as invested capital of such person with respect to such interest for purposes of such section. (C) Election The election under subparagraph (A)(ii) shall be made under rules similar to the rules of subsection (b)(2). (D) Partnership interest (i) In general For purposes of this paragraph, any applicable financial instrument or contract (as defined in section 1299(b)(2)(B)) or interest in an entity other than a partnership which is treated as an applicable partnership interest under section 1299(b)(2) shall be treated as an interest in a partnership. (ii) Regulations The Secretary shall prescribe such regulations or other guidance as the Secretary determines necessary or appropriate to carry out this paragraph, including regulations for the application of this paragraph to applicable financial instruments or contracts (as so defined) or interests in entities other than partnerships which are treated as partnership interests under clause (i). . (b) Effective date The amendments made by this section shall apply to interests in partnerships transferred after the date of the enactment of this Act. 3. Treatment of certain partnership interests received in connection with performance of services (a) In general Subchapter P of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new part: VII Treatment of certain partnership interests received in connection with performance of services Sec. 1299. Treatment of certain partnership interests received in connection with performance of services. 1299. Treatment of certain partnership interests received in connection with performance of services (a) In general In the case of a taxpayer who holds 1 or more applicable partnership interests in any partnership at any time during any taxable year of the partnership ending with or within the taxable year of the taxpayer— (1) there shall be included in the gross income of the taxpayer as ordinary income an amount equal to the aggregate of the deemed compensation amounts determined under