Assume the same facts as in Problem C:2-55. Under what circumstances is the tax
ID: 2466040 • Letter: A
Question
Assume the same facts as in Problem C:2-55.
Under what circumstances is the tax result in Problem C:2-55 beneficial, and for which shareholders?
Can you suggest ways to enhance the tax benefit?
See photo for C:2-55 that will have the necessary facts to answer the question above.
Assume the same facts as in Problem C:2-55.
Under what circumstances is the tax result in Problem C:2-55 beneficial, and for which shareholders?
Can you suggest ways to enhance the tax benefit?
See photo for C:2-55 that will have the necessary facts to answer the question above.
Explanation / Answer
In the present problem, eric purchased the land ( a capital asset ) , 5 years ago for $ 200,000.
Florence purchased the equipment three years ago for $ 48,000.The equipment has been fully depreciated.
To offset tax liabilities, eric has to use his loss or decrease in value of land.
Eric would be able to use his loss or decrease in value on land tooffset other tax liabilities.The loss of $ 150,000 ($200,000 - $ 50,000) would be recognized and it is capital loss.
As per IRS , the tax benefit can be done by Eric, Florence, and Greg. If in the company, Assets are transferred as equity or corporation debt are transferred at an amount which exceeds basis of property transferred.It has to be more than the 50000 FMV of the property