2.3 Loss Not Recognized (Nondeductible)

1. Wash Sales

Within 30 days before or after the sale date

(1) Basis of new security
 = Purchase price of new security + Loss not recognized

(2) Holding period of new security

(3) Gain recognized

2. Related Party Transaction

1) Related parties defined
(a) Husband and wife
(b) Brothers and sisters
(c) Lineal descendants (father, son, grandfather)
(d) Entities that are more than 50% owned
(e) Personal service corporation and any of its owner-employee

2) Related party loss: disallowed
Any gain recognized on related-party sales transactions is ordinary income if the property is a depreciable asset in the hands of the transferee

3) Basis of buying relative: cost basis
However, future gain on the disposition of the property is reduced by the amount of the disallowed loss.

3. Personal Losses (Not Bussiness or Investment)

No deduction is allowed