New client for next year has income from the following sources: Hubby's jobs as they move around country where he works as a Physical Therapist (not sure if he gets W-2s or 1099s); two rental properties; and investments. For 2012 one of the rental houses is occupied by their kid who pays below fair market value rent and acts as property manager for the other property. I am looking for the most tax advantaged way of handling that situation. They would like their kid not to have tax consequences from the arrangement. I am not seeing how that can be done.
I know they have to recognize rent equal to the sum of cash rent the kid pays plus the value of the kid's services. I believe they can write off the value of the kid's services as an expense. I am thinking they need to give the kid a 1099M or W-2 for the value of the kid's services. Am I right or am I missing something?
I know they have to recognize rent equal to the sum of cash rent the kid pays plus the value of the kid's services. I believe they can write off the value of the kid's services as an expense. I am thinking they need to give the kid a 1099M or W-2 for the value of the kid's services. Am I right or am I missing something?