Related Parties, Owner Loans, and Transfers
Learn the decision pattern the exam can test, then apply it to a realistic taxpayer fact pattern.
What changes the answer?
Calling a payment a loan does not establish bona fide debt, and related-party losses may be limited or deferred.
A tax-practice scenario
An owner advances funds, takes repayments, rents property to the company, and sells an asset at a loss. Analyze each relationship.
Identify the taxpayer, entity, transaction, and tax period first. Write the controlling tests in order, apply only the relevant facts, and keep the reporting result separate from any planning recommendation.
Do not take this shortcut.
Accepting account labels without notes, repayment terms, ownership calculations, or business purpose.
Turn the rule into recall.
Maintain written agreements and a related-party ledger that reconciles both sides of every transaction.
- ExplainState the governing distinction without notes.
- ApplyChange one fact in the scenario and predict the new result.
- RetrieveAnswer an unseen question, then review every option.
Official source and scope
This lesson follows the current PSI content outline and uses the IRS reference below for the underlying tax or practice framework. Always confirm current forms, instructions, thresholds, and effective dates before advising a taxpayer.