Rent or Commission?
This sounds more like a commission earned since the "rent" is a percentage of the trainer's sales. What happens if the trainer has no sale? No rent or no commission?
There is PLR that stated when an owner charges rent based on a "% of the subcontractor sales" those subcontractors were considered employees (they had no risk, so it looked more like an employer/employee relationship).
Getting back to your situation, in my opinion I believe it would make sense if the owner of the Gym prepared a rental agreement and charged the trainer a fixed rental rate. Then the trainer would have a document to support his filing a 1099 to his "landlord" claiming "rent" and the trainer deducts the rent expense. It also shows "intent" on the gym owner's part.
Also, something the gym owner needs to discuss with his tax professional: the gym owner, if he claims the rental income on Schedule E would then have to prorate all the gym's expenses that would pertain to the "rental income" and charge it against rental income, thus reducing rental income that is not subject to SE. The results of reallocating some of those gym expenses away from gym fees, which ARE subject to SE, to instead reduce rental income, will then increase the gym owner's income tax exposure (more income subject to SE tax).
This sounds more like a commission earned since the "rent" is a percentage of the trainer's sales. What happens if the trainer has no sale? No rent or no commission?
There is PLR that stated when an owner charges rent based on a "% of the subcontractor sales" those subcontractors were considered employees (they had no risk, so it looked more like an employer/employee relationship).
Getting back to your situation, in my opinion I believe it would make sense if the owner of the Gym prepared a rental agreement and charged the trainer a fixed rental rate. Then the trainer would have a document to support his filing a 1099 to his "landlord" claiming "rent" and the trainer deducts the rent expense. It also shows "intent" on the gym owner's part.
Also, something the gym owner needs to discuss with his tax professional: the gym owner, if he claims the rental income on Schedule E would then have to prorate all the gym's expenses that would pertain to the "rental income" and charge it against rental income, thus reducing rental income that is not subject to SE. The results of reallocating some of those gym expenses away from gym fees, which ARE subject to SE, to instead reduce rental income, will then increase the gym owner's income tax exposure (more income subject to SE tax).
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