Six years ago, Mr. Magarian contributed an office building to Magarian Rugs, a C corporation, in exchange for 25 percent equity interest in the business. Since the contribution, the company uses the building to house their inventory and offices. After this contribution, Mr. Magarian has 85% interest in the corporation. His tax basis in the office building was $500,000 and the buildings appraised FMV on date of contribution to the business was $675,000. This year, Magarian Rugs sold the building to an unrelated purchaser for $800,000. He paid a realtor a 5 percent commission. Mr. Magarian is planning on retiring soon and will eventually sell the business. Required: 1. Write a short tax research memo describing the correct tax treatment of the related to the facts above. Be sure to cite your primary sources properly and use the proper tax research memo format. (15 points) 2. Based on the factors above, did Mr. Magarian recognize a gain on the contribution of the office building to the corporation? Use IRC Section 351 in your analysis to explain your answer. (15 points) 3. What was the corporations basis and holding period in the property immediately after the contribution? (15 points) 4. Considering that the building would be depreciable property, determine the adjusted basis of the property on the date of sale. You will need to consult the depreciation tables. Assume that the contribution of the property to the corporation was made on the first day of the year and the corporations sale of the property was made on the last day of the year (six years later). (20 points). 5. Calculate the realized gain on the sale of the property based on the amount realized on the sales and the calculated adjusted basis (#4). 6. Will the corporation have a recognized gain on the sale of the building? Explain. (10 points)

7. If gain is recognized, calculate the amount of tax that the corporation will be required to pay. Explain.