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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: Re: In Law's Related Persons? Date: 9/17/2000 6:24 PM
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<<I have read the IRS Pub on Investment Gains/Losses and am unclear on whether or not transactions with in-law's or step-relations would fall under the related persons rule.
More specifically, I am married and if I sold an asset held in my name alone to a) an in-law (blood related to my wife) or b) to a step-relation (not blood related to either of us) such as a stepfather would either transaction be considered a sale to a related person? >>

I would respectfully disagree with the one word "yes" answer that you recently received on this thread.

When dealing with stock issues, if you sell the stock at a profit to anybody at the full fair market value, using a cash deal (and not an installment sale), it makes no difference WHO you sell it to...related or not.

But if you are selling the stock at a loss, that loss will be ignored if it is sold to a "related party".

The general rule is that members of a family are related persons. But, for this purpose, an individual's family includes **only** whole blood and half blood siblings, spouses, ancestors, and lineal descendants. Note that, although a spouse is related, in-laws are not. Although full effect is given to a legal adoption, step parents are not considered to be related to their stepchildren for this purpose.

This being said, the related party rules can (and do) become very complicated. But, simply dealing with the specifics in your question, I don't believe that your "in-laws" as noted nor your "step-parent" would be considered related for this purpose.

And, for the person who gave the one word "yes" answer, you might want to take some time and review code section 267.

TMF Taxes
Roy
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