Posted: April 23rd, 2015

Your client owns an apartment building in Los Angeles for which he paid a price of $500,000 which was his original basis. During the ten years he has owned the building, he has taken depreciation deductions which total $120,000. An investor has offered to buy the building from your client for a price of $850,000 which is agreeable to your client if the client can avoid paying taxes on his gain.

Research Assignment Accounting (Tax) class

Your client owns an apartment building in Los Angeles for which he paid a price of $500,000 which was his original basis.     During the ten years he has owned the building, he has taken depreciation deductions which total $120,000.    An investor has offered to buy the building from your client for a price of $850,000 which is agreeable to your client if the client can avoid paying taxes on his gain.

       The client has found an office building located in San Diego which was legally converted into co-op shares in 2012.    Two shares in the co-op are for sale for a price of $425,000 each, so the client would like to acquire those as part of an exchange qualifying under IRC sec. 1031.     The client would have the investor buy the two shares immediately prior to exchanging those two shares so that at the end of the exchange the investor owns the apartment building and your client owns the two shares in the office co-op.

    Write a letter to the client explain all of the income tax related consequences and risks of this transaction.

Your grade will mostly be based on your identifying issues in tax law and citing and explaining sources of law (court cases and sources written by Congress, Treasury, and the IRS).

Use Intelliconnect (CCH) to find your sources.

5 pages in 12 point font.    Please cite sources within your text or as footnotes on the bottom of each page (as opposed to putting them at the end of your paper).  

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