Julie is a real estate developer and owns property that is treated as inventory (not a capital asset)in her business.She contributed a parcel of this land (basis $60,000; fair market value $58,000)to a partnership,which will also hold it as inventory.After three years,the partnership sells the land for $56,000.The partnership will recognize a $4,000 ordinary loss on sale of the property.

Question

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Since the property was not a capital asset in Julie's hands,the partnership is not subject to the requirement that precontribution losses (realized and recognized by the partnership within five years of contribution)be treated as capital losses.

Julie Is a Real Estate Developer and Owns Property That