Business & farm


@easyxpress wrote:

I had read this tax codes (few levels up) and don't see there's a way to recognize such loss except in liquidation of a partner's interest.


You have to read (carefully) the posts by @Anonymous with respect to distributions and material participation, the latter of which you have presumed existed in your hypothetical. 

 

That being the case, a loss can be recognized assuming the partner has sufficient basis.