LOSSES ON RELATED PARTY TRANSACTIONS:EXAMPLE
01.Core Concepts
Ursula purchased Triton stock three y ears ago for $30 a share. The stock is currently valued at $25 a share. Ursula decides to gift her shares of Triton to her son, Sebastian. Sebastian immediately sells the shares of stock for $26. The $5 loss that occurred during Ursula’s holding period will never be recognized (disallowed loss). Sebastian has an economic gain of $1 per share and no taxable gain (double-basis rule).