Wallace and Pedersen Have Equal Interests in the Capital and Profits

question 46

Multiple Choice

Wallace and Pedersen have equal interests in the capital and profits of the partnership of Wallace and Pedersen.They are otherwise unrelated to each other.On August 1, 2018, Wallace sold 100 shares of Kalmia Mining Corporation to the partnership for its fair market value of $7,000.Wallace had bought the stock in 2009 at a cost of $10,000.What is Wallace's deductible loss for 2018 as a result of the sale of this stock?

• A)$0
• B)$1,500 long-term capital loss
• C)$3,000 long-term capital loss
• D)$3,000 ordinary loss
• E)None of the above

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Definitions:

Fraudulent Conduct

Deliberate deception practiced to secure unfair or unlawful gain, often leading to financial or personal losses for the victim.

Negligence Theory

A legal principle asserting that a defendant's failure to exercise reasonable care under the circumstances results in unintentional harm to another party.

Impropriety

Inappropriate or unethical behavior or conduct.

Embezzling Funds

The act of dishonestly withholding assets for the purpose of conversion of such assets, by one or more individuals to whom the assets were entrusted, typically to be held or used for other purposes.