# 22 LO.1, 7 Keith’s sole proprietorship holds assets that, if sold, would yield
ID: 2434203 • Letter: #
Question
# 22LO.1, 7 Keith’s sole proprietorship holds assets that, if sold, would yield a gain of $100,000. It also owns assets that would yield a loss of $30,000. Keith incorporates his business using only the gain assets. Two days later, Keith sells the loss assets to the newly formed corporation. What is Keith trying to accomplish? Will he be successful?
# 23
LO.7 Emily incorporates her sole proprietorship, but does not transfer the building the business uses to the corporation. Subsequently, the building is leased to the corporation for an annual rent. What tax reasons might Emily have for not transferring the building to the corporation when the business was incorporated?
Explanation / Answer
Keith wants to be able to take a loss on his individual tax return for the loss on his assets. I am not aware of any tax law that prohibits this. Emily wants to be able to continue to take the writeoff for depreciation on the building on her individual tax return. If she transferred the building to the corporation she would be unable to do it.
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