A reduction in their income tax liability

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Reference no: EM13513111

Carol is a successful physician who owns 100% of her incorporated medical practice. She and her husband Dick are considering the purchase of a commercial office building located near the local community hospital. If they purchase the building, Carol would move her medical practice to the new location and rent space at an arm's length price. The rent income that Carol and Dick receive will be available to absorb passive losses generated by other passive activities they own. The net effect of this arrangement is a reduction in their income tax liability. Will Carol and Dick's plan work? Explain.

Reference no: EM13513111

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