Section 267

Section 1241

Losses not recognized upon the transfer of property to
related persons should nevertheless be available to off-
set gain on the transfer of other property to such
person during the same year. (Recommendation No. 1970-8).

Amounts received upon the extinguishment or transfer
of certain contractual rights should be treated as
received in exchange for such rights. (Recommendation
No. 1967-5).

New Section 1251 Amounts received from the sale, satisfaction or
(11450-$59)

other disposition of a purchase money obligation
should be treated as received from the sale or
exchange of the property in respect of which the
obligation was originally received.

Tax Treatment of Real Estate

Section 1237 (11450-558)

Farm Operations

The special provision assuring capital gain treatment
of gain realized from the sale of subdivided real
estate held for 10 years should not be restricted
to taxpayers who agree to elect to forgo an increase
in the basis of the property for the cost of improve-
ments and who are able to establish that the
improvements were commercially necessary.

Section 6073 (11450-$78)

An individual should be permitted to file a declaration
of estimated tax for a taxable year on or before January 15
of the succeeding year if at least two-thirds of his
gross income for the year preceding the taxable year
constituted farm income.

Tax Treatment of Partnerships (Limited and General)

Section 701

Section 702 (11450-$39)

Section 702

Section 703 (11450-40)

In the interest of simplification, the partnership pro-
visions applicable generally to small partnerships should
be grouped together at the beginning of subchapter K.
(Recommendation No. 1959-27).

An ambiguity in the partnership provisions should
be clarified to insure that payments taxed to a
partner as guaranteed payments are not taxed again as
part of his distributive share of partnership income.

The character of gain or loss realized by a partnership should not, as some suggest, be determined at the partner level rather than at the partnership level as now provided. (Recommendation No. 1959-28).

Partners, like corporations, should be permitted to amortize their partnership organizational expenses over a period of 60 months.

Section 706 (11450-S41)

Section 707

Section 708 (11450-S42)

Section 735 (11450-S43)

Section 736 (11450-544)

Section 743 (11450-$45)

Section 751 (11450-S46)

Section 751 (11450-$47)

The death of a partner should close his partnership
taxable year unless his personal representative elects
to continue such year.

Taxation of sales by a partner to a controlled partner-
ship should be made to conform to the rules applicable
to sales by a shareholder to a controlled corporation.
(Recommendation No. 1959-29).

Sales or exchanges of partnership interests among
partners should be excluded in determining whether
a 50% transfer of partnership interests has occurred
to cause a termination of the partnership. Similarly,
the Code should be clarified to insure that a two-
man partnership will not be considered to terminate
upon the retirement or death of one of the partners
as long as the retired partner or personal repre-
sentative of the deceased partner receives section
736 payments from the partnership.

A partner is required to recognize, as ordinary income,
gain realized from the sale by him of unrealized
receivables and inventory items acquired in a previous
partnership distribution. This rule should be
extended to apply to transferees of such partners
if their basis for the receivables or inventory
items is determined by reference to the transferor-
partner's basis.

Absent an election by a retired partner or personal repre-
sentative of a deceased partner, payments received from
a partnership in excess of the retired or deceased
partner's share of partnership property should not be
taxed as ordinary income unless paid in cash installments
in two or more taxable years of the partnership.

The optional election relating to the basis of partnership property transferred by sale or exchange or upon a partner's death should exclude unrealized receivables. The basis of a partnership interest acquired by reason of a partner's death should be reduced by the value of unrealized receivables or other income taxed as income in respect of a decedent.

The rules for determining the taxability of gain from
the sale or exchange of a partnership interest attributable
to unrealized receivables and substantially appreciated
inventory items should be simplified and made to
reflect more accurately the economic gain to the trans-
ferring partner.

A partnership distribution of property to a partner
should not result in the recognition of gain or loss
merely because the partners' respective interests in
appreciated inventory or unrealized receivables are
changed unless the distributee partner's interest in
the partnership is completely terminated.

-4

Section 751 (11450-548)

Section 751 (11450-549)

Section 751

Section 752 11450-$50)

Section 761 (11450-$51)

"Unrealized receivables" should be defined to exclude
(1) payments for services to be rendered in the
future and (2) payments for goods sold by a part-
nership if the partnership has not as yet acquired
the goods.

The definition of substantially appreciated inventory
items of a partnership should be rewritten to minimize
the opportunities for planned tax avoidance and to exclude
property which is not normally considered to be
inventory.

In the interest of simplification, the collapsible part-
nership rules applicable to distributions of partnership
property should be confined to family partnerships where
the principal purpose of the distribution is to avoid
taxes by shifting income from one family member to another.
(Recommendation No. 1959-32).

The basis of a partnership interest should be increased or decreased to reflect the amount of the partner's unconditional liability to the partnership.

The right granted members of certain unincorporated organizations to elect to have the organization excluded from the partnership provisions should be replaced with a provision providing for automatic exclusion unless the organization (as distinguished from its members) elects to be treated as a partnership.

New Section 780 The election available to a partnership to adjust the basis of partnership assets should be permitted to be made separately with respect to distributions of partnership property and transfers of partnership interests. (Recommendation No. 1959-31 (a)).

Taxation of Foreign Income

Section 921 (11450-554)

Section 1504 (11450-567)

Section 3401

..

A western hemipshere trade corporation should be allowed to purchase freely outside the western hemisphere without loss of its status.

An affiliated group of corporations filing a consolidated return should not be required to include domestic corporations primarily engaged in foreign trade, unless they elect to do so.

An employer should not be required to withhold income tax on wages received by an employee for services in a foreign country if the employee certifies that his U.S. income tax on such wages will be completely offset by. a foreign tax credit. (Recommendation No. 1965-8).

Pension and Profit Sharing Plans and Other Deferred Compensation

Section 164

(11450-54)

Section 401

Section 401

Section 401

Section 402 (11450-$29)

Section 402

Section 503 (11450-532)

Where state law, in providing for disability benefit programs, permits a choice between participation in a private or State plan, contributions to the private plan should be deductible if contributions to the State plan would have been deductible as a tax.

Collective bargaining unit employees should not be con-
sidered in determining whether a qualified employee
benefit plan satisfies the coverage and anti-discrimination
requirements for qualified status. (Recommendation
No. 1971-5).

The time during which an employee benefit plan may be
retroactively amended to obtain "qualified" status
should be extended. (Recommendation No. 1971-6).

The qualified employee benefit plan provisions should be
rewritten (1) to eliminate all distinctions between
common-law employees and self employed individuals,
(2) to eliminate any distinctions based upon ownership,
(3) to establish new vesting requirements and rules for
eligibility and qualification of individual retirement
accounts, (4) to authorize deductions for employee con-
tributions and (5) to increase the maximum allowable
deductions for self-employed persons. (Recommendation
No. 1972-2).

Termination of "qualified" status of an employee benefit
plan should not cause participating employees to forfeit
tax benefits on distributions to the extent attributable
to accumulations during periods of qualification.

Employee-beneficiaries of non-qualified trusts and annuity
plans should not be taxed until distributions are actually
received or otherwise made available. (Recommendation
No. 1971-7).

The 25% limitation on the percentage of its assets
which a qualified employee benefit trust may invest
in unsecured obligations of the employer (or related
persons) should not be reduced by the amount of
adequately secured obligations of such persons held by it.

Corporate Tax Provisions Not Included Specifically Elsewhere
Section 162

Section 172 (11450-58)

Amounts paid in satisfaction of antitrust treble damage
claims should be fully deductible as ordinary and
necessary business expenses. (Recommendation No. 1968-6).
Taxpayers should not be denied the right to deduct
otherwise allowable net operating loss carryovers
merely because the loss was originally incurred in a
different business.

Section 246 (11450-$11)

Section 248 (11450-512)

Section 269 (11450-$15)

Section 301

Section 301

Section 302 (11450-$16)

Section 302 (11450-$26)

Section 302 (11450-$17)

Section 317 (11450-$18)

Section 331

The 85% deduction for intercorporate dividends should
not be subject to the limitation based on the recipient
corporation's taxable income since the limitation
frequently produces inconsistent and inequitable results.

The provision permitting 60-month amortization of
corporate organizational expenses should be extended
to include reorganization, recapitalization, and
stock issuance expenses.

The section 269 (c) presumption of income tax evasion or
avoidance in the case of a disproportionate purchase
price for stock or assets should be repealed.

All (as distinguished from certain) gain recognized
by a corporation in distributing property as a
dividend to another corporation should be added to
the payor's basis of the property in determining
the amount taxable to the recipient and the basis of the
property in the recipient's hands. (Recommendation
No. 1969-4).

The provisions limiting the taxable amount of certain
intercorporate dividends of property to the payor's basis
of the property should not be changed, as some suggest.
(Recommendation No. 1962-4).

A redemption of a shareholder's stock should not qualify
as a complete termination of interest if the shareholder's
spouse continues to own stock in the corporation.

A redemption of stock which qualifies as a complete
termination of interest should not lose such status
merely because the shareholder reacquires stock in the
corporation during the following 10-year period
through enforcement of his rights as a creditor.

The period in which an agreement must be filed
notifying the Commissioner of a reacquisition of
stock, after a redemption qualifying as a complete
termination of interest, should be extended.

Specific tests should be established which, if satisfied, would guarantee treatment of a corporate obligation as bona fide debt.

A shareholder receiving an installment obligation upon the complete liquidation of a corporation should be permitted to report his gain on the installment method if the obligation was originally received by the liquidating corporation in a sale of property under section 337 (12-month liquidation). (Recommendation No. 1967-2).