B20. Your client, James, is the 100% owner Best Corporation, Inc., a C Corporation. James wants to sell a building he owns to Best Corporation for its fair market value (FMV) of $100,000. The property’s adjusted basis is $150,000. James asks you if he will be able to deduct the $50,000 loss on the property if he sells it to Best. Can James recognize the loss? a. Yes, because it is being sold at its FMV.
B20.
Your client, James, is the 100% owner Best Corporation, Inc., a C Corporation. James wants to sell a building he owns to Best Corporation for its fair market value (FMV) of $100,000. The property’s adjusted basis is $150,000. James asks you if he will be able to deduct the $50,000 loss on the property if he sells it to Best. Can James recognize the loss?
a. Yes, because it is being sold at its FMV.
b. Yes, because individuals and corporations are never considered elated parties for purposes of loss disallowance.
c. No, because James and Best are considered related parties for purposes of loss disallowance under IRC 267.
d. No, because James and Best are considered related parties for purposes of loss disallowance under IRC 318.
e. No, not unless James and Best sign an agreement stating that the sale is bona fide. If they do so, James will be allowed to deduct the loss.
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