Sales Between a Partnership and Non-Partners

Abstract:     
Section 267(a)(1) denies a deduction for losses recognized on sales between certain related parties. With one minor exception, that provision does not apply to sales between a partnership and another person. Nevertheless, Reg. 1.267(b-1(b) applies that provision to deny part or all of a loss recognized on a sale between a partnership and a person who is not a partner but who has constructive ownership of a partnership interest. The author maintains that an amendment made to another provision of the Code (section 707(b)) in 1986 invalidated that part of the regulation under section 267. The author also maintains that the 1986 amendment invalidated parts of temp. reg. 1.267(a)-2T(c).

Number of Pages in PDF File: 7

Keywords: partnership, non-partner, sales, related parties, regulation

JEL Classification: K1, K2, L5

Accepted Paper Series