June 9, 2022
Sale of property produced capital loss that could not offset ordinary income, Tax Court holds
The Tax Court has held (William E. Musselwhite, Jr., et ux. v. Commissioner) that real property lots held by a taxpayer were not stock in trade, inventory or property held for sale to customers but, rather, capital assets; therefore loss on the sale of the property, exceeding $1m, was a capital loss and could not offset ordinary income. After initially assessing accuracy-related penalties, the IRS stipulated that penalties were not warranted.