u/b0b_ross

I hope someone has some experience with this.

Can't find good research on if the character of the disallowed loss changes between related parties.

In my example Related Party 1 (RP1) sold personal property to Related Party 2 (RP2). Loss would have been capital loss to RP1. RP2 sells the personal property for a gain. RP2 is in the business of selling this personal property.

Seems wild to think that the disallowed loss would change character, and reduce ordinary and S/E income, but can't find anything to confirm or deny.