“Tax Quiz – Sell Stock at a
Loss to Your Daughter”
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Say you bought stock in 2022 for $17,000. In 2024, you sell this stock to your daughter at fair market value for $9,000. What is the loss deduction you may claim on your 2024 tax return?
- $0
- $3,000
- $8,000
- $9,000
Answer
Correct answer: $0. You may not deduct this loss because you made the sale to a related party – your daughter.
The related-party rules apply. If she sells the stock at a loss, her basis is $9,000. If she sells the stock at a gain, she may use your unrealized loss to reduce her gain.
Example 1. Your daughter sells the stock for $7,000. She has a loss of $2,000 ($9,000 – $7,000).
Key point. Your loss is lost.
Example 2. Your daughter sells the stock for $11,000. She has zero gain ($11,000 – $9,000 = $2,000 gain – $2,000 of your loss, which she may use because she has a gain).
Key point. $6,000 of your loss is lost.
Example 3. Your daughter sells the stock for $30,000. She has a $13,000 gain ($30,000 – $9,000 basis – $8,000 unrealized loss—your loss on the sale to her, which she may use because she has a gain).
Planning tip 1. Don’t sell stock to your daughter at a loss.
Planning tip 2. If you do sell stock to your daughter at a loss, make sure you let her know the amount of your loss plus the rules that apply to her on this loss. (You have our permission to forward this email to her—and you should do that.)
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“Tax Quiz – Sell Stock at a
Loss to Your Daughter”