I have read all the posts on this subject, as well as all the text in TTB 1040 and Business until my eyes were crossed.
I'd like to make sure I have this right.
My client is a business consultant, he operates as an S-Corp, he is the 100% shareholder.
He individually owns a residential two story home. He owns it free and clear, ie, no mortgage.
His S-Corp operates from the entire lower level of the home.
There is a rental agreement in place and the Corporation pays him $1500 per month as rent for the use of that lower level.
He lives in the upper portion of the home.
For 2009, the total rent will be $18,000.
The S-Corp will deduct the $18,000 as rent expense on it's 1120S.
The client will include the $18,000 as rent income on the schedule E of his 1040.
In compliance with IRC 280(a)(6), the client will have no deductions on his schedule E, ie, no property taxes, no insurance, no repairs, no depreciation.
He can include 100% of the property taxes on the home on his 1040 Sch A.
Since there is no mortgage, he has no interest expense, but if he did, he would deduct 100% of the interest expense on 1040 Sch A as well.
He does not have an accountable plan in place for 2009 so there is no deduction anywhere, ie, 1040 or 1120S, for any portion of the home utilities, repairs, insurance, etc.
Under the rental agreement, the tenant, ie, the corporation is responsible for any and all tenant improvements to the lower level space it occupies.
The corporation incurred and paid approx $10,000 in expense remodeling the space in 2009 to make it more suitable for business use..
The Corporation will depreciate this $10,000 as a tenant improvement over 39 years.
Have I got this right?
Harvey Lucas
I'd like to make sure I have this right.
My client is a business consultant, he operates as an S-Corp, he is the 100% shareholder.
He individually owns a residential two story home. He owns it free and clear, ie, no mortgage.
His S-Corp operates from the entire lower level of the home.
There is a rental agreement in place and the Corporation pays him $1500 per month as rent for the use of that lower level.
He lives in the upper portion of the home.
For 2009, the total rent will be $18,000.
The S-Corp will deduct the $18,000 as rent expense on it's 1120S.
The client will include the $18,000 as rent income on the schedule E of his 1040.
In compliance with IRC 280(a)(6), the client will have no deductions on his schedule E, ie, no property taxes, no insurance, no repairs, no depreciation.
He can include 100% of the property taxes on the home on his 1040 Sch A.
Since there is no mortgage, he has no interest expense, but if he did, he would deduct 100% of the interest expense on 1040 Sch A as well.
He does not have an accountable plan in place for 2009 so there is no deduction anywhere, ie, 1040 or 1120S, for any portion of the home utilities, repairs, insurance, etc.
Under the rental agreement, the tenant, ie, the corporation is responsible for any and all tenant improvements to the lower level space it occupies.
The corporation incurred and paid approx $10,000 in expense remodeling the space in 2009 to make it more suitable for business use..
The Corporation will depreciate this $10,000 as a tenant improvement over 39 years.
Have I got this right?
Harvey Lucas