Your client is dr quack an md who owns 100 of her medical


Your client is Dr. Quack, an MD who owns 100% of her medical practice of which the legal entity is an LLP. The medical practice generates a net income of $800,000 per year before paying rent. She currently pays $5,000 per month for rent, so her income net of rent is $740,000 per year. She is considering the purchase of a commercial office building  at a location which would be better suited for her medical practice.   The price of the building is $1 million, and Dr. Quack would purchase it all for cash.  She would move her medical practice into the building, and the LLP which she owns and which employs Dr. Quack would rent the space in the new building for $6,000 per month which is an arm's length rate.  The  new building would have depreciation expense of $20,000 per year and $12,000 per year on other costs so it would have net income of $40,000 per year ($72,000 minus expenses of $32,000 per year). She owns other rental property which has $40,000 in passive losses from prior years which she could not deduct due to the overall passive loss limitations, and those properties currently generate $15,000 per year in additional passive losses. Dr. Quack wants to offset  the passive net rental income which she receives from the medical office building ($40,000 per year) with otherwise unused passive losses she has from her other real estate investments. Will that be permitted?

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Financial Management: Your client is dr quack an md who owns 100 of her medical
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