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Related taxpayers
The Code does not allow a loss, except in the case of a distribution in liquidation of a corporation, from the sale or exchange of property between related persons. A similar rule bars a deduction for expenses and interest incurred in transactions between related persons when the payer is on the accrual-basis method of accounting and the payee is on the cash-basis method. The following parties are considered related persons for purposes of these rules: (1) members of the same immediate family, except for transfers between spouses or incident to divorce; (2) an individual and a corporation in which the individual owns more than 50 percent of the outstanding stock (directly or indirectly); (3) two members of a controlled corporate group; (4) a trust fiduciary and a corporation of which more than 50 percent of the outstanding stock is owned by the trust or the grantor of the trust; (5) a grantor and fiduciary of any trust; (6) a fiduciary of one trust and a fiduciary of another trust if the same person is the grantor of both trusts; (7) a fiduciary of a trust and any beneficiary of such trust; (8) a fiduciary of a trust and a beneficiary of another trust if the same person is the grantor of the trusts; (9) a person and an exempt charitable organization controlled by that person; (10) a corporation and a partnership if the same person owns more than 50 percent of the interest in the partnership; (11) two S corporations if the same person owns more than 50 percent of the outstanding stock of each corproation; or (12) an S corporation and a C corporation if the same person owns more than 50 percent of the outstanding stock of each corporation.