Bao had investment land that he purchased in 1990 for $80,000. Two years ago, when the land was contributed to a partnership, the FMV was $50,000. The land is inventory in the hands of the partnership. The partnership then sells the land in the current year for $46,000. The partnership's recognized loss is
A)a $34,000 capital loss.
B)a $34,000 ordinary loss.
C)a $30,000 capital loss and a $4,000 ordinary loss.
D)a $4,000 capital loss and a $30,000 ordinary loss.

Question

Quizplus · Accepted Answer

The partnership's recognized loss is $34,000 ($50,000 - $46,000). The loss is a capital loss to the extent of the excess of the adjusted basis of the property over the FMV at the time of the contribution ($80,000 - $50,000 = $30,000). The remaining loss ($34,000 - $30,000 = $4,000) is an ordinary loss.

Bao Had Investment Land That He Purchased in 1990 for $80,000