Question: Ccile owns a highly profitable restaurant run as a sole proprietorship. To protect herself from liabilities related to the business, Ccile incorporates the business,

Ccile owns a highly profitable restaurant run as a sole proprietorship. To

Ccile owns a highly profitable restaurant run as a sole proprietorship. To protect herself from liabilities related to the business, Ccile incorporates the business, becoming the sole shareholder. However, she retains personal ownership of all of the assets (building, kitchen equipment, furniture, etc.) and rents them to the corporation, charging twice the normal rental value. What might Ccile be try- ing to accomplish with the rental arrangement? What is the most appropriate tax treatment?

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Cecile is likely trying to have the corporations future distributions treated as deductible rental expense to avoid the double triple double taxation ... View full answer

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