Michael Williams owns some vacant land that hes planning to sell and needs your tax advice. Michael purchased 200 acres of land for $800,000 on May 12th, 2017 from an unrelated party when the state was proposing a highway project. Michael thought that the state would need his land for the project and he would be able to hold out for a nice profit. Now that the highway project has been abandoned by the state, Michael has decided to sell the land to Xylem, Inc. for $650,000 and take a capital loss deduction on his taxes. Xylem Inc. is a privately held corporation with 1,000 shares of outstanding stock. The Xylem stock is owned by Peter Williams, Michaels brother, Holly Jackson, Michaels niece (Peters daughter) and Bruce Jones, an unrelated individual. Peter owns 400 shares (40%), Holly owns 200 shares (20%) and Bruce owns the remaining 400 shares. Before he proceeds with the sale, Michael would like to know if he will be able to deduct the loss or if the IRS will likely disallow the loss in accordance with the related party loss rules.