The information your CPA gave you is correct. You cannot deduct a loss on the sale of investment property when it is a related party transaction
. This includes the following:
You cannot deduct a loss on the sale or trade of property, other than a distribution
in complete liquidation of a corporation, if the transaction is directly or indirectly between you and the following related parties.
Members of your family. This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc.), and lineal descendants (children, grandchildren, etc.).
in which you directly or indirectly own more than 50% of the capital interest
or the profits interest.
A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. (See Constructive ownership of stock , later.)
charitable or educational organization that is directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable.
Please refer to the following IRS
publication under the section covering Related Party Transactions.
I understand your thinking as to why this would apply even when the loss appears to be legitimate, but the IRS does not allow for any exceptions to this rule. My guess is that it would just be too difficult to try and monitor or audit
each and every person who might try to claim this type of loss.
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Thank you zugg.