event which occurs during a taxable year in which the partnership meets the gross receipts test of section 448(c) unless the partnership elects, at such time and in such manner as prescribed by the Secretary, to not have this paragraph apply. (3) Revaluation event For purposes of this subsection, the term revaluation event means— (A) any disproportionate contribution of money or other property (other than a de minimis amount) to the partnership, (B) any disproportionate distribution of money or other property (other than a de minimis amount) by the partnership, (C) any grant of an interest in the partnership (other than a de minimis interest) as consideration for the provision of services, (D) any issuance by the partnership of a non-compensatory option (other than an option for a de minimis partnership interest), (E) except as provided by the Secretary, any agreement to change (other than a de minimis change) the manner in which the partners share any item or class of items of income, gain, loss, deduction, or credit of the partnership, or (F) any other event prescribed by the Secretary. (4) Application to tiered entities If— (A) a partnership (hereinafter in this paragraph referred to as the upper-tier partnership) is a partner in another partnership (hereinafter in this paragraph referred to as the lower-tier partnership), and (B) the upper-tier partnership holds more than 50 percent of the capital or profits interests in the lower-tier partnership, then a revaluation event with respect to the upper-tier partnership shall be treated as a revaluation event with respect to the lower-tier partnership.. (b) Conforming amendments (1) Section 168(h)(6) is amended by striking section 704(c) each place it appears in subparagraphs (B) and (C) and inserting subsections (c) and (f) of section 704. (2) Section 514(c)(9)(E)(i) is amended by striking section 704(c) and inserting subsections (c) and (f) of section 704. (3) Section 613A(c)(7)(D) is amended by inserting after the fourth sentence the following new sentence: In the case of any revaluation event (as defined in section 704(f)), section 704(f) shall apply in determining such share.. (4) Section 743(b) is amended by inserting after the third sentence the following new sentence: In the case of any revaluation event (as defined in section 704(f)) which occurs before such transfer, section 704(f) shall apply in determining such share.. (5) Section 897(k)(4)(C) is amended by striking section 704(c) each place it appears and inserting subsections (c) and (f) of section 704. (c) Effective date The amendment made by this section shall apply to revaluation events (as defined in section 704(f)(2) of the Internal Revenue Code of 1986, as added by this section) occurring after the date of the enactment of this Act.