Question

In: Finance

Describe a situation where a loss on the sale of business or investment property is not...

Describe a situation where a loss on the sale of business or investment property is not currently deductible, and explain why. In the post, discuss how a disallowance of a loss may impact your decision on when to sell an investment or to whom.

Please do not copy and paste. Thank you!

Solutions

Expert Solution

When there can be an establishment of direct relationship between both the parties like both the parties are related parties and the contract was being executed then the loss on sale of business or investment property will not be allowed because there would not be a fair price at which transaction would have been committed in case of related party so there is total disallowance on the part of the loss made on sales.

Disallowance of loss will impact my decision when to sell my investment because it will have a significant effect on the overall realisation and it will also have a significant effect on the overall profits, so I would be also looking for selling all these assets when it will attract the lowest possible rate of taxes, So it means they could be long term, so that it will attract the minimum rate of tax and hence my realisation would be highest and it would help me to expand my profits


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