---
kind: "section"
citation: "26 U.S.C. § 755"
title: "26"
title_heading: "Internal Revenue Code"
number: "755"
heading: "Rules for allocation of basis"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/26/755"
units:
  - "Subtitle A — Income Taxes"
  - "Chapter 1 — Normal Taxes and Surtaxes"
  - "Subchapter K — Partners and Partnerships"
  - "Part II — Contributions, Distributions, and Transfers"
  - "Subpart D — Provisions Common to Other Subparts"
---

# §755. Rules for allocation of basis

- (a) **General rule—** Any increase or decrease in the adjusted basis of [partnership](/usc/26/761.md?p=a) [property](/usc/26/317.md?p=a) under [section 734(b)](/usc/26/734.md?p=b) (relating to the optional adjustment to the basis of undistributed [partnership](/usc/26/761.md?p=a) [property](/usc/26/317.md?p=a)) or [section 743(b)](/usc/26/743.md?p=b) (relating to the optional adjustment to the basis of [partnership](/usc/26/761.md?p=a) [property](/usc/26/317.md?p=a) in the case of a transfer of an [interest](/usc/26/856.md?p=f-1) in a [partnership](/usc/26/761.md?p=a)) shall, except as provided in [subsection (b)](#b), be allocated—
  - (1) in a manner which has the effect of reducing the difference between the fair market [value](/usc/26/851.md?p=c-4) and the adjusted basis of [partnership](/usc/26/761.md?p=a) [properties](/usc/26/317.md?p=a), or
  - (2) in any other manner permitted by regulations prescribed by the Secretary.
- (b) **Special rule—** In applying the allocation rules provided in [subsection (a)](#a), increases or decreases in the adjusted basis of [partnership](/usc/26/761.md?p=a) [property](/usc/26/317.md?p=a) arising from a distribution of, or a transfer of an [interest](/usc/26/856.md?p=f-1) attributable to, [property](/usc/26/317.md?p=a) consisting of—
  - (1) [capital assets](/usc/26/1221.md?p=a) and [property](/usc/26/317.md?p=a) described in [section 1231(b)](/usc/26/1231.md?p=b), or
  - (2) any other [property](/usc/26/317.md?p=a) of the [partnership](/usc/26/761.md?p=a),

  shall be allocated to [partnership](/usc/26/761.md?p=a) [property](/usc/26/317.md?p=a) of a like character except that the basis of any such [partnership](/usc/26/761.md?p=a) [property](/usc/26/317.md?p=a) shall not be reduced below zero. If, in the case of a distribution, the adjustment to basis of [property](/usc/26/317.md?p=a) described in paragraph [(1)](#b-1) or [(2)](#b-2) is prevented by the absence of such [property](/usc/26/317.md?p=a) or by insufficient adjusted basis for such [property](/usc/26/317.md?p=a), such adjustment shall be applied to subsequently acquired [property](/usc/26/317.md?p=a) of a like character in accordance with regulations prescribed by the Secretary.

- (c) **No allocation of basis decrease to stock of corporate partner—** In making an allocation under [subsection (a)](#a) of any decrease in the adjusted basis of [partnership](/usc/26/761.md?p=a) [property](/usc/26/317.md?p=a) under [section 734(b)](/usc/26/734.md?p=b)—
  - (1) no allocation may be made to [stock](/usc/26/1504.md?p=a-4) in a corporation (or any person related (within the meaning of sections [267(b)](/usc/26/267.md?p=b) and [707(b)(1)](/usc/26/707.md?p=b-1)) to such corporation) which is a [partner](/usc/26/761.md?p=b) in the [partnership](/usc/26/761.md?p=a), and
  - (2) any amount not allocable to [stock](/usc/26/1504.md?p=a-4) by reason of [paragraph (1)](#c-1) shall be allocated under [subsection (a)](#a) to other [partnership](/usc/26/761.md?p=a) [property](/usc/26/317.md?p=a).

  Gain shall be recognized to the [partnership](/usc/26/761.md?p=a) to the extent that the amount required to be allocated under [paragraph (2)](#c-2) to other [partnership](/usc/26/761.md?p=a) [property](/usc/26/317.md?p=a) exceeds the aggregate adjusted basis of such other [property](/usc/26/317.md?p=a) immediately before the allocation required by [paragraph (2)](#c-2).


## Source credit

(Aug. 16, 1954, ch. 736, 68A Stat. 252; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 108–357, title VIII, § 834(a), Oct. 22, 2004, 118 Stat. 1592.)

## Notes

### Editorial Notes

### Amendments

2004—Subsec. (c). Pub. L. 108–357 added subsec. (c).

1976—Subsecs. (a), (b). Pub. L. 94–455 struck out “or his delegate” after “Secretary” wherever appearing.

### Statutory Notes and Related Subsidiaries

### Effective Date of 2004 Amendment

Pub. L. 108–357, title VIII, § 834(b), Oct. 22, 2004, 118 Stat. 1592, provided that: “The amendment made by this section [amending this section] shall apply to distributions after the date of the enactment of this Act [Oct. 22, 2004].”