Alicia, Bob and Carol are equal partners in, Dunning Law Associates. In 2015, Alicia, in an attempt to maximize the firm’s return on its investment portfolio, encourages her partners to acquire $90,000 of stock in a local Internet provider. The stock was acquired by the partnership from the issuing corporation and the corporation that issued the stock meets all the tests for the stock to be treated as small business stock. In 2021, when the stock is worth $20,000, Bob and Carol, who are upset with Alicia’s investment choice, distribute all the shares of the small business stock to Alicia as part of her partnership distribution. The following year, Alicia sells the stock for $15,000.

Required:

Determine the tax treatment of Alicia’s loss on the sale of the stock. Search a tax research database and find the relevant authority(ies) that forms the basis for your answer. Your answer should include the exact text of the authority(ies) and an explanation of the application of the authority to Alicia’s facts. If there is any uncertainty about the validity of your answer, indicate the cause for the uncertainty.