Rental Income

[bekzm]

Have a daycare that is a corporation. Well - I'm not doing the corporation but on the prior years there is a rental on her personal tax return. When ask her about it - says the CPA does it and she doesn't get any rent. So was wondering - how does he come up with the rent for her personal return on a schedule E. I see the interest but the rental is what - the payments she makes on the building - or principal or what. Any clue so I can ask her. The building is in her name - so guess the corp pays her rent - but how is it figured?

[BHoffman]

Have a daycare that is a corporation. Well - I'm not doing the corporation but on the prior years there is a rental on her personal tax return. When ask her about it - says the CPA does it and she doesn't get any rent. So was wondering - how does he come up with the rent for her personal return on a schedule E. I see the interest but the rental is what - the payments she makes on the building - or principal or what. Any clue so I can ask her. The building is in her name - so guess the corp pays her rent - but how is it figured?

One easy way to see what her rental income is would be is to look at the Corp return and see what was reported as rent expense. Make sure you don't double dip on the property taxes and mortgage interest.

You might want to suggest she have a simple written rental agreement between herself and her Corporation. Have the Corp pay her a rent check every month. She would make the mortgage payment and property tax payment from her personal checking account. It takes, however, an act of God to get them to actually do this.

Good luck.

[Gretel]

It seems this is the same as having an OIH as a shareholder. Keep in mind that the only expenses allowed against the rental income are taxes and mortgage interest.