Sheila sells stock, which has a basis of $12,000, to her daughter for $7,000, the stock's fair market value. Subsequently, the daughter sells the stock to an unrelated party for $5,000. Which of the following is true for the Sheila and the Daughter?

Question

Quizplus · Accepted Answer

The $5,000 ($7,000 - $12,000) loss on Sheila's sale to Daughter is disallowed under the related party transaction rules. Her daughter's subsequent sale at a $2,000 loss, however, is recognized.

Sheila Sells Stock, Which Has a Basis of $12,000, to Her