In this article, I explain how a disjuncture between the provisions governing capital loss treatment and those governing ordinary loss treatment has created tax planning opportunities for a partner taking a worthlessness deduction for a partnership interest. I argue that some of these tax planning opportunities are inappropriate, and he proposes a simple way to fix the problem.

Conclusion
It is notably difficult to change the tax code, even when current provisions make little sense. The disjuncture between sections 1222 and 1001 is such a circumstance and could well be accidental. The disjuncture has been around for so long that many likely assume it is the way the law must be.

It is not, and this has been the cause of many problems, not the least of which is the subject matter of this report. In the early days, the disjuncture might not have been that important. But over time, coupled with the emergence of the worthlessness deduction, the disjuncture has evolved into a real problem. The IRS is not blameless. It failed to foresee the challenges the worthlessness deduction would create which it likely could have addressed through regulations in the early days. Now it may take congressional 

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