B purchased a tractor trailer from his mother for its fair market value of $2,100.She had used the trailer exclusively for business purposes.At the time of sale, the mother's basis in the vehicle was $5,500.What is B's recognized gain or loss if he immediately sells the vehicle for $3,200?
A)($3,400)
B)($2,300)
C)$0
D)$1,100

Question

Quizplus · Accepted Answer

B's recognized gain or loss is $0 because the sale to a related party (his mother) results in a loss that is not recognized for tax purposes. The loss is the difference between the mother's basis ($5,500) and the sale price to B ($2,100), which is $3,400, but it is not recognized. When B sells the vehicle for $3,200, he has a gain of $1,100 over his purchase price, but this gain is offset by the unrecognized loss, resulting in no recognized gain or loss.

B Purchased a Tractor Trailer from His Mother for Its