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    Self Rental

    This is my first time doing a self rental tax return. Taxpayer is a S-corp 100% shareholder for a small retail operation. No problem with this activity as she has been filing the S-corp returns for several years as renting the shop where she operates. But this year she purchased the property where she operates her shop and wants to create a separate LLC for the real estate that she just purchased (commercial building). Here are the questions that I need help with:
    1. Will she be considered as self rental? No other tenants.
    2. Where can I get more information on self rental?
    3. Since her business qualifies for QBI as non-SSTB?
    4. Will this real estate LLC qualify for QBI?
    5. Other suggestions or feedback
    6. Is the deprecation rules same on self rental as any other commercial real estate?

    #2
    It sounds like a Self Rental situation to me.

    Self Rentals are part of QBI, and the income is not "passive" for purposes of the Passive Loss rules. Other than that, they should be the same as any other rental.

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      #3
      Reference TTB 7-8 & 7-9 (self rentals - also see ref. Court case on 7-9) and other sections as applies to your other questions. Great reference material to help make informed decisions .
      Last edited by TAXNJ; 01-11-2019, 11:45 PM.
      Always cite your source for support to defend your opinion

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        #4
        I agree with above on Self Rental being eligible for QBI. One other suggestion I would make is have taxpayer create a lease between the two entities (probably a triple net lease) and determine a FMV rent.

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          #5
          If taxpayer have other rentals apart from self rental, do they qualify to group them? What is the election number to group them? Will they still be able to take QBI deduction as the other rental does not qualify for the trade or business activity?

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            #6
            My experience is that clients who have an operating business that rents a commercial building they also own rarely shows a rental loss. To the contrary, they're looking to escalate the monthly rental to the maximum justifiable amount to avoid paying wages-related taxes and to minimize funds potentially subject to the Section 531 tax.

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