Arnold purchases a building for $750,000 which is going to be used by his wholly-owned corporation.Which of the following statements are correct?
A)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.
B)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.
C)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.
D)Leasing the building to the corporation will contribute to the tax avoidance objective of minimizing double taxation.
E)All of the above statements are correct.

Question

Quizplus · Accepted Answer

If Arnold contributes the building to the corporation, there is no immediate tax consequence, and the corporation takes a carryover basis. Lease payments are deductible for the corporation and taxable to Arnold, and leasing avoids double taxation compared to dividends.

Arnold Purchases a Building for $750,000 Which Is Going to Be