Jason sells stock with an adjusted basis of $66,000 to JJ Inc., his 60% owned corporation, for its fair market value of $60,000. JJ Inc. sells the stock three years later for $67,000. JJ Inc.'s recognized gain or loss on the sale will be

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JJ Inc. initially recognizes a $6,000 loss on the purchase from Jason due to the related party rules. When JJ Inc. sells the stock for $67,000, it recognizes a gain of $7,000. However, it can offset this gain by the previously disallowed $6,000 loss, resulting in a net recognized gain of $1,000.

Jason Sells Stock with an Adjusted Basis of $66,000 to JJ