Other Nonrecognition transactions

Question 1

Disallowed losses

Answer 1

Losses are disallowed on transactions between related taxpayers, including a corporation and a shareholder owning more than 50% of its stock.

Losses are disallowed on sales or exchanges of property between related taxpayers, including members of a family.

Question 2

Disallowed losses between relatives

Answer 2

Losses are disallowed on the sale of property between related taxpayers, including a parent and their child. Any gain later realized by the related transferee on the subsequent disposition of the property is not recognized to the extent of the transferor’s disallowed loss.