SECTION 1.761-1.   TERMS DEFINED. 

(a) PARTNERSHIP. The term partnership means a partnership as determined
under Secs. 301.7701-1, 301.7701-2, and 301.7701-3 of this chapter.

(b) PARTNER. The term PARTNER means a member of a partnership.

(c) PARTNERSHIP AGREEMENT. For the purposes of subchapter K, a partnership
agreement includes the original agreement and any modifications thereof
agreed to by all the partners or adopted in any other manner provided by
the partnership agreement. Such agreement or modifications can be oral or
written. A partnership agreement may be modified with respect to a
particular taxable year subsequent to the close of such taxable year, but
not later than the date (not including any extension of time) prescribed
by law for the filing of the partnership return. As to any matter on which
the partnership agreement, or any modification thereof, is silent, the
provisions of local law shall be considered to constitute a part of the
agreement.

(d) LIQUIDATION OF PARTNER'S INTEREST. The term LIQUIDATION OF A PARTNER'S
INTEREST means the termination of a partner's entire interest in a
partnership by means of a distribution, or a series of distributions, to
the partner by the partnership. A series of distributions will come within
the meaning of this term whether they are made in one year or in more than
one year. Where a partner's interest is to be liquidated by a series of
distributions, the interest will not be considered as liquidated until the
final distribution has been made. For the basis of property distributed in
one liquidating distribution, or in a series of distributions in
liquidation, see section 732(b). A distribution which is not in
liquidation of a partner's entire interest, as defined in this paragraph,
is a current distribution. Current distributions, therefore, include
distributions in partial liquidation of a partner's interest, and
distributions of the partner's distributive share. See paragraph
(a)(1)(ii) of Section 1.731-1.

(e) DISTRIBUTION OF PARTNERSHIP INTEREST. For purposes of section
708(b)(1)(B) and Sec. 1.708-1(b)(1)(iv), the deemed distribution of an
interest in a new partnership by a partnership that terminates under
section 708(b)(1)(B) is not a sale or exchange of an interest in the new
partnership. However, the deemed distribution of an interest in a new
partnership by a partnership that terminates under section 708(b)(1)(B) is
treated as an exchange of the interest in the new partnership for purposes
of section 743. This paragraph (e) applies to terminations of partnerships
under section 708(b)(1)(B) occurring on or after May 9, 1997; however,
this paragraph (e) may be applied to terminations occurring on or after
May 9, 1996, provided that the partnership and its partners apply this
paragraph (e) to the termination in a consistent manner.

[TD 6500, 25 FR 11814, Nov. 26, 1960, as amended by TD 7208, 37 FR 20686,
Oct. 3, 1972, TD 8717, 62 FR ____, May 9, 1997]