Case I

Moon Corporation plans to sell an investment property to Sun Partnership based on its appraised value of $3.5 million. Moon purchased the property about 10 years ago by paying $3.1 million. Lee is the largest shareholder in Moon by owning 45% of Moons shares outstanding. Sue, Lees sister, owns 8% and other unrelated investors own the remaining shares outstanding. Sue is a limited partner of Sun by owning 25% while her daughter, Kathy, owns a 28% limited interest in Suns capital and profits. Two unrelated general partners own the remaining partnership interest. Sue and Kathy are not engaged in operating the partnership.

If Moon sells its property to Sun, can Moon recognize a loss of $400,000 resulting from the transaction?