Elimination of preformation expenditure exception to partnership transaction rules

(a) In general Section 707(a)(2)(B) is amended by adding at the end the following new sentence: For purposes of the preceding sentence, a transfer of money or other property by a partnership to a partner or by a partner to a partnership will not fail to be characterized as part of a sale or exchange of property because such transfer is made to reimburse the partner or partnership for an expenditure chargeable to capital account (determined without regard to any election under this chapter).. (b) Effective date (1) In general The amendment made by this section shall apply to property transferred after the date of the enactment of this Act. (2) Binding contract exception The amendment made by subsection (a) shall not apply to a transfer of property described in section 707(a)(2)(B)(i) of the Internal Revenue Code of 1986 if such transfer is pursuant to a written binding contract in effect on the date of the enactment of this Act, and at all times thereafter before the transfer.