ACC 703: Extra Credit (Maximum 7 points) Facts: Not-for-Profit. Inc. ("NFP) owns 60% of a For-Profit Corporation (FP). FP owns title to property (land) leased to NFP The lease rental amounts from NFP are equal to reimbursement to FP for maintenance, property taxes and other incidental expenses related to the leased property. Thus, FP pays no income taxes because the rental income from NTP is completely offset by the maintenance and property taxes, etc. incurred by FP FP also has net operating loss ("NOL) carryforwards. Pursuant to the lease agreements, leasehold improvements made by NFP, which are substantial, revert back to FP at the end of the lease. However, these long-term leases have been renewed regularly over several decades. The property has become extremely valuable over the years and is located in an upscale residential neighborhood. This leased property could be used for other purposes, which would yield much higher returns to FP than the related party lcase with NFP. FP has not applied (nor does ir intend 10) for Title Holding Company status with the IRS, which would require amendments to FP's certificate of incorporation and bylaws and related shareholder approvals. Title Holding Companies are tax exempt entities. 26 U.S.C. $501(c)(2) Neither FP nor NFP have disclosed in their respective audited separate or consolidated financial statements any "Uncertain Tax Positions (UTP) (See FASB Interpretation No. 48 (Codified at ASC 740-10). Nor have FP or NFP disclosed on their respective federal tax returns that FP or NFP have any UTP (these would be reported on Schedule UTP (Form 1120 for FP) and Schedule D (Form 990 for NFP). Instead, primarily relying upon GCM 35188 (attached), both FP and NFP have taken the position that they are not required to disclose any UTPs. Relevant Law: IRC $$482, 501(a), 501(x2.(7), and related IRS regulations and rulings, GCM 35188 (1973-419); see also "Instructions for Schedule UTP (Form 1120)." Instructions for Form 990 (Schedule D and Part XIII), FASB Interpretation No. 48 (2009) For purposes of this project, it is assumed that FP and NFP are related parties under federal income tax law (see IRC SS 267(b), 318(1), 707(b)). Issue: Does NFP or FP have UTP disclosure requirements under federal tax law? Instructions: After conducting the appropriate research and analysis, prepare a research memorandum (see "4007 of text). Use proper legal citations. Optional: You also may attach legal briefs of portinent case law (see 13019.03 of text). FP's certificate of incorporation calls for that company to be engaged in for profit activities Notwithstanding, FP's primary activity has been the related party lease income from the NFP. This listing of the relevant law is not exhaustive. ACC 703: Extra Credit (Maximum 7 points) Facts: Not-for-Profit. Inc. ("NFP) owns 60% of a For-Profit Corporation (FP). FP owns title to property (land) leased to NFP The lease rental amounts from NFP are equal to reimbursement to FP for maintenance, property taxes and other incidental expenses related to the leased property. Thus, FP pays no income taxes because the rental income from NTP is completely offset by the maintenance and property taxes, etc. incurred by FP FP also has net operating loss ("NOL) carryforwards. Pursuant to the lease agreements, leasehold improvements made by NFP, which are substantial, revert back to FP at the end of the lease. However, these long-term leases have been renewed regularly over several decades. The property has become extremely valuable over the years and is located in an upscale residential neighborhood. This leased property could be used for other purposes, which would yield much higher returns to FP than the related party lcase with NFP. FP has not applied (nor does ir intend 10) for Title Holding Company status with the IRS, which would require amendments to FP's certificate of incorporation and bylaws and related shareholder approvals. Title Holding Companies are tax exempt entities. 26 U.S.C. $501(c)(2) Neither FP nor NFP have disclosed in their respective audited separate or consolidated financial statements any "Uncertain Tax Positions (UTP) (See FASB Interpretation No. 48 (Codified at ASC 740-10). Nor have FP or NFP disclosed on their respective federal tax returns that FP or NFP have any UTP (these would be reported on Schedule UTP (Form 1120 for FP) and Schedule D (Form 990 for NFP). Instead, primarily relying upon GCM 35188 (attached), both FP and NFP have taken the position that they are not required to disclose any UTPs. Relevant Law: IRC $$482, 501(a), 501(x2.(7), and related IRS regulations and rulings, GCM 35188 (1973-419); see also "Instructions for Schedule UTP (Form 1120)." Instructions for Form 990 (Schedule D and Part XIII), FASB Interpretation No. 48 (2009) For purposes of this project, it is assumed that FP and NFP are related parties under federal income tax law (see IRC SS 267(b), 318(1), 707(b)). Issue: Does NFP or FP have UTP disclosure requirements under federal tax law? Instructions: After conducting the appropriate research and analysis, prepare a research memorandum (see "4007 of text). Use proper legal citations. Optional: You also may attach legal briefs of portinent case law (see 13019.03 of text). FP's certificate of incorporation calls for that company to be engaged in for profit activities Notwithstanding, FP's primary activity has been the related party lease income from the NFP. This listing of the relevant law is not exhaustive