Husband and wife are 50% owners in their S-Corp they just finished their basement an use it exclusively for business. Has anyone ever heard of renting a home office to an S-Corp to avoid some of the pitfalls of the home office (not sure of all the pitfalls) I realize that the income would have to be included on their personal return and that the S-Corp would get the rent expense deduction. I guess they would NOT have to go back and recapture the depreciation when they sold the property. However, I’m not sure of the other advantages and disadvantages. I was wondering if anyone ever heard or recommended anything like this and what your thoughts on this would be. Thanks in advance.
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self-rental is a no-no. do a search; there has been a lot of discussion on this. -
See "Renting home office to employer" on page 5-15 in TTB. That will answer your questions.Comment
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Can you "self rent" a home if you do not live in but you do own it?Last edited by BOB W; 01-01-2009, 09:14 AM.This post is for discussion purposes only and should be verified with other sources before actual use.
Many times I post additional info on the post, Click on "message board" for updated content.Comment
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Commercial Use
Is it zoned for commercial use?Comment
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No...............................This post is for discussion purposes only and should be verified with other sources before actual use.
Many times I post additional info on the post, Click on "message board" for updated content.Comment
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IRC Section 280A(c)(6)
Dwelling unit in the context of Section 280A means a home used by the taxpayer as a residence [IRC §280A(a)]. Thus, as long as the taxpayer does not also use the property as a residence, renting property to the employer would be OK, such as an S corporation shareholder/employee renting his commercial building to his S corporation employer. All expenses in that case would be deductible on the Schedule E rental activity.(6) Treatment of rental to employer
Paragraphs (1) and (3) shall not apply to any item which is attributable to the rental of the dwelling unit (or any portion thereof) by the taxpayer to his employer during any period in which the taxpayer uses the dwelling unit (or portion) in performing services as an employee of the employer.
In fact, this is a common way of keeping real estate out of the corporation. You own the building personally and rent it to your corporation. That way you can pull income out of the S corporation without having to run it through payroll, and you keep the building outside of the corporation in case the business fails and the corporation needs to be liquidated.Last edited by Bees Knees; 01-01-2009, 06:29 PM.Comment
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