Because this is common practice. The business owner my dad worked for "leased" the building and warehouse from his son.
I guess my question would be, is there a point where it does become illegal even if there was an individual owner? Is there a threshold where leasing at higher than market rate becomes illegal?
In the US, you typically want different entities owning the real estate versus the ones operating the business for liability and tax purposes. The IRS treats owners' basis differently based on whether the income is due to passive (real estate rental) or non passive activity (operations).
And your comment didn't help clear anything up other than getting across that you are obviously superior in the field of tax law.
Thanks.