Question

1. Arnold purchases a building for $750,000 that is going to be used by his wholly owned corporation. Which of the following statements are correct?

   a.If Arnold leases the building to the corporation, lease-rental payments of $30,000 per year to Arnold will result in a $30,000 deduction for the corporation.

   b.If Arnold leases the building to the corporation, lease-rental payments of $30,000 per year to Arnold will result in $30,000 of gross income for Arnold.

   c.Leasing the building to the corporation will contribute to the tax avoidance objective of minimizing double taxation.

   d.If Arnold contributes the building to the corporation, there will be no gross income in the current year and a carryover basis of $750,000.

   e.All of these statements are correct.

Answer 1

e.All of these statements are correct.

Leasing the building contribute to minimizing double taxation. If Corporation owns the bulding and sells it for gain, you will be taxed twice to take out the money.Once as a corporation and second time as individual. If you lease the building, you will be taxed once for making gain by selling the building

$30,000 per year will be expense of the corporation and add to your personal income as lessor

If the buiding is transferred to the corporation, the building will have  carryover basis of $750,000 for purpose of depreciation and taxation