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Ask Lane Your Own Question
Category: Tax
Satisfied Customers: 12009
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Can you purchase a house in Florida, sell it to your own Real

Customer Question

Can you purchase a house in Florida, sell it to your own Real Estate company for a loss, then sell it back to yourself for a loss, then rent the home out to someone? Is this legal. Would someone be doing this to avoid paying capital gains tax?
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.
Hi,.Your intuition is good... this has to do with what IRS calls related party rules (selling to yourself or a company you is, of course, the most highly related)..It's legal from a state law perspective, but IRS would (depending on the prices involved) likely call this income shifting. (a form of tax evasion)..
Expert:  Lane replied 1 year ago.
Sec. 267 was enacted to disallow certain losses and deductions on transactions between related taxpayers. Without such a provision, related parties could create fictitious tax losses that lack economic substance since the "family unit" (e.g., the related parties) continue to enjoy the property subject to the loss sale.
Expert:  Lane replied 1 year ago.
A “related party” is defined in Code Sec. 267 as including family members, a taxpayer and a corporation controlled directly or indirectly (through attribution from other family member stock holdings) by the taxpayer (more than 50% of the value of the stock), and a partner and a controlled (directly or indirectly) partnership. Sec. 267 also specifies other related parties, including a trust and its grantor, a trust and its beneficiary, and a personal services company and anyshareholder-employee.
Expert:  Lane replied 1 year ago.
I hope this has helped to clarify..Let me know if you have questions..If this HAS helped, I'd appreciate a positive rating, by clicking or touching, the smiles or stars on your screen ... that's the ONLY WAY I'm credited for the work here..Lane.
Expert:  Lane replied 1 year ago.
Let me know if my answer helped...
Expert:  Lane replied 1 year ago.
Hi,….I'm just checking back in to see how things are going.….Did my answer help?….Let me know…….Lane...