Video: Related Party Transactions Overview

In this lesson, Nick Palazzolo, CPA, peels back the layers of complexity found in related party transactions, guiding you through the intricacies of tax rules and regulations that come into play when property changes hands between individuals with familial or business ties. Discover how to identify related parties and the impact these relationships have on property acquisitions or dispositions. Get a firm grasp on determining direct and indirect ownership percentages and their significance for tax purposes. Nick will also shed light on the rules surrounding selling assets at a loss to prevent tax fraud, and how to calculate basis and recognize gains or losses in subsequent sales to unrelated third parties. To top it off, he dives into the notion of imputed interest and its effects on loans within these special transaction scenarios.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Today, we've got another property transaction-related lesson for you. We've seen a few lessons dealing with the basis of an asset, dealing with the amount and character of the gains and losses dealing from a transaction. We've got another layer of complexity. Well, what happens if you've got related parties when it comes to a transaction? Now these transactions, they can happen, right? And you can give anything to anyone unless it's illegal, but what is the taxability of such an event? That's where the IRS steps in and says, let's add a layer of extra rules and regulations. Let's dive in and see what our learning objectives are as we go through this lesson. First off, we're going to want to identify related parties to understand their impact on an acquisition or disposition of property. That's going to be important. We want to understand what is the implication if you sell something to a brother, sister, family member, or someone who's in business with you who also owns percentage of the company. We want to understand and determine the direct and indirect ownership percentages of corporate stock or partnership interest to ascertain if the parties are related for tax purposes. That's an important point. We'll also see how if I own 20% of a company and my brother owns 40% constructively, that's as if I own 60%. That has implications for tax purposes as well. We want to understand and calculate taxpayer's basis sold at a loss by a related party. I can't just sell a bunch of assets at a loss to a sibling to try to recognize that for tax purposes. That's called committing tax fraud, and we'll talk about that much more. We also want to compute a taxpayer's gain or loss on the subsequent sale

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Property tax transactions

Module: 3 Concepts, 34 Videos

Taxable and Nontaxable Dispositions Overview

1:43

Introduction to Taxable and Nontaxable Dispositions

3:21

Gain Recognized on Property Received as Compensation

2:31

Like-Kind Exchanges