May 01, 2020 · Alternatively, a taxpayer can pursue a loss deduction under Sec. 165(a) for worthlessness. In a recent Tax Court case, MCM Investment Management LLC, T.C. Memo. 2019-158, the taxpayer successfully proved it was entitled to a Sec. 165(a) loss deduction for worthlessness of a partnership interest. This case provides a road map for establishing the legal requirements needed to sustain a deduction for worthlessness, and reinforces the position that actual abandonment of a partnership interest …
Oct 21, 2020 · Recent Tax Court Case on Worthlessness of Partnership Interest. In December 2019, the Tax Court in MCM Investment Management LLC v. Commissioner, T.C. 2019-158, allowed a partnership a $41.5 million loss for worthlessness in the year it began a five-year wind down of operations. This allowed the partners to recoup their adjusted bases in their interests.
Office of Chief Counsel Internal Revenue Service …
similar specific provision for the worthlessness of a partnership interest . Rev. Rul. 93-80, 1993 -2 C.B. 239, provides that a loss incurred on the abandonment or worthlessness of a partnership interest is an ordinary loss if sale or exchange treatment does not apply. If there is an actual or deemed
Worthlessness of Real Estate Partnership Interests ...
Oct 02, 2018 · Worthlessness of Real Estate Partnership Interests Rejected by Tax Court. In a recent case, the U.S. Tax Court upheld the Internal Revenue Service’s (IRS) denial of taxpayer’s worthlessness deduction claim relating to several real estate partnership interests. The decision in Forlizzo v.
Ordinary Loss on Worthless Partnership Interests Is Still ...
Feb 18, 2014 · Worthlessness deductions for partnership interests are still alive and should not be ignored. Disclaimer As provided in Treasury Department Circular 230, this publication is not intended or written by Alvarez & Marsal Taxand, LLC, (or any Taxand member firm) to be used, and cannot be used, by a client or any other person or entity for the purpose of avoiding tax penalties that may be imposed …
Can a partnership interest be abandoned because of worthlessness?
To the extent the partner has remaining adjusted basis in his partnership interest, he may be allowed a loss under section 165 (a) for an abandonment or because the interest is worthless. Several factors must be considered in order for the taxpayer to properly deduct such a loss, including the following:
Are there any tax deductions for worthless partnership interest?
Editor: Kevin D. Anderson, CPA, J.D. Sec. 165 (a) generally permits an income tax deduction for any loss sustained during the tax year for which a taxpayer does not receive compensation in the form of insurance proceeds or other reimbursement. The loss may be ordinary or capital, depending on the circumstances.
Can a couple take a loss on a partnership interest?
The appeals court held that a married couple who owned an interest in a real estate partnership could take a loss deduction under Sec. 165 (a) on grounds of worthlessness, even if the partnership's sole asset (an unimproved tract of land) was not abandoned.
When does an abandonment of a partnership interest lead to an ordinary loss?
In the absence of actual or deemed consideration (under IRC Section 752) recognized by the abandoning partner, the abandonment of a partnership interest gives rise to an ordinary loss under IRC Section 165. Worthlessness Under IRC Section 165 Let’s say you are a partner with economic risk of loss for a partnership liability.