Cleint has lease his car to his C Corp. Corp is sending a lease payment to him. He will need to report that payment on his individual tax return. Is the monies reported on the Sch E or somewhere's else?
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Line 21 reported as PPR
The PPR stands for personal property rent. Only report retail income from real estate or property leased in connection with real estate (office furniture and equipment leased with a commercial building perhaps). No deduction for depreciation, interest etc.Originally posted by Ed Taxes View Post
Be cautious with this arrangement, the IRS loves opportunities to reclassify payments to Corporate officers as wages and in the case of C Corps, dividends. I would consider advising the client having the Corp reimburse him/her for the use of the vehicle or to reimburse the business mileage. This keeps everything a bit cleaner and the reimbursements are not included in income (as long as expense substantiation is kept).
If the vehicle is a true work vehicle and the company needs the vehicle to operate its business (cargo van for a carpet cleaning business for example) there shouldn't be an issue with the lease arrangement. Just my two cents.Circular 230 Disclosure:
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Even if the corporation leases the vehicle, it is still required to prove business use. That means that the full amount of the lease may not be deductible as a lease, and the related expenses, and should be reclassified as wages.
I think an accountable plan requesting reimbursement for the business use of the vehicle would be more appropriate.Jiggers, EAComment
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Armlength transaction is required. If this is a legitimate lease than the income should be reported on Schedule C if shareholder is active in Corporation. There are issues with "self dealing".Comment
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Don't forget sales tax!
In many states, lease payments for personal property are subject to sales tax. This added burden can make the economics less attractive.Comment
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