Item — HN Reader

It's not inherently fraudulent to sell something for below market value.

If I sell something I bought for $1 million for $1 in an arm's length transaction, I'm realizing a loss of $999,999 even if the asset was worth $500,000. And it'd be a rational decision if it cost me $5 million in opportunity costs to do that $500k sale.

1 comments

That's not how US capital gains tax law works. It's legal to sell something at below market value, but you have to use the fair market value when calculating a loss for tax purposes. Of course some people cheat.

I'm reading the IRS website and it says:

https://www.irs.gov/taxtopics/tc409

> When you sell a capital asset, the difference between the adjusted basis in the asset and the amount you realized from the sale is a capital gain or a capital loss.

Am I misinterpreting this?

Should be easy to determine when a 409a evaluation was done.