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The Family Tax Rule That Kills Deductions

The Family Tax Rule That Kills Deductions

Construction owners with multiple LLCs — this one’s important.

You can sell equipment to your spouse’s company at a loss…And lose the entire deduction.

No fraud. No penalties. Just gone.

It’s called Section 267 — the related-party rule.

If you sell assets at a loss to:• Your spouse• Your kids• A company you own more than 50% of• A partnership your family controls

That loss is disallowed.

And here’s the trap: ownership attribution.

You may think you own 40%.But if your spouse owns 20% and your kids own 10%?

The IRS says you own 70%.

Contractors get burned moving:• Equipment between LLCs• Real estate between family entities• Accrued management fees

Before transferring assets internally, run the related-party analysis.

Once the loss is disallowed — you don’t get it back.