Wallace and Pedersen have equal interests in the capital and profits of the partnership of Wallace and Pedersen. They are otherwise unrelated to each other. On August 1, 2019, 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 2010 at a cost of $10,000. What is Wallace's deductible loss for 2019 as a result of the sale of this stock?

Question

Quizplus · Accepted Answer

Since Wallace sold the stock to the partnership for fair market value, there is no gain or loss recognized on the sale. However, Wallace has a long-term capital loss of $3,000 ($10,000 basis minus $7,000 fair market value). This loss is deductible on his personal tax return as a capital loss.

Wallace and Pedersen Have Equal Interests in the Capital and Profits