Is a niece considered a "related party" in a sale of property?

Forum|Forum|2 years ago
March 7, 2024
1 reply
19 views

Taxpayer sold an inherited home at a loss to his niece (his brother's daughter.) Is this niece considered a "related party" to the sale, therefore, disallowing the loss to taxpayer?

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BobKamman

Level 15

Not according to Code Section 267(c)(4)

(4) The family of an individual shall include only his brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants

If the niece is 18 years old and signed it over the next day to her father, then "substance over form" would be an issue.

G

GotaxesAuthor

Level 3

Thank you very much for the quick response. I would like to ask opinion from you or others out there, about the gift of equity. I have been researching a lot and found different contradicting opinions.

Taxpayer inherits home and sells to niece at a loss. Since she is not his "related" party, he should be able to claim the loss. There is also involved a gift of equity to her involved in the loss. In computing Taxpayer's adjusted cost basis, which I have as FMV date of death and costs to sell. Can I also add the gift of equity to the niece to Taxpayer's adjusted cost basis? This does increase the loss he already has.

sjrcpa

Level 15

So maybe he didn't really dispose of it at a loss.

Does sale price plus gift of equity = FMV?

The more I know the more I don’t know.

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