Same sex partners related parties?

[jdemellocpa]

Hello all,

Have a client who sold 50% interest in real estate to his same-sex partner. They are not married. Going by the strict IRC 267 rules, they are not related parties. Can he claim the loss, which would be currently disallowed if they WERE related parties. There was a bona fide sale at FMV and there exists a note receivable.

Regards,
JD

[Bees Knees]

A same sex partner cannot be considered a spouse for federal tax purposes. That is because under the Defense of Marriage Act (Public Law 104-199), a marriage can only be between a man and a woman.

Thus, unless they are related through some other means besides marriage, a loss on the sale of property may be deductible, as long as all other criteria for deducting a loss are met.

However, you may have a different set of rules for State tax purposes. If the State recognizes the relationship as a marriage, and State law disallows losses between married couples, then the loss may be disallowed on the State return.