Disallowed At-risk limitations on pship sale

How are disallowed losses treated when a taxpayer has a partial sale of a pship interest at a gain?

Example:

Taxpayer has $20,000 of ordinary losses disallowed due to at-risk limitations. He sells 50% ownership in the partnership for a $20,000 capital gain (assume no "Hot assets"). Can we allow $10,000 of the ordinary losses and offset it against the capital gain or does the disallowed loss stay until complete disposition?

have you read this?

https://www.thetaxadviser.com/issues/20 ... ry-04.html

Can we allow $10,000 of the ordinary losses and offset it against the capital gain or does the disallowed loss stay until complete disposition?

All $20k would be allowed. Gain is sale is treated as being “from the activity.” See Prop Reg 1.465-12.

The gain adds to the at risk amount that you can deduct.

Your facts are fuzzy. Was it a partnership and he sold 50% of his interest? Or was it a sole proprietorship who created a new partnership?

have you read this?

https://www.thetaxadviser.com/issues/20 ... ry-04.html

Thanks, I did read a couple of them, but missed this article. This nails it.

The gain adds to the at risk amount that you can deduct.

Your facts are fuzzy. Was it a partnership and he sold 50% of his interest? Or was it a sole proprietorship who created a new partnership?

I really tried to simplify my situation down to ask the question, but made it confusing. The taxpayer sold 50% of their ownership in a partnership.