1) Gina owns an office building in which she conducts her accounting practice. S
ID: 2796486 • Letter: 1
Question
1) Gina owns an office building in which she conducts her accounting practice. She is considering selling the building to a trust and leasing it back. This sale/leaseback would have all of the following benefits for Gina except?
a. Off balance sheet financing.
b. Avoidance of tax on gain from sale of the asset.
c. Improved cash flow.
d. Removal of future growth from Gina's estate.
2) Which of the following is not true concerning a business continuation agreement?
a. If the agreement is a stock redemption or cross purchase plan, the agreement may be oral.
b. The business continuation agreement must specify which event(s) will trigger the obligations of the parties.
c. The agreement may contain provisions related to the funding of the agreement.
d. The agreement binds the estate of the business owner to sell the business interest to another party.
Explanation / Answer
Answer-
(1) : Option (b) . Because, Sale of an asset is subject to Tax on the gain portion.
Other Reasons:
By selling commercial property to a funder and agreeing to lease it back for a pre-determined time period in return for fixed monthly rental payments, you can unlock capital that's currently tied up in commercial property.So it boosts cash flow. So Option C is not the answer.
By Selling the property and acquiring the same asset will not be reflected under liabilities side of the balance sheet. So Option a is not the answer.
Answer-
(2) Option: (b)
A business continuation agreement will not contain provisions regarding funding of the Agreement
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