A client is selling her entire interest in an S Corp. The S Corp is the BUYER.

Facts:

1. My client is a passive investor
2. She owns 38% of the S, her brother owns 37% of the S and the final 25% is owned by a non-family member
3. She will have a large capital loss on the sale
4. The sale proceeds will be paid in 48 monthly installments (since it is a loss it is not an installment sale for tax)
5. She has a large suspended passive loss carryover

On the surface it would seem that she has a large capital loss and her suspended passive losses would now be allowed to be utilized due to a complete disposition of her shares.

I am concerned that there might be an issue of a sale to a related party. If so, how would that affect her stock loss? Her suspended passive losses?

All comments and insight would be appreciated.