Assignment task: Which of the following arrangements would most likely be treated as creating an "entity" for U.S. tax purposes?
1. Bright Solar Power Corp. owns solar panels in a facility that produces electricity, which it leases to Never Reliable Utilities Inc: for 25 years. Never Reliable operates all aspects of the facility and pays annual rent of $2,000,000 plus 2% of the utility revenue to Bright Solar Power.
2. Evan hires Gloria to work as a manager in Evan's very successful uptown book store. Gloria's annual salary is $120,000 plus a bonus of 2% of the book store's business profits.
3. Martin gives $1,000,000 to Joan to purchase and renovate buildings in Alabama. Joan manages all aspects of the project, including renovation and eventual sale of the real estate. Martin is entitled to 60% of the profits from the sale of each building, and Joan is entitled to 40% of the profits. Martin expects to also receive back a proportionate amount of his principal invested after each sale, unless the building is sold at a loss, in which case Martin expects to lose his capital investment.
4. Rodrigo lends to Jodi $50,000 as start-up money for Jodi's cybersecurity consulting business. The loan is for a 7-year term and entitles Rodrigo to 4% interest plus 1% of the consulting business revenue.