What Does IRS Transaction Code 767 Mean?

The United States tax law, organized under Title 26 of the U.S. Code, does not contain a Section 767. A search for this section number is likely the result of a typographical error or misinformation. While there is no such law, the IRS does use transaction code 767. This code signifies a reduction or removal of a credit on a taxpayer’s account transcript and is an internal processing number, not part of the statutory tax law.

Commonly Confused Code Sections

When a search for a tax code section yields no results, it is often a typo. Several sections of the Internal Revenue Code are numerically close to 767 and cover distinct financial topics. One such section is IRC Section 707, which governs the tax treatment of transactions between a partnership and one of its partners, helping to determine if the partner is acting in their partner capacity or as an outside party.

Another possibility is a reference to IRC Section 676. This section deals with revocable trusts, stating that if the person who creates a trust (the grantor) retains the power to revoke it, the income from that trust is taxed to the grantor. A final possibility is IRC Section 7872, which addresses the tax implications of loans with below-market interest rates by imputing interest to reflect a market rate.

Overview of Partnership Transactions

Given its numerical proximity, the code governing partnership transactions is a frequent source of confusion. It establishes that when a partner engages in a transaction with their partnership, but not in their role as a partner, the transaction is treated as if it occurred between the partnership and an unrelated third party. For example, if a partner sells a piece of property to the partnership, this rule would treat it as a standard sale, requiring the partner to recognize any gain or loss.

Similarly, payments determined without regard to the partnership’s income are known as “guaranteed payments.” These are treated as ordinary income to the partner and are generally deductible by the partnership. The rules also address situations designed to look like contributions and distributions but are, in substance, sales, which are known as “disguised sales.”

If a partner contributes property to a partnership and soon after receives a distribution of cash or other property, the IRS may recharacterize the event as a sale. Transactions where a partner contributes property and receives a related distribution within a two-year period are presumed to be a sale unless facts clearly indicate otherwise.

How to Find Correct IRS Code Sections

Verifying a section of the Internal Revenue Code is a process that can prevent confusion. The most reliable source is the government itself. The U.S. House of Representatives provides a free, searchable version of the entire United States Code on its website, where you can navigate to Title 26 for the Internal Revenue Code.

The Internal Revenue Service website also provides access to the code, regulations, and other official guidance, allowing users to browse or search for a specific section. For additional context, legal information websites maintained by institutions like Cornell Law School offer the full text of the U.S. Code with helpful annotations and cross-references.