Twelve years ago, Mr. Davis contributed a property that includes a building and land to Davis Office Furniture, a C corporation. Sub-subject The property will be used for office and warehouse space. Search And Select Mr. Davis acquired the property and used it as rental property for five years prior to the contribution to the corporation. The property was exchanged for a 30 percent. equity interest in the corporation. After the contribution of the property, Mr. Davis had an 80% interest in the corporation. The adjusted tax basis in the warehouse property at the time of the contribution to the corporation was S 1,500,000 (building $900,000 and 5600, 000 land). This basis reflects depreciation taken up to the date of the contribution. The building's appraised FMV on date of contribution to the business was $1,650,000. During the current year, Mr. Davis decided to retire and close the business. On the last day of the year the corporation sold the property (building and land) to an unrelated purchaser for 52, 500,000. A realtor was paid a 6 percent commission. The corporation will liquidate its office furniture inventory shortly and the company may need your assistance with that at a later date. Calculate the corporation's after-tax cash flow on the sale of the building. Assume there is a $350,000 mortgage balance at the time of sale. The mortgage was not assumed by the buyer but is required to be paid back by the seller at closing. Show your calculation using a table within the analysis section of the memo. Remember, depreciation deductions do not represent cash outflows. However, they impact basis and therefore, the tax cost of any recognized gain. Explain your analysis. Be specific. I have calculated it with explanation but would like your opinion as an expert if I did it correctly. Thank you. Please don't use any AI. It's strictly prohibited. Thanks Help me asap.
Twelve years ago, Mr. Davis contributed a property that includes a building and land to Davis Office Furniture, a C corporation.
Sub-subject
The property will be used for office and warehouse space.
Search And Select
Mr. Davis acquired the property and used it as rental property for five years prior to the contribution to the corporation.
The property was exchanged for a 30 percent. equity interest in the corporation.
After the contribution of the property, Mr. Davis had an 80% interest in the corporation.
The adjusted tax basis in the warehouse property at the time of the contribution to the corporation was S 1,500,000 (building $900,000 and 5600, 000 land). This basis reflects depreciation taken up to the date of the contribution.
The building's appraised FMV on date of contribution to the business was $1,650,000.
During the current year, Mr. Davis decided to retire and close the business.
On the last day of the year the corporation sold the property (building and land) to an unrelated purchaser for 52, 500,000.
A realtor was paid a 6 percent commission.
The corporation will liquidate its office furniture inventory shortly and the company may need your assistance with that at a later date.
Calculate the corporation's after-tax cash flow on the sale of the building. Assume there is a $350,000 mortgage balance at the time of sale. The mortgage was not assumed by the buyer but is required to be paid back by the seller at closing. Show your calculation using a table within the analysis section of the memo. Remember, depreciation deductions do not represent cash outflows. However, they impact basis and therefore, the tax cost of any recognized gain. Explain your analysis. Be specific.
I have calculated it with explanation but would like your opinion as an expert if I did it correctly. Thank you.
Please don't use any AI.
It's strictly prohibited.
Thanks
Help me asap.
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