§1.706-1   Taxable years of partner and partnership.

(a) Year in which partnership income is includible.

(b) Taxable year.

(1) Partnership treated as taxpayer.

(2) Partnership's taxable year.

(i) Required taxable year.

(ii) Exceptions.

(3) Least aggregate deferral.

(i) Taxable year that results in the least aggregate deferral of income.

(ii) Determination of the taxable year of a partner or partnership that uses a 52-53 week taxable year.

(iii) Special de minimis rule.

(iv) Examples.

(4) Measurement of partner's profits and capital interest.

(i) In general.

(ii) Profits interest.

(A) In general.

(B) Percentage share of partnership net income.

(C) Distributive share.

(iii) Capital interest.

(5) Taxable year of a partnership with tax-exempt partners.

(i) Certain tax-exempt partners disregarded.

(ii) Example.

(iii) Effective date.

(6) Certain foreign partners disregarded.

(i) Interests of disregarded foreign partners not taken into account.

(ii) Definition of foreign partner.

(iii) Minority interest rule.

(iv) Example.

(v) Effective date.

(A) Generally.

(B) Voluntary change in taxable year.

(C) Subsequent sale or exchange of interests.

(D) Transition rule.

(7) Adoption of taxable year.

(8) Change in taxable year.

(i) Partnerships.

(A) Approval required.

(B) Short period tax return.

(C) Change in required taxable year.

(ii) Partners.

(9) Retention of taxable year.

(10) Procedures for obtaining approval or making a section 444 election.

(11) Effect on partner elections under section 444.

(i) Election taken into account.

(ii) Effective date.

(c) Closing of partnership year.

(1) General rule.

(2) Disposition of entire interest.

(i) In general.

(ii) Example.

(iii) Deemed dispositions.

(3) Disposition of less than entire interest.

(4) Determination of distributive shares.

(5) Transfer of interest by gift.

(6) Foreign taxes.

(d) Effective/applicability date.

§1.706-2   Certain allocable cash basis items. [Reserved]

§1.706-2T   Temporary regulations; question and answer under the Tax Reform Act of 1984 (temporary).

§1.706-3   Items attributable to interest in lower tier partnership. [Reserved]

§1.706-4   Determination of distributive share when a partner's interest varies.

(a) General rule.

(1) Variations subject to this section.

(2) Coordination with section 706(d)(2) and (3) and other Code sections.

(3) Allocation of items subject to this section.

(4) Example.

(b) Exceptions.

(1) Permissible changes among contemporaneous partners.

(2) Safe harbor for partnerships for which capital is not a material income-producing factor.

(3) Special rules for publicly traded partnerships.

(c) Conventions.

(1) In general.

(i) Calendar day convention.

(ii) Semi-monthly convention.

(iii) Monthly convention.

(2) Exceptions.

(3) Permissible conventions for each variation.

(i) Rules applicable to all partnerships.

(ii) Publicly treated partnerships.

(4) Examples.

(d)

(1) Optional regular monthly or semimonthly interim closings.

(2) Example.

(e) Extraordinary items.

(1) General principles.

(2) Definition.

(3) Small item exception.

(4) Examples.

(f) Agreement of the partners.

(g) Effective/applicability date.

§1.706-5   Taxable year determination.

(a) In general.

(b) Effective/applicability date.