1099-Misc as Rent or Other Income?

[nwtaxlady]

I have a client that is a personal trainer. He uses floor space at a Gym and the owner of the gym charges him 15% of his income for say space rent. It isn't a separate room, it is just floor space area that my client has all his own equipment on the floor so it is his area. So it's like paying rent and its based on his income and he pays 15% of his income to the Gym owner. He had the Gym owner fill out a W-9. My question is, should the amount he paid to the Gym owner be in box 1 for rent or box 3 other income?

Thanks.

[taxmom34]

I may be off on this, but I think the gym owner would be giving client W9, and why box 3, shouldn't it be box 7? on the 1099misc. a W9 is given to someone you are hiring as an employee, right?

[nwtaxlady]

no....

I may be off on this, but I think the gym owner would be giving client W9, and why box 3, shouldn't it be box 7? on the 1099misc. a W9 is given to someone you are hiring as an employee, right?

My client is paying the Gym owner 15% of what my client makes. My client is a personal trainer with a Sch C and is paying the Gym owner so he can use space there. The Gym owner is NOT paying my client anything.

[nwtaxlady]

oh taxmom....or is my client paying commision?

I got to thinking about it... is my client paying commission to the gym owner? But I DON'T think it would be subject to SE because the Gym owner isn't earning or working for it. That is why I say Box 3 other income. Or box 4 for Rent.

Any others input what box this should be reported in?

[DaveO]

Is the gym owner in the business of running a gym or is it just space. If the owner runs a gym it sounds like chair rent at a salon which is subject to SE tax. If it is just space it sounds like rent in box 1 of the 1099.

[nwtaxlady]

Gym owner is in the business of running a gym...

Is the gym owner in the business of running a gym or is it just space. If the owner runs a gym it sounds like chair rent at a salon which is subject to SE tax. If it is just space it sounds like rent in box 1 of the 1099.

Yes, the Gym owner is in the business of running a gym. So if that's the case, then box 7?

[Snaggletooth]

Nothing No 1099 at all

I think in the purest sense what you have is a "commission." A commission requires no 1099 at all.

[Jiggers]

I think in the purest sense what you have is a "commission." A commission requires no 1099 at all.

Wrong. Commissions paid to non-employees are reported on a 1099.

Rent is rent. He is renting the use of the facility. Box 1 rent.

Now the Gym owner has to report the rent income as Schedule C income on his return because he is deducting utilities, maintenance, etc.

To prevent a CP2000, I show the rent on Schedule E with a deduction for the same amount "To Schedule C".

[nwtaxlady]

Help! I need to get this 1099-misc done!

That was my initial thought box 7 for rent. Just like my gals that pay rent to have a station in the hair salon. In past I have had my gals do 1099-misc Box 1 for rent since they were renting a station. Then DaveO posted here that it is subject to SE to the Salon Owner. So do these others just add their "Rents" into Sch C income and not on a E?

I need to get this 1099-misc done. So does my personal trainer issue a 1099-misc Box 1 for rent or another box?

[Snaggletooth]

Take Your Best Feel On This

Miss Tax Lady, I don't think you are going to get a consistent position on this from the rest of us. You've already heard several opinions. Jiggers doesn't agree with me because he views this as rent. I don't agree because I view this commission as "unearned" income. Others insist on Box 7.

The owner, assuming he is not also your customer, will have to deal with his own tax problems. But what you do with this 1099 will affect his (her) tax return. In most cases, "rent" is the most benign income to report.

Choose the course of action you feel most appropriate. I think it will as difficult as herding cats to get a single opinion from the rest of us.

[taxea]

Is there a written agreement or contract? If not tell client to get one that clarifies this issue.

[Kram BergGold]

It is Rent

Client is paying for space in a gym. Client is not paying for services rendered. It is rent on the 1099 Form.

[TaxGuyBill]

I think box 3 would be best.

Yes, the taxpayer is renting a space, so box 1 makes sense from the viewpoint of the Personal Trainer.

However, from the viewpoint of the Gym, they it is questionable if they are renting an exclusive rental space so it may not be recorded as a Rental on their tax return. It will probably go on their general income. So reporting it in box 3 would make it easier for the Gym.

In my opinion, when in doubt, throw it in box 3. Maybe the IRS doesn't like it, but the taxpayer is fulfilling their requirement of filing a 1099, and when the amount is in box 3, it makes it much more flexible for how the receiver of the 1099 can report it (without receiving an IRS notice about it).

As a side note, is the Gym taxed as a corporation? If so, a 1099 isn't necessary at all.

[Jiggers]

The person making the payment determines what box to use on the 1099. Not the person receiving the money.

The taxpayer is renting space. So it is rent.

[Twin Turbo Z]

Rent all the way.