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
A)$0.
B)($3,000).
C)$1,000.
D)$4,000.

Question

Quizplus · Accepted Answer

JJ Inc. initially recognizes a $0 gain or loss due to the related party loss disallowance rule. However, when JJ Inc. sells the stock for $67,000, it can recognize a gain of $1,000, which is the excess of the sale price over Jason's original basis of $66,000.

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