to the partner under clause (i)(II). (II) Special rule for dispositions If a partner disposes of a partnership interest, the adjusted basis of the partner in the partnership interest shall be increased immediately before the disposition by the amount of the excess (if any) of the amount of the basis reduction under subclause (I) over the portion of any excess business interest allocated to the partner under clause (i)(II) which has previously been treated under clause (ii) as business interest paid or accrued by the partner. The preceding sentence shall also apply to transfers of the partnership interest (including by reason of death) in a transaction in which gain is not recognized in whole or in part. No deduction shall be allowed to the transferor or transferee under this chapter for any excess business interest resulting in a basis increase under this subclause. (C) Excess taxable income The term excess taxable income means, with respect to any partnership, the amount which bears the same ratio to the partnership’s adjusted taxable income as— (i) the excess (if any) of— (I) the amount determined for the partnership under paragraph (1)(B), over (II) the amount (if any) by which the business interest of the partnership exceeds the business interest income of the partnership, bears to (ii) the amount determined for the partnership under paragraph (1)(B). (D) Application to S corporations Rules similar to the rules of subparagraphs (A) and (B) shall apply with respect to any S corporation and its shareholders. (5) Business interest For purposes of this subsection, the term business interest means any interest paid or accrued on indebtedness properly allocable to a trade or business. Such term shall not include investment interest (within the meaning of subsection (d)). (6) Business interest income For purposes of this subsection, the term business interest income means the amount of interest includible in the gross income of the taxpayer for the taxable year which is properly allocable to a trade or business.