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One of your clients is an incorporated golf and te...




One of your clients is an incorporated golf and tennis club, Clubs & Racquets, Inc. It is a private club, and only members may use the facilities (although they may bring guests, pursuant to the club rules). When a new member is admitted, Clubs & Racquets requires the new member to purchase stock in the corporation and to make a $50,000 deposit to the club. Under the terms of the agreement, however, the member does not forever forfeit this deposit. Instead, Clubs & Racquets has an obligation to repay the deposit to the member in 30 years. At the end of that 30 year period, Clubs & Racquets repays the $50,000 deposit -- crucially, however, no interest is charged on the deposit. Your client has come to you for advice. Are these loans subject to the below-market loan rules? One of your clients, Dr. Diane Marlbury, is a successful physician. She has structured her medical practice as a corporation, and she owns 100% of the stock in this corporation. They also have a number of other business activities that are characterized as passive business activities. Generally, these activities generate passive losses that cannot be used against other sources of income, including their wage income. Dr. Marlbury has visiting physician rights at a local community hospital. As a result, she and her husband (who is not a physician) are considering whether to purchase a commercial office building near the hospital. If they do purchase the building, Dr. Marlbury would move her medical practice from its current location to the new building. Unsurprisingly, they are trying to see whether or not they might be able to structure the transaction so as to generate the best possible tax consequences. They have envisioned having Dr. Marlbury?s practice not own the building but instead rent the building for an arm?s length price from the Marlburys. They would then be able to use the passive losses generated by these other activities to offset the rent income generated by the building, reducing the overall tax burden on this rent income. Will this plan be successful, or is it barred by the passive loss limitation rules? As covered in Weeks 1 and 3 and discussed in the TDAs, Congress enacted provisions that cut the tax that individuals must pay on dividends received from qualifying domestic corporations. One of the justifications for these provisions was the argument that if the tax rate was decreased, domestic corporations would increase the dividends paid to shareholders. Did this occur? Find at least two studies on the Internet addressing this issue and compose an essay (1) analyzing these studies and (2) drawing conclusions, based upon these studies, as to whether corporations did, in fact, increase dividend payments to shareholders. Analyze the studies thoroughly, and use them in supporting your conclusions.


Paper#4839 | Written in 18-Jul-2015

Price : $25