Tim, a real estate investor, Ken, a dealer in securities, and Hardware, Inc., a retail lumber store form a partnership called HKT, LP. HKT is in the home building business. Tim recently purchased his interest in HKT while the other partners purchased their interest several years ago. During X3, HKT reports a $12,000 gain from the sale of a stock in a wholesale lumber company it purchased in X1 for investment purposes. Which of the following statements best represents how their portion of the gain should be reported to the partner?

Question

Quizplus · Accepted Answer

The gain from the sale of stock held for investment purposes for more than one year is considered a long-term capital gain. Since the stock was purchased in X1 and sold in X3, it qualifies as a long-term capital gain for all partners, including Hardware, Inc.

Tim, a Real Estate Investor, Ken, a Dealer in Securities