Video: Introduction to Related Party Transactions

In this lesson, Nick Palazzolo, CPA, unpacks the complexities surrounding related party transactions as outlined in section 267 of the Internal Revenue Code (IRC). While affirming that memorization of the section number isn't crucial, he illustrates how these transactions can be misused to manipulate tax liability. With a touch of humor, Nick breaks down the prohibitions against deducting losses and expenses from related party dealings and explains which relationships qualify as "related parties." He makes the concept of "arm's length transactions" relatable and delves into the implications of not adhering to these principles. By exploring practical examples, Nick sheds light on how related party transactions might impact tax returns and the legitimacy of certain financial arrangements, ultimately providing a clearer understanding of how these rules aim to prevent abuse and maintain tax integrity.