Sarah purchased land for investment in 2008 for $80,000. In 2009 when the FMV of the land was only $70,000, she contributed it to the SL Partnership, which is in the business of developing and selling lots. SL Partnership developed the contributed land and sold it in 2010 for $50,000. What is the amount and character of the gain or loss?
What will be an ideal response?
There is a $30,000 loss ($50,000 - $80,000). The $10,000 loss that accrued while Sarah held the asset retains its character and is a capital loss. The remaining $20,000 of loss is an ordinary loss, as the land was part of the partnership's inventory.
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What will be an ideal response?
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