Individual Taxes: Loss Limitations

Question 1

A Type A statutory merger

Answer 1

is usually completed as a stock-for-stock swap without a payment of cash, qualifying as a like-kind exchange

Question 2

Any current losses are allowed

Answer 2

only to the extent of the amount to which the taxpayer is at risk. Excesses are carried forward until such time they may be deducted from a gain that has adequate at-risk amounts

Question 3

A partner’s share of a partnership loss

Answer 3

is limited to the partner’s basis in the partnership. It is then limited by passive activity rules and at-risk rules under IRC Sections 469 and 465. The excess of the loss over the basis is carried forward

Question 4

When property that is owned by the taxpayer is transferred to his controlled corporation (80% owned immediately following the transfer of property to the corporation)

Answer 4

no gain or loss is recognized if the exchange is solely for stock.

Question 5

IRC Section 1221 explains what a capital asset does not include. For example, it does not include:

Answer 5

inventory,
any depreciable property,
a copyright, a literary, musical, or artistic composition, or
accounts or notes receivable acquired in the ordinary course of trade or business for services.