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This is the caseRex “Tumbleweed” Banyon was a big western movie star back in the 1950s and1960s. Now in his late 80s and not in the best of health, Rex has not been aworking actor for many years. Rex has also fallen into some financial difficulties.He and his third wife live in a beautiful ranch home near Santa Barbara, Californiathat he purchased about ten years ago when he was in better financial andphysical condition. Rex is presently several months behind in his mortgagepayments (he owes about $3.6 million on the outstanding loan) and the bank hasstarted foreclosure proceedings. A sympathetic loan officer alerted the media to oldTumbleweed’s plight and several stories about Rex’s problems have run in thenational press and on television. One person moved by the story is Dot Matrix, avery successful and wealthy software designer. Dot fondly ***** ***** toSaturday Matinees as a child and watching Tumbleweed put an end to the evildoings of assorted varmints and bad-apples. She decides to help Rex out in histime of need by purchasing his ranch home from the lender (appraised value of$3.4 million – the bank agrees to “write off” the $200,000 excess of debt over value)and lease the home to Rex and his wife for $1.00 per month. Dot figures the SantaBarbara property is a good long-term investment – and the value of the mediacoverage of her act of kindness to old Tumbleweed (Dot is certain she and hersoftware company will get plenty of favorable publicity) ain’t too shabby either. OnAugust 1, Rex and his wife execute a Deed in lieu of Foreclosure, conveying thehouse to the lender in exchange for being released from the debt. Simultaneously,Dot purchases the home from the lender for its appraised value and a grateful Rexand his wife execute a renewable five-year lease on the home at $1.00 per month.A comparable rental in Rex's neighborhood is presently running about $6,000 permonth.

Submitted: 2 years ago.Category: Tax
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3/15/2016
Tax Professional: PDtax, Certified Public Accountant (CPA) replied 2 years ago
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PDtax, Certified Public Accountant (CPA)
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