Tax Research Memorandum Case 2 - Tax Research Memorandum Date To Tax Files From Thang Nguyen Subject Propter Tax Treatment and Result of the Increase in

Tax Research Memorandum Case 2 - Tax Research Memorandum...

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Tax Research Memorandum Date : December 11, 2012 To : Tax Files From : Thang Nguyen Subject : Propter Tax Treatment and Result of the Increase in Rent Money Summary of Facts : Stephen Colbert is the founder and a one-third partner of Prescott Pharmaceuticals, and he also is a materially participant. This general partnership has been generated considerable profits. Stephen also owns two properties separately by himself: one is a warehouse that he rented to Prescott Pharmaceuticals to engage in manufacturing and management, the other is a rental property that that Mr. Colbert rented out for tourists to generate passive income. In 2012, the rental property suffered a loss of $20,000 due to the BP/Gulf of Mexico oil leak incident. Stephen Colbert and his wife file their tax return jointly and have income well above $400,000; therefore they cannot deduct any of the losses from the rental condo. Also in this year of 2012, Mr. Colbert plans to increase the rent fee of the warehouse that he rented to Prescott to generate an additional $20,000 to offset his lost from the rental condo.

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