Corp to shareholder rent payments

[DaveinTexas]

I know this has probably been discussed somewhere but I am too lazy to look it up.

If you are a shareholder in a corporation and you personally lease an office space, can you either:

1. Have the corporation reimburse you, the shareholder, for the cost of the lease? or,

2. Lease the office space back to the corporation at FMV rent or the same rents that you pay? If so, can you deduct the lease payment you pay on your 1040, schedule E as an expense?

The ultimate goal is to get money out of the corp that isn't subject to SE tax or FICA. I know that if you own equipment or property the corp can use in its operations, you can rent equipment/property to the corp and it is kosher as long as the rents are reasonable and close to FMV rents. What I don't know is, does the same arrangement apply if the shareholder does not own the property, but pays the lease personally?

This situation arises when a person enters into a 3 or 5 year lease agreement and then a year or two later decides to incorporate and the lessor doesn't want to change the original contract with some obvious reasons. Some property owners do not want to deal with corporations for fear of difficulty to evict or the hassle of suing a corp for nonpayment of rents.

Any help would be appreciated. TIA.

[JAinNC]

If he is 100% shareholder

why not have him hold a board meeting to have the corporation pay the rent (because the lessor does not agree to change the lease agreement.?
Of course he may not be the only shareholder.

Jeannie

[DaveinTexas]

100% shareholder is correct

I suppose this could work, but what if the lessor gripes about a check written by the Corporation versus the individual tenant?

And would the IRS consider this a distribution to the shareholder first because the lease payments might be classified as a "nondeductible personal expense"?

I'm not disagreeing, just need more clarification.

Thanks,

Dave

[JAinNC]

Hey Dave,
If there are minutes of the board meeting that the board made a decision to pay the rent because of the the lessor would not change the agreement and that the agreement was made by the sole prop that now is a corporation ... I do not see any problem with that.

If the lessor will not accept a corpoation check, then have the board (with written minutes) make the decision to establish and accountable plan with the shareholder to directly reimburse the shareloan the cost of the rent. Draw up an accountable plan fill in sheet so the shareholder can turn in his proof of payment (copy of the check or recpt). The accountzble plan sheet with attached proof can be present to the corporation each month or whenever to request reimbursement. Make sure it is in the corp's permanent records as minutes.

Hey Dave - I never take reading marial to go fishing, just bait and sunscreen.
Jeannie

[DaveinTexas]

Thanks

"If the lessor will not accept a corpoation check, then have the board (with written minutes) make the decision to establish and accountable plan with the shareholder to directly reimburse the shareloan the cost of the rent. Draw up an accountable plan fill in sheet so the shareholder can turn in his proof of payment (copy of the check or recpt). The accountzble plan sheet with attached proof can be present to the corporation each month or whenever to request reimbursement. Make sure it is in the corp's permanent records as minutes."


I think this is what should be done.

I don't think the IRS should take issue with this. It is a legitimate, ordinary and necessary expense for the corporation; its just paid by the shareholder and reimbursed by the corp.

Thanks for the help.

Dave