Part II of Notice 2002–45 states that to
Section 6. CHARACTER OF LOSSES
Internal Revenue Bulletin 2005-16 · 2026-10-03 edition · updated 2026-10-04 · United States
DISALLOWED UNDER § 743(e)(2)
Until further guidance is issued, if an EIP allocates losses with a different character from the sale or exchange of property to the transferee (such as ordinary or § 1231 losses and capital losses) and the losses allocated to that partner are limited by § 743(e)(2), then a proportionate amount of the losses disallowed under § 743(e)(2) shall consist of each loss of a separate character that is allocated to the transferee partner.
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