Question for tax lawyers: can you sell something to yourself? Or, is a true sale, by definition, a transaction between two distinct legal entities?
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It sounds like this is about 2 distinct entities: the trust and the trustee.
Technically, a trust is not an independent legal entity, but may be treated as one for tax purposes.
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It is a common estate tax planning tool for a person to “sell” an asset to themselves in their capacity as trustee of an irrevocable trust. The sale is disregarded for income tax purposes, but valid for estate tax purposes.
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For tax reason it should be irrelevant a transaction where the seller and the buyer are the same entity.
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Loss denial? If you sell at a loss to yourself, but reacquire the property at the same time, wouldn’t that deny the loss?
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