Arthur owns a tract of undeveloped land (adjusted basis of $145,000) which he sells to his son, Ned, for its fair market value of $105,000. What is Arthur's recognized gain or loss and Ned's basis in the land?
A) $0 and $105,000.
B) $0 and $145,000.
C) ($40,000) and $105,000.
D) ($40,000) and $145,000.
E) None of the above.

Question

Quizplus · Accepted Answer

Arthur's recognized loss is $0 because losses on sales to related parties, such as family members, are not deductible. Ned's basis in the land is the purchase price, which is $105,000.

Arthur Owns a Tract of Undeveloped Land (Adjusted Basis of $145,000)