Sheila sells stock,which has a basis of $12,000,to her daughter for $7,000,the stock's fair market value.Subsequently,the daughter sells the stock to an unrelated party for $5,000.Which of the following is true for Sheila and her daughter?

Question

Quizplus · Accepted Answer

A) The $5,000 ($7,000 - $12,000) loss on Sheila's sale to Daughter is disallowed under the related party transaction rules. Her daughter's subsequent sale at a $2,000 loss, however, is recognized. The disallowed loss incurred by Sheila can only be used to reduce her daughter's subsequent gain, not loss.

Sheila Sells Stock,which Has a Basis of $12,000,to Her Daughter