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Partnership Taxation (Graduate Tax Program)Prof. MauleSpring 2009Rev. Rul. 96-101996-1 C.B. 138ISSUES (1) If a loss on the sale of partnership property is disallowed under Section 707(b)(1) of the Internal Revenue Code, are the partners' bases in their partnership interests decreased under Section 705(a)(2) to reflect the disallowed loss? (2) If gain from the sale of partnership property is not recognized due to Sections 707(b)(1) and 267(d), are the partners' bases in their partnership interests increased under Section 705(a)(1) to reflect that gain?
Section 707(b)(1) also provides that, in the case of a subsequent sale or exchange by a transferee described in Section 707(b)(1), Section 267(d) applies as if the loss were disallowed under Section 267(a)(1). Section 267(d) provides that, if a taxpayer acquires property by sale or exchange from a transferor who, on the transaction, sustained a loss not allowable as a deduction by reason of Section 267(a) (1), then any gain realized by
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Taxation in the United States, partner, Income tax in the United States