If a loss from sale or exchange of property between related parties is disallowed and the property is subsequently sold to an unrelated party,
A)An amended return may be filed to claim the loss previously disallowed.
B)The unrelated party may claim the loss previously disallowed.
C)The disallowed loss may be used to offset gain on the subsequent sale.
D)The disallowed loss may be used if there is a further loss on the subsequent sale.
E)The disallowed loss is lost forever.

Question

Quizplus · Accepted Answer

The disallowed loss may be used to offset gain on the subsequent sale. This is known as suspended loss, which can be used in future years to offset future gains. In this case, the disallowed loss from the related party transaction can be used to offset any gain from the subsequent sale to the unrelated party.

If a Loss from Sale or Exchange of Property Between