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Among which of the following related parties are losses from sales and exchanges not recognized for tax purposes?
A. Father-in-law and son-in-law.
B. Brother-in-law and sister-in-law.
C. Grandfather and granddaughter.
D. Ancestors, lineal descendants, and all in-laws.
Correct Answer: C
Explanation/Reference: Explanation:
Choice "c" is correct. Losses from sales and exchanges are not recognized for tax purposes between grandfather and granddaughter.
Rule: Losses are disallowed on sales between related parties. "Related" includes brothers and sisters, husband-wife, lineal descendants (father, son, grandfather), and entities that are more than 50% owned by individuals, corporations, trusts and/or partnerships.
Choices "a", "b", and "d" are incorrect, because losses from sales and exchanges are recognized for all "in-laws."
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