Lease income

[AccTaxMan]

Taxpayer leases his business to another person. He collects a fixed amount of lease income per month. But he still pays for some expenses like the property tax, fire insurance, etc (he owns the property where the business is located).

Does he report the lease income and expenses on a Schedule E?

[Jiggers]

Taxpayer leases his business to another person. He collects a fixed amount of lease income per month. But he still pays for some expenses like the property tax, fire insurance, etc (he owns the property where the business is located).

Does he report the lease income and expenses on a Schedule E?

Yes, this goes on Schedule E.

[Gary2]

Taxpayer leases his business to another person. He collects a fixed amount of lease income per month. But he still pays for some expenses like the property tax, fire insurance, etc (he owns the property where the business is located).

Does he report the lease income and expenses on a Schedule E?

What does it mean to "lease his business"? Is he leasing a mixture of real estate, business-use personal property (furniture, computers, cash registers, etc.), and intangibles (business name, customer lists, goodwill, etc.)? If so, there's a Schedule C. There may or may not be a Schedule E.

If he has any interest in the income or growth of the business, then there may be a partnership there, possibly unintentional.

[AccTaxMan]

What does it mean to "lease his business"? Is he leasing a mixture of real estate, business-use personal property (furniture, computers, cash registers, etc.), and intangibles (business name, customer lists, goodwill, etc.)? If so, there's a Schedule C. There may or may not be a Schedule E.

If he has any interest in the income or growth of the business, then there may be a partnership there, possibly unintentional.

He is leasing the business to someone else. So he is the lessor.

He had been running the business for a long time. And then he wanted to retire. He tried to sell the business but could not find any buyers. So he decided to lease the business to the other person.

Does the situation require him to require a Schedule C? If yes, does he just report the lease income on the Schedule C?

[AccTaxMan]

Yes, this goes on Schedule E.

Thank you for your reply. How do you see the argument that it should be reported on a Schedule C?

[Jiggers]

Thank you for your reply. How do you see the argument that it should be reported on a Schedule C?

He is not in the business of renting personal property. He leased his business, in total, equipment, building, everything.

Besides, how would he allocate the rent between the building and personal property?

[AccTaxMan]

He is not in the business of renting personal property. He leased his business, in total, equipment, building, everything.

Besides, how would he allocate the rent between the building and personal property?

That's what I think too. If he operates a leasing business, it would be a Schedule C. But that's not the situation in his case.

[Gary2]

He is leasing the business to someone else. So he is the lessor.

He had been running the business for a long time. And then he wanted to retire. He tried to sell the business but could not find any buyers. So he decided to lease the business to the other person.

Does the situation require him to require a Schedule C? If yes, does he just report the lease income on the Schedule C?

A business isn't a thing that you can lease. Would it make sense to say that you're leasing a partnership, corporation, or trust to someone? You can lease well-defined business assets, but not the abstract entity.

Or look at it another way: Suppose that this new lessee triples the size of the business, opening two new sites. When the "lease on this business expires", does that mean the expanded business, including the right to operate the two new sites, all revert to your lessor?

Or suppose the lessee runs the business into the ground. How will your lessor account for the loss of goodwill, etc?

The point is that you have to account for the intangibles somehow. Maybe the intangibles are worthless - it's possible. But if they're not, I'm pretty sure they don't have a 39 year class life.

[S T]

I looked at this post yesterday, and was questioning how you lease a business vs real estate owned.

Question - What is the business entity in the hands of the owner (T/P)? is it Sole Proprietor, Partnership, S Corp- C Corp

Question - the Property ( Real Estate) how is it titled? Is it a self-rental

Seems to me there would be two components - one for the lease of a business if there is such, and then one for the Real Estate Rental Value that the T/P owns.

I am probably thinking way beyond ????

Sandy

[Y2KEA]

Agree with ST. What is the type of entity? Proceed from there.
Not sure how, but that is step one.