Rental income treatment by owner/employee of C Corp

[OldJack]

What was the purpose for not allowing deductions when an office in home is rented to the employer?

The purpose of not allowing expense deduction (1040 Sch-E ) for employer paid rent income (1040 Sch-E rental income) was to keep rent deducted by the employer from being a desirable way to pull money out of a C-corp without paying SE taxes.

Why did Congress put that in there?

Congress put the code there because the IRS requested it as the IRS did not want to address the issue with taxpayers of "fair rental value" of a home office.

And why would accomplishing the same thing through an accountable plan reimbursement be OK? It is a planning issue that has yet to be tested in the courts.

Because reimbursement does not have to deal with the issue of fair rental value as it is only addressing actual expenses and therefore no need to test in a court.

[Bees Knees]

Twisting citations

Reimbursement under an accountable plan is an established method, for an employee, discussed in the IRS publication on the subject of "Business Use of Your Home" and I don't think the IRS would consider it a loophole. It is simply a form 2106 filing if you don't meet the requirements in the quote from their publication above.

Talk about taking something out of context. That discussion was clearly made in the context of all the other employee business expenses you might have in addition to business use of a home, such as job-related vehicle, travel, transportation, meal, or entertainment expenses, mentioned just a few sentences before the ones you quoted.

Why don’t you provide a cite, any citation where office in home expenses are mentioned under an accountable plan?

[Bees Knees]

The purpose of not allowing expense deduction (1040 Sch-E ) for employer paid rent income (1040 Sch-E rental income) was to keep rent deducted by the employer from being a desirable way to pull money out of a C-corp without paying SE taxes.

You mean FICA. SE tax doesn't apply to corporation distributions.

Congress put the code there because the IRS requested it as the IRS did not want to address the issue with taxpayers of "fair rental value" of a home office.

Yeah, and I suppose you looked it up in the committe reports? Or are you just making things up?

Because reimbursement does not have to deal with the issue of fair rental value as it is only addressing actual expenses and therefore no need to test in a court.

Oh really? Fair rental value? Can you provide a cite to the committe reports that said the IRS was tired of dealing with fair rental value?

Well I can. J.C.S. 23-97: General Explanation of Tax Legislation Enacted in 1997 (Provisions Relating to Small Businesses) says the following:

"Prior to 1976, expenses attributable to the business use of a residence
were deductible whenever they were "appropriate and helpful" to the
taxpayer's business. In 1976, Congress adopted section 280A, in order to
provide a narrower scope for the home office deduction."

In other words, people were abusing it. Home office expenses are generally those you would incur regardless of whether you were conducting business out of your home, or using it as a TV room. Congress passed the law to try to close loopholes, not because IRS didn't want to deal with fair rental value issues.

[OldJack]

What is Bees Knees problem?

What is your problem Bees Knees? My posts were not personal here.. I was only expressing my opinion and facts of the subject as I know them. You appear to be taking this as some sort of personal attack. Get a life.

[Armando Beaujolais]

What is your problem Bees Knees? My posts were not personal here.. I was only expressing my opinion and facts of the subject as I know them. You appear to be taking this as some sort of personal attack. Get a life.

Don't mind Bees Mr. Jack. He's been like that ever since the repeal of section 1034 a few years ago. That was his favorite code section you know. He keeps arguing about the tax code in hopes that someone will quote section 1034 so he can use that as proof that it's still around. We just kinda humor him. He's a little noisy sometimes, but he's really harmless.

[Bees Knees]

What is your problem Bees Knees? My posts were not personal here.. I was only expressing my opinion and facts of the subject as I know them. You appear to be taking this as some sort of personal attack. Get a life.

Sorry if you were offended. But please understand that when you challenge my “opinion and facts of the subject as I know them”, I might argue back.

[OldJack]

Sorry if you were offended. But please understand that when you challenge my “opinion and facts of the subject as I know them”, I might argue back.

Nothing wrong with stating ones opinion, but I am not here to argue or challenge anyone. I was not offended.. just noted that you had your nose bent out of shape.. evidently because you didn't agree. If you think you know everything about taxes you have a lot still to learn.

[Bees Knees]

Nothing wrong with stating ones opinion, but I am not here to argue or challenge anyone. I was not offended.. just noted that you had your nose bent out of shape.. evidently because you didn't agree. If you think you know everything about taxes you have a lot still to learn.

Actually, I do know everything about taxes. I read the code book every day....















































































































just kidding....