capital gain taken into account in determining net capital gain under paragraph (1). (3) Recognition of gain on disposition of applicable partnership interests Any gain on the disposition of any applicable partnership interest shall be recognized notwithstanding any other provision of this title. (4) Recognition of gain on distributions of partnership property (A) In general In the case of any distribution of property by a partnership with respect to any applicable partnership interest, the partner receiving such property shall recognize gain equal to the excess (if any) of— (i) the fair market value of such property at the time of such distribution, over (ii) the adjusted basis of such property in the hands of such partner (determined without regard to subparagraph (B)). (B) Adjustment of basis In the case of a distribution to which subparagraph (A) applies, the basis of the distributed property in the hands of the distributee partner shall be the amount determined under subparagraph (A)(i). (c) Recharacterization account balance (1) In general For purposes of this section, the term recharacterization account balance means, with respect to any taxpayer for any taxable year, the excess (if any) of— (A) the sum of— (i) the taxpayer’s aggregate annual recharacterization amounts with respect to applicable partnership interests for such taxable year, plus (ii) the taxpayer’s recharacterization account balance for the taxable year preceding such taxable year, over (B) the sum of— (i) the taxpayer’s net ordinary income with respect to applicable partnership interests for such taxable year (determined without regard to this section), plus (ii) the amount treated as ordinary income of the taxpayer under this section for the taxable year preceding such taxable year. (2) Annual recharacterization amount For purposes of this subsection— (A) In general The term annual recharacterization amount means, with respect to any applicable partnership interest for any partnership taxable year, an amount equal to the product of— (i)