Divestiture of Land and Taxation Strategies
Mr. Tucker owns investment land ($690,000 FMV and $228,000 adjusted basis) that he is interested in selling. Several prospective purchasers have offered to pay cash, but Mr. Tucker wants to avoid recognizing this entire gain in the year of sale. Accordingly, he is considering selling the land to the Tucker Family Corporation in return for a 20-year, 9 percent corporate debt obligation. The corporation could then sell the land to an unrelated party for cash.
Will Mr. Tucker's strategy be effective in deferring gain recognition on sale of the land?
- Describe the steps you utilized in conducting your research.
- List any tax principles used in your analysis.
- Assess the likelihood that the IRS will challenge your position (state the likelihood of challenge in terms of a percentage (example, 80%).