Webster, who owns all the Bear Corporation stock, purchases a dump truck from Bear Corporation in January. The truck cost $12,000 and has a $10,000 adjusted basis at the time of the sale. Webster pays Bear the truck's $8,000 FMV. Later in the same year, Webster sells the dump truck to an unrelated party for $6,000. Webster can recognize a loss of

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Webster can recognize a loss of $2,000, which is the difference between the $8,000 he paid for the dump truck and the $6,000 he sold it for. Losses from sales between a corporation and its controlling shareholders are generally recognized only to the extent of the loss that would be recognized by the corporation. Since Webster is a controlling shareholder and the transaction might not be considered as made at arm's length, the basis for loss recognition is the difference between his purchase price and the selling price.

Webster, Who Owns All the Bear Corporation Stock, Purchases a Dump