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 Topic: Partnership recognition of LTCL ( Topic Closed)
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lauritta
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Joined: 02 Jan 2011
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Posts: 83
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| Posted: 20 Jan 2012 at 17:53 | IP Logged
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I wanted to share this question. I found it interesting. I assumed they are parners with 50% ownership - so no loss is allowed. But the answer is totaly different. Does anybody have any thoughts?
Doris and Lydia are equal partners in the capital and profits of Agee & Nolan, but are otherwise unrelated. The following information pertains to 300 shares of Mast Corp. stock sold by Lydia to Agee & Nolan:
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Year of purchase |
2008 |
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Year of sale |
2010 |
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Basis (cost) |
$9,000 |
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Sales price (equal to fair market value) |
$4,000 |
The amount of long-term capital loss that Lydia recognized in 2010 on the sale of this stock was
A. $5,000
Answer A is correct. Although gains and losses incurred in sales transactions between a partnership and its partners are generally recognized, a loss is disallowed if incurred in a transaction between a partnership and a partner owning (directly or constructively) more than a 50% capital or profits interest. Since Lydia's partnership interest does not exceed 50%, she realizes and recognizes a long-term capital loss of $9,000 – $4,000 = $5,000 from the sale of stock.
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Holly
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| Posted: 20 Jan 2012 at 23:25 | IP Logged
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interesting. thanks for posting it.
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CPA#1
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| Posted: 30 Jan 2012 at 13:08 | IP Logged
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No loss is allowed for a MORE THAN 50% partner. Lydia's interest is exactly 50%, not more than 50%. Tricky tricky tricky question!!
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DONE!!!!!!!
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