Aaron Purchases a Building for $500,000 Which Is Going to Be

question 116

Multiple Choice

Aaron purchases a building for $500,000 which is going to be used by his wholly-owned corporation.Which of the following statements are correct?

• A)If Aaron contributes the building to the corporation,there will be no recognition under § 351 and a carryover basis of $500,000.
• B)If Aaron leases the building to the corporation,lease-rental payments of $30,000 per year to Aaron will result in a $30,000 deduction for the corporation.
• C)If Aaron leases the building to the corporation,lease-rental payments of $30,000 per year to Aaron will result in $30,000 of gross income for Aaron.
• D)Leasing the building to the corporation will contribute to the tax avoidance objective of minimizing double taxation.
• E)All of the above are correct.

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Definitions:

Capital Budgeting Procedures

A process that involves the evaluation and selection of long-term investments that are likely to yield positive returns and align with a company's strategic objectives.

Analyzing

The process of examining and evaluating data or information to gain insights or make conclusions.

Self-supporting Growth Rate

The maximum growth rate a firm can achieve without requiring additional external financing.

External Funds

Capital that comes from outside of a company, which can include debt financing from banks or equity financing from investors.