Rent paid to a stockholder

[Super Mom]

If a Corp rents a building from the stockholder can the amount be set at any amount below FMV? Say $100 a month for something rented to a stranger would probably bring $1000 per month?

[Burke]

Is this an S-Corp? More than 2% owner?

[ChEAr$]

At first I thought about the S corporation 2%'er issue, but is it even an issue then?

Any corporation's board of directors must make sound financial decisions, and if the corporation can only afford x dollars for rent without going into the red, I would be inclined to do what's best for the corporation to which directors have a fiduciary responsibility.

[Burke]

I suppose a building owner can rent for whatever he wants. The issue comes up when he tries to depreciate it as rental property taking a big loss. OP did not say from whose perspective he was looking. The corp's position is not a problem. Unless the IRS wanted to take the position that a nominal rent of 10% of FMV is just an underhanded way of funneling income to an owner other than salary. Depends on all the facts and circumstances and who owns what.

[ChEAr$]

I suppose a building owner can rent for whatever he wants. The issue comes up when he tries to depreciate it as rental property taking a big loss. OP did not say from whose perspective he was looking. The corp's position is not a problem. Unless the IRS wanted to take the position that a nominal rent of 10% of FMV is just an underhanded way of funneling income to an owner other than salary. Depends on all the facts and circumstances and who owns what.

Seems to me that IRS would question excessive rent, i.e. more than FMV in order to funnel income to the owner.

[JON]

You cannot

get a loss from a related party... I think you end up with deemed paid if even by note to the stockholder...

[Burke]

Seems to me that IRS would question excessive rent, i.e. more than FMV in order to funnel income to the owner.

I was looking at it from the point of FICA avoidance.