Six years ago, Mr. Magarian contributed an office building to Magarian Rugs, a C corporation, in exchange
Question:
Six years ago, Mr. Magarian contributed an office building to Magarian Rugs, a C corporation, in exchange for a 25 percent equity interest in the business. Since the contribution, the company uses the building to house its inventory and offices. • After this contribution, Mr. Magarian has an 85% interest in the corporation. • His tax basis in the office building was $500,000 and the building’s appraised FMV on the date of contribution to the business was $675,000. • This year, Magarian Rugs sold the building to an unrelated purchaser for $800,000. He paid a realtor a 5 percent commission. Mr. Magarian is planning on retiring soon and will eventually sell the business.
1. Write a short tax research memo describing the correct tax treatment related to the facts above. Be sure to cite your primary sources properly and use the proper tax research memo format
Federal Taxation 2016 Comprehensive
ISBN: 9780134104379
29th edition
Authors: Thomas R. Pope, Timothy J. Rupert, Kenneth E. Anderson