Wallace and Pedersen have equal interests in the capital and profits of the partnership of Wallace and Pedersen,but are otherwise unrelated.On August 1,2013,Wallace sold 100 shares of Kalmia Mining Corporation to the partnership for its fair market value of $7,000.Wallace had bought the stock in 1998 at a cost of $10,000.What is Wallace's deductible loss for 2013 as a result of the sale of this stock?

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Quizplus · Accepted Answer

Since Wallace sold the stock to the partnership at fair market value, he did not realize a loss or gain on the sale. However, he can still deduct the loss of $3,000 ($10,000 cost basis - $7,000 fair market value) as a long-term capital loss on his tax return. Since Wallace is a partner in a partnership, this loss would be reported on his individual tax return, not on the partnership's tax return.

Wallace and Pedersen Have Equal Interests in the Capital and Profits