Gary and Greta Grumpy are a married couple who reside

| August 14, 2017

Below are the facts for
a file memo. A file memo is discussed in your text and should take the format
of – Facts, Issues, Analysis and Conclusion. The analysis should contain the
law, etc. you used to arrive at your conclusion. remember you are writing this
for other tax people, so it should be technical in nature.

Gary and Greta Grumpy are a married couple who
reside in Hinderland, USA. Both of them own a separate C Corporations. The
corporations operate out of the Grumpy’s home and pay rent for office space in
the home. In addition to their C corporations, the Grumpy’s own five rental
properties, which have operated at a loss for the previous five years. Gary and
Greta have been using the losses from these rental properties to offset the
rental income they have been charging their corporations for operating in their
home. On their last three individual tax returns, the Grumpy’s have shown
income from the leasing office space to their C Corporations of $40,000,
$24,000 and $22,000. The losses from the rental properties have been in excess
of the income from the leased office, thus the couple has a passive loss
carryforward of some amount; however, they did offset the lease income with the
losses from the rental properties. Please give the tax issues and your advise
in a tax memo format for the file.

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