Georgia, an individual, owns all of the stock of Malific Xenophobe Oil Distributing Corporation, which not...

Georgia, an individual, owns all of the stock of Malific Xenophobe Oil Distributing Corporation, which not only has not shown a profit, but has consistently lost money in every year since Georgia acquired the stock. Georgia also conducted an oil and gas equipment leasing business as a sole proprietor. Georgia’s largest drilling rig normally leases for $1,000 a day. Recently Malific Xenophobe used Georgia’s drilling rig for 60 days, and because Malific Xenophobe’s reserves and credit were insufficient to permit it both to pay its workers and pay Georgia $60,000, Georgia rented the drilling rig to Malific Xenophobe for the 60 days for $5,000.

Question: What are the tax consequences to Georgia and Malific Xenophobe?

Solutions

Expert Solution

Georgia have an income equal to $5000.therefore tax will be paid on this amount only.As malific Xenophobe paid amount of $5000 it will be allowed to claim expense of $5000 only.

ekkarill92 answered 2 years ago

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