Rick 19744,
Thank you! That's the answer I was looking for.
But suppose I have a net loss on the sale even including the Section 751 gain? Don't I have a wash sale in that case? If so, I have to allocate the disallowed loss to the replacement shares. How do I treat the Section 751 gain? Do I just carry it forward to the replacement shares and report it on Form 4797 when the replacement shares are sold?
When I sell the replacement shares I will also have to adjust the cost basis of those shares using data supplied on my K-1 for that year. This will include another ordinary gain. Do I just add the ordinary gain associated with the disallowed loss to the ordinary gain provided on the new K-1?
