Self Rental

[Beersheba]

Some Schedule E transactions bring forth self-employment tax. One of these is "self-rental."

A contractor purchased a building to accommodate his blueprints, administrative staff, etc. He has the building set up as a Partnership LLC with his wife, reporting Form 8825 Rent. Has he sufficiently avoided the IRS concept of "self-rental?"

[Maribeth]

I believe the self-rental rules deal with the character of the profit on the rental of real estate between related parties. The profit on the Schedule E from this self-rental activity cannot be used to offset any passives losses from other rental activity. This procedure of owners of companies buying real estate and renting to their companies is very common. I have never once calculated SE tax on the profit on the Schedule E on a self-rental. This is real property, however, not personal property. The rental of personal property to your company would go on a Schedule C and be subject to SE tax.

[ttbtaxes]

The self-rental rules recharacterize the rental profit as nonpassive for purposes of Section 469 not for purposes of Section 1402. No SE tax any rental profit should there be one in the example above.

[Beersheba]

Thank you, folks.