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are allowable only to the extent allowed in sections 1211 and
1212. Sec. 165(f). If an individual's capital losses exceed
capital gains, section 1211(b) restricts deductions for capital
losses to the lower of $3,0004 or the excess of such losses over
gains.
The term "capital asset" is defined in section 1221 as
"property held by the taxpayer (whether or not connected with his
trade or business)," subject to five specified exceptions. One
such exception, section 1221(2), includes real property used in
the taxpayer's trade or business.
Gain or loss from the sale of a partnership interest is
generally considered as gain or loss from the sale or exchange of
a capital asset. Sec. 741; Pollack v. Commissioner, 69 T.C. 142,
145 (1977)(holding section 741 operates independently of section
1221(2)); sec. 1.741-1(a), Income Tax Regs. The gain or loss of
a partner on the sale of a partnership interest is the difference
between the amount realized and the partner's adjusted basis in
the partnership interest. Sec. 1.741-1(a), Income Tax Regs. For
purposes of section 741, the "amount realized" includes the
transferor-partner's share of liabilities assumed by the
transferee. Sec. 752(d).
There is no dispute in this case regarding either the amount
or timing of the $65,316 loss. The only issue is whether this
4The limit is $1,500 in the case of a married individual
filing a separate return.
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