Your assignment is to individually prepare a memorandum to the tax file. The relevant facts are: Louise is a successful physician who owns 100% of her incorporated medical practice. She and her husband Pablo are considering the purchase of a commercial office building located near the local community hospital. If they purchase the building, Louise would move her medical practice to the new location and rent space at an arms length price. The rent income that Louise and Pablo receive will be available to absorb passive losses generated by other passive activities they own. The net effect of this arrangement is a reduction in their income tax liability. Will Louise and Pablos plan work? Explain. Please provide the followinfg in the memorandum: the Facts, Tax Issue, Conclusion, and Analysis.

Hint - you will find guidance from the following sources of tax law.

These sources should provide you with adequate information to come to a definitive conclusion regarding whether or not Louise and Pablo will achieve the results they are hoping for.

1. You will find guidance from the regulations under Section 469. (Youll find relevant provisions for the facts of this case in Reg. 1.469-2(f)).

2. Once you have located the section of the regulation that applies to this fact pattern, review the following court cases that are relevant to this issue to help you in your analysis and conclusion: Fransen v. U.S., 98-2 USTC 50,776 Sidell v. Comm., 2000-2 USTC 50,751 Krukowski v. Comm., 2001-1 USTC 50,219