Barber Shop Space

[Kurly]

Hey guys and Gals:

Man owns barber shop, he rents 6 of the 7 spaces to other barbers. (They supply all the on items they use, including hair tonic, shampoo, etc.)( Collect their own monies from their clients (they have a seperate cash drawer in the cash register) ) How would you suggest he handle the income from these rents? Is this one of the gray areas as to Schedule C or Schedule E? The 6 other barbers give him a 1099-Misc for rents paid in box #1.

Thanks

Kurly

[Black Bart]

Well,

I vote for E. Rent's rent even if it's only a spot on the floor of a building.

[solomon]

The ATG on this topic would agree with Bart.

[skhyatt]

RIA Taxdesk

Here is a quote from checkpoint:

"Individual taxpayers use Schedule E (Form 1040) to report income from rentals of real estate and personal property leased with real estate. 5 Income from the rental of other personal property, e.g., equipment or vehicles, is reported on Schedule C or C-EZ (Form 1040), if the taxpayer is in the business of renting personal property, or on lines 21 of Form 1040, if the rental isn't part of taxpayer's business." ¶121,001 RIA Tax Desk Analysis

I don't think I would vote for Sch E. I would think that it would go on Sch C. If the barber is renting/leasing the space, it is simply a reduction in his/her rental expense. I don't think it would go on line 21 as I think it would be part of the business. Interested in hearing what others have to say.

[skhyatt]

Hey guys and Gals:

Man owns barber shop, he rents 6 of the 7 spaces to other barbers. (They supply all the on items they use, including hair tonic, shampoo, etc.)( Collect their own monies from their clients (they have a seperate cash drawer in the cash register) ) How would you suggest he handle the income from these rents? Is this one of the gray areas as to Schedule C or Schedule E? The 6 other barbers give him a 1099-Misc for rents paid in box #1.

Thanks

Kurly

Well, he owns the shop? I still vote for Sch C as I think it is a part of that business. Can you really separate the chair rental from the barbershop biz?

[solomon]

"Rental Revenue
If the salon has all booth rentals, the salon owner is a landlord."

From MSSP on Beauty and Barber Shops.

In this case I guess it is 6 out of 7 - would count in horseshoes.

[Davc]

Do the individual barbers also answer their own phone, set up their own appointments, do their own advertising, and have their own business license if required?

[Kurly]

Yes

Yes,except for the phone they have a separate extension.

K

[solomon]

Surely the client should not be paying SE Tax on the rental income - C would do that.

[skhyatt]

Surely the client should not be paying SE Tax on the rental income - C would do that.

I see your point Solomon. I still tend to think it belongs with the barbers business, but nothing strong to base that on. Have searched and can't find anything solid on this.

[skhyatt]

Not sure

Found some info in PLR 7103260340A that talks about booth rentals. It doesn't talk directly about barbers. Mentions that "booth rentals" do not constitute "rents" within the meaning of section 1372(e)(5) of the Code.

[ED SMITH]

Chairs?

Usually barber shops have barber chairs, which would be personal property. So unless the others bring their own chairs - Sch C.

[solomon]

Found some info in PLR 7103260340A that talks about booth rentals. It doesn't talk directly about barbers. Mentions that "booth rentals" do not constitute "rents" within the meaning of section 1372(e)(5) of the Code.

Sec. 1372 has to do with partnership fringes - hardly applicable here. If the barbershop income (his own) is overriding to the rentals, then he is not in the business of personal property rentals. Thus, Line 21 of the 1040 and any associated expense on line 36 with description of PPR.

[skhyatt]

Sec. 1372 has to do with partnership fringes - hardly applicable here. If the barbershop income (his own) is overriding to the rentals, then he is not in the business of personal property rentals. Thus, Line 21 of the 1040 and any associated expense on line 36 with description of PPR.

You are correct about that code section. The PLR I referenced was dated back in the 70's. From what I found, Sec. 1372 was amended in 1982. Still not sure it applies here though. But if you can find that PLR, take a look and tell me what you think.

[Davc]

Rental of personal property incidental to real property rental is still rental income.