Your college roommate approaches you 6 months from now in need of accounting advice. The roommate inherited a rental building from a dear uncle with a FMV of $2,000,000. The details about the building are as follows: Gross rent – $100,000 Depreciation – $55,000 Operating expenses – $50,000 Basis to roommate $1,000,000 The roommate won’t sell it outright and instead wants to contribute the building to either a Partnership (you can be the partner if you agree to do the accounting work), S corp, or C corp. The roommate is working full-time as a production assistant earning a salary but she also has passive income. In 1-2 pages identify the issues relating to: a) contribution b) operations (think about the operating loss), and c) eventual liquidation for each entity choice. State the rules you are applying and apply to the facts above. Conclude with a recommendation.
Sample Solution
