Question

A wash sale results when an employer transfers property to an employee at less than the property's fair market value or when a corporation transfers property to a shareholder at less than the property's fair market value.

A) True

B) False

Answer 1

A wash sale occurs when property is transferred at a price lower than its fair market value.

Step-by-step explanation:

A wash sale refers to a situation where an employer transfers property to an employee or a corporation transfers property to a shareholder at a price lower than the property's fair market value.

For example, if an employer sells a piece of land to an employee for $10,000, even though the fair market value of the land is $15,000, it would be considered a wash sale.

This practice is generally not allowed as it can be used to manipulate the value of transactions and potentially evade taxes.