Paper

Taxes Research Problem 5-73

World wide web Baker was hired 3 years ago by Berry Corporation to serve as a CEO for the company. As part of his employment deal, the corporation consented to purchase his residence at fair market value in the event the company decided to flames him. Unfortunately, last year Super berry fired World wide web, due to him not being pleased with Web's overall performance. With shooting Web, the contract came into affect in which the company acquired his property for $350, 000. With buying the home, Berry right away listed your house with a real-estate agency. Because of serious decrease in the real estate market, he ended up being selling the property for $270, 000 and paying offering expenses of $12, 1000. With the loss of $92, 500, I was trying to figure out how Berry Organization should deal with this loss. In order for me personally to find this out I will be looking at Albur Nut Co. v. Commissioner of Inside Revenue, which can be very similar to my personal problem previously mentioned, and Sec. 1221.

In the case of Circunstancia Nut Co. v. Office, Azar Nut Company was a business that processed, grouped together, and marketed nuts in El Transito, Texas. The owners Edward and Phillip Azar were hoping to find a high level exec, in which that they found Thomas L. Frankovic. During the contract negotiations, Frankovic insisted that he would not really accept work with Circunstancia unless Circunstancia agreed to buy his home for its good market value upon termination of his work. Azar brothers reluctantly arranged and integrated that agreement into Frankovic's contract. After two years, Albur fired Frankovic and bought his property for $285, 000, that has been agreed in the contract. Just like the scenario approach above, Azar immediately outlined the house in the marketplace, but it would not sale for almost two years. They will finally sold the house intended for $185, 000, but sustained a loss of $111, 366.

Albur deducted the realized quantity of $111, 366 since ordinary and necessary business expense on its 1984 tax return. The Commissioner disallowed the deduction and...



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