ACC312 Federal Taxation Research problems use IRS website to

ACC312 Federal Taxation

Research problems (use IRS website to answer these questions) https://www.irs.gov/

As discussed in Chapter 3, the IRS carefully scrutinizes transactions between related parties. Several different Code sections define which taxpayers are considered related parties. Suppose that Marsha and Jan are sisters. Are they considered family members and, therefore, related parties under Section 318(a)(1)? How about under Section 267(b)(1)?

Solution

Section 318(a)(1) is about constructive ownership of stocks, it lists down the relationship of families which are considered related parties:

A. Spouse

B. Parents

C. Lineal descendants.

Therefore here brothers and sisters are not included in related party definition.

Section 267(B)(1) covers 13 different relationships which can be considered as related parties such as family members, grantor and fiduciary of a trust, two corporations controlled by the same group etc.

In the family members it covers:

A. Spouse

B. Lineal ascendants

C. Lineal descendants

D. Siblings and half siblings also.

Therefore Marsha and Jan are related party for the purpose of section 267(B)(1), but not 318(a)(1).