Rob sells stock with a cost of $3,000 to his daughter for $2,200, which is its fair market value. Later the daughter sells the stock for $3,200 to an unrelated party. Which of the following describes the tax treatment to Rob and Daughter?

Question

Quizplus · Accepted Answer

The $800 ($2,200 - $3,000) loss on Rob's sale to Daughter is disallowed under the related party transaction rules. His daughter's subsequent sale at a $1,000 gain ($3,200 - $2,200) may be reduced by Rob's $800 disallowed loss resulting in a gain to Daughter of $200 ($1,000 gain - $800 loss).

Rob Sells Stock with a Cost of $3,000 to His