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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]
Topic #: 3
Among which of the following related parties are losses from sales and exchanges not recognized for tax purposes?
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.'
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