jimntx
Veteran
Good work "OneFlyer."
Like selling the HDQ building to an AMR subsidiary then leasing it back to AA for much more than necessary. It's legal, but ridiculous.
First off, making all your posts oversized and bold does not make them any more believable. In fact, it is considered rude--the Internet Bulletin Board equivalent of shouting.
Second, selling a building to a subsidiary of the company is done all the time. We were doing it at Texaco 20 years ago. It's perfectly legal.
One of the main reasons for doing it is that certain expenses involved with owning the building are not tax-deductible if the building is owner-occupied, but are if the space is income-producing rental property.
The same thing is true about your home. As long as you own it and live in it, if the roof leaks, too bad, the money comes out of your pocket. However, if you move out and rent the house, then the roof repair can be deducted from the rental income--even if you have rented it to another member of your family. The difference between your situation and AMR's "business" situation is that you can not live in the house as a renter, if you are also the owner.
The advantage to the company is not the income produced by renting the HDQ building--that's a wash. $1 rental income on this subsidiary's business ledger is a $1 rental expense on the company's ledger. The financial advantage is that every single expense associated with upkeep is now deductible on the subsidiary's books--in fact some of it may even be tax credits. In dealing with the dollar amounts involved in that large a physical plant, the savings can be substantial. Even to the point that the real estate subsidiary "loses" money, therefore reducing the tax liability of the parent corporation.