ExpertMedium1 markMultiple Choice
CPA · Question 68 · Area IV: Property Transactions
A taxpayer sells a building to a partnership in which they own 60% of the capital interest. The building (Basis $100,000) is sold for $80,000. What is the recognized loss?
A taxpayer sells a building to a partnership in which they own 60% of the capital interest. The building (Basis $100,000) is sold for $80,000. What is the recognized loss?
Answer options:
A.
$0
B.
$20,000
C.
$10,000
D.
$12,000
How to approach this question
Check ownership %. If > 50%, loss is disallowed under §707(b).
Full Answer
A.$0✓ Correct
IRC §707(b)(1). No deduction is allowed for a loss on a sale or exchange of property between a partnership and a person owning more than 50% of the capital or profits interest.
Common mistakes
Thinking the threshold is 80% (control) instead of 50%.
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