Wednesday, the 5^th circuit reversed the Tax Court and held in Pilgrim’s Pride that a taxpayer could receive an ordinary loss on the abandonment of a stock interest. In 2004 the taxpayer affirmatively abandoned their stock interest and declined an offer to sell the underlying stock because a $98.6M ordinary loss on abandonment was worth greater than the $20M offer it had to sell the stock. However, the IRS and Tax Court disagreed, citing Section 1234A for the proposition that an abandonment of a capital asset was treated as a capital loss. Noting this was a novel issue, the 5^th circuit court disagreed with the IRS and Tax Court reading of Section 1234A to indirectly cover abandonments, concluding that Section 1234A(1) only applies to the termination of contractual or derivative rights, and not to the abandonment of capital assets. This case is quite significant and is the latest and most determinative authority on whether abandonment of an asset results in a capital versus an ordinary loss.