S-corp question

[Roberts]

I have a new client and they have an S-corp for their business and for years were reporting something called "other income". They also file on their Schedule E a rental property with rent. Well I asked some questions and found out the "other income" for all those years was nothing more than a repeating of the rental income. Major woops with major refund coming.

Here's my questions / issue: They have been depreciating everything on the Schedule E as rental property and now want to move everything over to the business because that's technically where they think it should have been from the beginning. Do you see that as a problem with the IRS? (they are the only owners on the S-corp so it's entire income flows through THEIR Schedule E anyway so the actual tax situation doesn't change.

[Maribeth]

Rule of thumb: Never, ever put real estate in a corporation.

Maribeth

[ChEAr$]

The most important issue here, Roberts, is whether or not titled to rental property is in the corporation. I'm guessing it's not, so it's schedule e all the way. No ifs, ands, or buts about it.