Property sold to a related party that is depreciable by the purchaser may cause the seller to have ordinary gain.

Question

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When a property that is depreciable by the purchaser is sold to a related party, the seller may have ordinary gain instead of capital gain. This is because the sale could be considered a "wash sale" or a transaction that is not made at arm's length, and as a result, the IRS may require the seller to recognize ordinary income instead of capital gain.

Property Sold to a Related Party That Is Depreciable by the Purchaser