25. W, a businesswoman, needs to borrow additional cash for her business. In order to satisfy her lender and comply with state usury laws, she transfers her office building to her wholly owned corporation, which then takes out the loan at a high rate of interest. State law permits this high rate of interest only when a corporation is the borrower, and the lender insists on this high rate of interest in order to make the loan. As is customary in Ws state for this type of loan, it is made clear in the paperwork that the corporation is only the nominee, and an agreement between W and her corporation specifically provides this. W continues to be the true owner of the office building for economic purposes, except that the lender has recourse to the office building if payments are not made on the loan. W continues to occupy the office building for her business, and does not pay rent to her wholly owned corporation..

What is the tax treatment of W and her wholly owned corporation:

A. W is treated as receiving a dividend from her corporation equal to the rent the corporation could have charged, and she cannot depreciate the building for tax purposes.

B. W is treated as receiving a dividend from her corporation equal to the rent the corporation could have charged, but she can depreciate the building for tax purposes.

C. W is not treated as receiving a dividend from her corporation equal to the rent the corporation could have charged, but she cannot depreciate the building for tax purposes.

D. W is treated as the true owner of the building for tax purposes. Thus, she is not treated as receiving a dividend from her corporation equal to the rent the corporation could have charged, and she can depreciate the building for tax purposes.