of a disposition of an investment services partnership interest by gift or by reason of death of the taxpayer— (i) subparagraph (A) shall not apply, (ii) such interest shall be treated as an investment services partnership interest in the hands of the person acquiring such interest, and (iii) any amount that would have been treated as ordinary income under this subsection had the decedent sold such interest immediately before death shall be treated as an item of income in respect of a decedent under section 691. (2) Loss Any loss on the disposition of an investment services partnership interest shall be treated as an ordinary loss to the extent of the excess (if any) of— (A) the aggregate amount treated as ordinary income under subsection (a) with respect to such interest for all partnership taxable years to which this section applies, over (B) the aggregate amount treated as ordinary loss under subsection (a) with respect to such interest for all partnership taxable years to which this section applies. (3) Election with respect to certain exchanges Paragraph (1)(A)(ii) shall not apply to the contribution of an investment services partnership interest to a partnership in exchange for an interest in such partnership if— (A) the taxpayer makes an irrevocable election to treat the partnership interest received in the exchange as an investment services partnership interest, and (B) the taxpayer agrees to comply with such reporting and recordkeeping requirements as the Secretary may prescribe. (4) Distributions of partnership property (A) In general In the case of any distribution of property by a partnership with respect to any investment services partnership interest held by a partner, 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 (C)). (B) Treatment of gain as ordinary income Any