Discussion:Worthless Partnership Interest

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Revision as of 18:11, 20 October 2009
Wamark (Talk | contribs)
(Thanks Michaelst)
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Michaelstar (Talk | contribs)
(Unfortunately, y)
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Revision as of 18:35, 20 October 2009

Discussion Forum Index --> Advanced Tax Questions --> Worthless Partnership Interest
Discussion Forum Index --> Tax Questions --> Worthless Partnership Interest

Wamark (talk|edits) said:

20 October 2009
My client invested in a partnership as a limited partner to buy and develop land. In 2008, the bank foreclosed on the land. The partnership dissolved in 2008 and my client lost his entire investment.

He received a 2008 K1 from partnership that shows:

  • Marked as final K1
  • Ordinary loss of $35,000
  • Partner’s share of recourse debt $380
  • Partner’s ending Capital Account $35,000

I don’t understand the accounting on the final K1. It seems like his capital account should have been reduced to zero thru a loss.

Regardless, I want to take an ordinary loss for the remaining balance in his capital account for a loss on his worthless interest.

In researching the subject it seems that the requirements are pretty strict to be able to do that.

Given the entries on the K1 can I take an ordinary loss for a worthless partnership interest in 2008?

Michaelstar (talk|edits) said:

20 October 2009
Based on the K-1 you received and your post - my answer would be No - you will not be able to take an ordinary loss for this ending capital account. See Rev. Rul. 93-80.

Wamark (talk|edits) said:

20 October 2009
Thanks Michaelstar.

Yes, I read that.

To be clear I assume you say no because of the releif of $380 of recourse debt?

Michaelstar (talk|edits) said:

20 October 2009
Unfortunately, yes. The recourse debt of $380 presents a problem. Also, there would need to be a formal abandonment as I read the Revenue Ruling.
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