Your Client Owns a Parcel of Land That Has Depreciated

question 23

Essay

Your client owns a parcel of land that has depreciated in value. He wants to know if there is a way he can contribute the property to his partnership, have the partnership sell the property, and convert the existing capital loss into an ordinary loss. He also wants to know if part of the loss would be allocated to his other partners. What is your reaction?

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Definitions:

Times Interest Earned Ratio

A financial metric used to measure a company's ability to meet its debt obligations, calculated by dividing earnings before interest and taxes (EBIT) by interest expenses.

Debt-To-Equity Ratio

A ratio demonstrating the balance between shareholder equity and debt in funding a company's assets.

Return On Equity

A measure of financial performance calculated by dividing net income by shareholders' equity, indicating how efficiently a company uses its equity investment.

Price/Earnings Ratio

A valuation metric for stocks calculated by dividing the market price per share by the earnings per share, indicating how much investors are willing to pay per dollar of earnings.