Advantages and disadvantages of transferring real estate

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Father and son are co-owners of a manufacturing company, with father having transferred some of his stock to his son in previous years. There is no debt in excess of stock basis. The father retained the land and buildings from which the company operates, and leases the land to the company at below market rates. The father's land includes excess property that has development potential and is in an area where property values are appreciating rapidly. Note, however, that the manufacturing process may be generating environmental hazards that could affect land values. The father is nearing retirement and wants to continue transferring ownership to his son. Additionally he believes that his family would face significant estate tax problems due to the dollar value of his assets. He has asked you to review his current situation and discuss the tax and non-tax issues you believe should be considered.

You may consider the following issue as part of your research. These are suggestions to get you started and not necessarily the way that you choose to go or all that should be considered.

1. Advantages and disadvantages of transferring real estate to a corporation, either a C or S, or to a partnership. Consider concerns relative to appreciated property; individual vs. corporate tax rates; flexibility for developing excess property.

2. Any additional tax and non-tax issu??fchat you believe should be addressed.

Reference no: EM13127386

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