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 1,2017,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 2008 at a cost of $10,000.What is Wallace's deductible loss for 2017 as a result of the sale of this stock?

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When Wallace sold the shares to the partnership for $7,000, he incurred a long-term capital loss of $3,000 ($10,000 - $7,000). This loss is deductible on his tax return as a long-term capital loss. Since Wallace is a partner in the partnership, the loss will flow through to his personal tax return.

Wallace and Pedersen Have Equal Interests in the Capital and Profits