Question

ETHICS Lisa is the sole proprietor of a business that man ufactures solar panels This Week Lisa was ap proached to exchange her business assets for shares in Burns Power. As part of the exchange, Lisa is requiring Burns Power to assume the home equity loan on her home. Do you think that ulsa should argue that there is no tax-avoidance motive in this arrangement? Suppose that Lisa established her business five years ago by in- vesting funds from a home equity loan. Does this make any difference? Searchentries or author Unread

Answer 1

Answer:

A home equity loan is one where in the borrower takes cash by having the home as an collateral.

Assumption of liabilities of an investor by the organization isn't constantly treated as a tax avoidance measure. There are two significant exemptions to this assumption:

• On the off chance that the liabilities assumed need to relation to the business taken over or did by the organization. It is treated as tax avoidance measure and is taxable. It is on a par with offering money to the investor or shareholder out of the organization's funds.
• On the off chance that the liabilities assumed that are more noteworthy than their basis, at that point it is treated as tax avoidance.

In the above case the home equity loan taken by Lisa appears to be purportedly for her own utilization and has no connection to the business action. Subsequently, it very well may be viewed as an tax avoidance method.

In the other case ,if Lisa has built up her business by contributing funds from the home equity loan then it is for the business reason and assuming such obligation or liability is for the business itself. Subsequently, it's anything but a part of tax avoidance.