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Fred and Wilma Flintstone are the sole shareholders of Bedrock Rock (BR), a business organized as a C corporation that provides natural stone and rock countertops. In addition, they co-own Cave Dwellings (CD), an unincorporated business that holds a single property – a warehouse to store the rock sold by BR and allow potential customers to examine rock countertops for purchase. BR leases the warehouse from CD. In 2017, Bedrock Rock (BR) generated substantial taxable income ($400,000) as business was quite good. CD, on the other hand generated a taxable loss of $40,000 for the year. Fred and Wilma are material participants in both BR and CD. Fred and Wilma would like to report the taxable results of BR and CD as a single activity to avoid any potential issues with the deferral of the loss on CD as a passive activity. You may assume that the rent charged by CD to BR is ordinary and reasonable in amount. addressi the issue as to whether the Flintstones may group the two activities as a single activity or if they must report them separately and what the tax consequences are of each choice.

Financial Management, Finance

  • Category:- Financial Management
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