11/12/2007
Partnership Distributions of Marketable Securities
At first blush, section 731(c) seems perfectly reasonable: Treat marketable securities like money for purposesof determining whether gain is recognized in a partnership distribution.1(Securities that are readily marketablesure seem a lot like money — they should be treated like money!) And the absence of a single case interpreting anyof the substantive aspects of section 731(c)2might even create the impression that it is an unusually well-drafted provision. But a closer look reveals that section 731(c) is less about treating marketable securities like money as a matter of principle and more about targeting a perceived abuse. Also, section 731(c) often produces unexpected, unintended, and unclear results.
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