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:

$20,000

$10,000

$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%.

Question 67 All questions

Practice the full CPA TCP Practice Exam 4

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