M4: Related Party Transactions

Question 1

Related Parties

Answer 1

wRap = applies to disallowed losses

Gains are taxed

Exception: sales between the following related parties do not receive capital gains treatment:

• husband and wife (where basis is merely transferred)
• an individual and a 50-percent-plus controlled corporation or partnership (where the gain is taxed as ordinary income)

Question 2

Capital losses & Related Parties

Answer 2

losses are disallowed on most related party sales transactions, even if they were made at an arms-length “ FMV price

Question 3

Basis rules and Relate Parties

Answer 3

same as gift tax basis rules