Question

which of the following are considered related parties for purposes of the disallowance of losses on related party sales? (select all that apply.)multiple select question.two corporations controlled by the same shareholdersa corporation and an individual owning more than 50 percent of the corporation's stockindividuals who are partners in a partnershipfamily members

Answer 1

In the context of the disallowance of losses on related party sales, related parties include two corporations with the same shareholders, a corporation and an individual owning more than 50% of its stock, partners in a partnership, and family members.

Step-by-step explanation:

The determination of related parties for purposes of the disallowance of losses on related party sales includes:

• Two corporations controlled by the same shareholders.
• A corporation and an individual owning more than 50 percent of the corporation's stock.
• Individuals who are partners in a partnership.
• Family members, which typically includes siblings, spouse, ancestors, and lineal descendants.

These relationships are considered related because they have the potential to create transactions that may not reflect the true economic substance due to the influence that can be exerted over the entities or individuals. The Internal Revenue Service (IRS) in the United States, for example, disallows the recognition of tax losses on transactions between related parties to prevent tax avoidance strategies where losses are created to offset other taxable income through non-arm's length transactions.