Marilyn owns land that she acquired three years ago as an investment for $250,000. Because the land has not appreciated in value as she anticipated, she sells it to her brother, Amos, for its fair market value of $180,000. Amos sells the land two years later for $240,000.
a. Explain why Marilyn's realized loss of $70,000 ($180,000 amount realized - $250,000 adjusted basis) is disallowed.
b. Explain why Amos has neither a recognized gain nor a recognized loss on his sale of the land.
c. Is the family unit treated fairly under the related-party disallowance rule under § 267? Explain.
d. Which party wins, and which party loses?
e. How could Marilyn have avoided the loss disallowance on her sale of the land?