Question

If a loss from sale or exchange of property between related parties is disallowed and the property is subsequently sold to an unrelated party: a.The unrelated party may claim the loss previously disallowed. b.The disallowed loss is lost forever. c.The disallowed loss may be used to offset gain on the subsequent sale. d.An amended return may be filed to claim the loss previously disallowed. e.The disallowed loss may be used if there is a further loss on the subsequent sale.

Answer 1

The disallowed loss may be used to offset gain on the subsequent sale

Step-by-step explanation:

A recognized gain or loss is simply refered to as the gains or losses that increase or decrease the gross income of taxpayers.

The Internal Revenue Code (IRC) §267 had laid out rules guiding or relations to the deductions of either losses or expenses between 2 or more related parties.

The related-party loss disallowance rules states that tax laws significantly treat parties involved as though they are the same taxpayer and does not allow recognition of losses on sales to related parties and it may be able to forthrightly deduct the disallowed loss by selling the property to an unrelated third party at a gain and also oonly if the related buyer sells the property at a gain(the related-party buyer sells it for more than she purchased it for).

On the condition that the related-party buyer sells the property for less than her purchase price from the related seller, then disallowed loss expires unused.