Friday, January 27, 2006
Burgess J.W. Raby & William L. Raby have published Loss Deductions When Transactions or Partnership Interests Are Abandoned, also available on the Tax Analysts web site as Doc 2006-1464, 2006 TNT 17-14. Here is the Introduction:
In a variety of situations, purchase options and alternative arrangements are used to hedge against market risk. For example, a land developer may secure an option on a piece of property that may be needed three or four years in the future. If the market price of the property drops, the option is allowed to expire unexercised and a deal is made to buy the land at the then market value. If land prices rise, the cost of that land is capped. Two recent technical advice memorandums involving corporate finance situations involve IRS agent challenges to section 165 losses sought by the taxpayers in those situations. After exploring these current IRS National Office rulings, this article will then look at losses from abandoning a partnership interest.