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 these.

Question

Quizplus · Accepted Answer

Arthur's realized loss of $40,000 ($105,000 - $145,000)is disallowed as a related­party transaction under § 267.Ned's basis for the land is his purchase price of $105,000.

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