What does disallowed loss mean on the CPA exam?
Disallowed loss. A loss the Code refuses to let you deduct, typically on a sale to a related person or a wash sale. It is often added to the buyer's basis rather than lost outright.
Defined against Sec. 267(a)(1).
Which CPA exam sections use disallowed loss?
Disallowed loss appears in the REG section of the CPA exam.
Related terms
- capital loss: Loss on the sale of a capital asset.
- wash sale: Selling a security at a loss and buying a substantially identical one within 30 days either side.
- ordinary loss: A loss deductible against ordinary income without the capital loss limits.
- related person: A person close enough to the taxpayer that the Code distrusts the transaction: family, controlled entities, and certain fiduciaries.
- built-in loss: Loss that already existed in property before it changed hands, measured at the transfer date.
- excess business loss: The amount by which a noncorporate taxpayer's aggregate business deductions exceed business income plus a threshold.