Case | HBS Case Collection | December 1999 (Revised October 2006)

Praedium Corporation

by Henry B. Reiling and Catherine M. Conneely

Abstract

George Hicks and Patricia Ferrey, primary shareholders of the Praedium Corp., faced a dilemma that could dissolve their real estate management company. Praedium received an attractive offer to lease one of its properties, however, Hicks did not want to terminate the existing tenants although they were in arrears. One possible solution involved declaring a dividend in kind of the property to Hicks and a dividend equal to the excess value of the property to be paid to Ferrey in the form of a corporate note. This answer intrigued Hicks and he wanted to examine the tax implications of this possibility with regard to both the corporation and himself. A rewritten version of an earlier case.

Keywords: Leasing; Property; Taxation; Investment Return; Real Estate Industry; Construction Industry;

Citation:

Reiling, Henry B., and Catherine M. Conneely. "Praedium Corporation." Harvard Business School Case 200-029, December 1999. (Revised October 2006.)