If a loss is disallowed under Section 267,a gain on a subsequent sale of the property by the related purchaser may be offset by the previously unrecognized loss.

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This is known as the "wash sale rule" and is outlined in Section 1091 of the IRS code. Essentially, if a loss is disallowed under Section 267 (which disallows losses on sales between related parties), any subsequent gain on the sale of the property by the related purchaser can be offset by the previously unrecognized loss.

If a Loss Is Disallowed Under Section 267,a Gain on a Subsequent