I think the parent is 0, and the child will recognize a loss of $1,000.
Parent sells to related party, no G/L. But there is a built in loss on the item of $2,000 now, so that when it eventually is sold to an unrelated party, the loss of $2,000 is recognized.
@no_one
What I mean is that you only include the state tax refund in your gross income if it is in excess of the standard deduction.
You would have had $3,950 deductible from the standard deduction, no matter what. So if you paid 6k in taxes last year and received a 2.5k refund, you are down to $3,500 (now less than the std deduction amount). The government would give you that $450 (3950 – 3500) amount tax free anyway had you used a standard deduction. So they let you have that and only charge you the excess amount of $2,050 (6000-3950).
If you had paid 6k taxes and only got a refund of $1,000, now you're at $5,000 (6000-1000). You are above the std deduction, so you include all $1,000 in your gross income. Because the itemized deductions still gave you a $5,000 deduction instead of the lower std deduction of $3,950.
Basically, if your refund puts you in a position where your std deduction would have been better than your itemized amount, you will not be including the full amount of the refund in gross income. Only the tax that you benefited from, by deducting it last year (hence tax benefit rule).
FAR - 86
REG - 83
AUD - 97
BEC -
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