AICPA Exam CPA-Regulation Topic 3 Question 7 Discussion

Actual exam question for AICPA's CPA-Regulation exam

Question #: 7
Topic #: 3

[All CPA-Regulation Questions]

Among which of the following related parties are losses from sales and exchanges not recognized for tax purposes?

AFather-in-law and son-in-law.

BBrother-in-law and sister-in-law.

CGrandfather and granddaughter.

DAncestors, lineal descendants, and all in-laws.

Show Suggested Answer

Suggested Answer: C

Choice 'c' is correct. Losses from sales and exchanges are not recognized for tax purposes between grandfather and granddaughter.

Rule: Losses are disallowed on sales between related parties. 'Related' includes brothers and sisters, husband-wife, lineal descendants (father, son, grandfather), and entities that are more than 50% owned by individuals, corporations, trusts and/or partnerships.

Choices 'a', 'b', and 'd' are incorrect, because losses from sales and exchanges are recognized for all 'in-laws.'

by Geoffrey at May 04, 2022, 05:12 PM

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