Frasier sells some stock he purchased several years ago for $10,000 to his brother, Niles, for $6,000.
I.If this is Frasier's only stock transaction, he can deduct only $3,000 of the loss.
II.If Niles sells the stock for $10,000, his taxable gain is $4,000.

Question

Frasier sells some stock he purchased several years ago for $10,000 to his brother, Niles, for $6,000.
I.If this is Frasier's only stock transaction, he can deduct only $3,000 of the loss.
II.If Niles sells the stock for $10,000, his taxable gain is $4,000.
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Quizplus · Accepted Answer

Frasier cannot deduct the loss because it is a related party transaction. Niles' gain would be $0 because his basis is Frasier's original cost of $10,000.

Frasier Sells Some Stock He Purchased Several Years Ago for $10,000