Discussion:S-Corp Shareholder Home Office AGAIN!
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Discussion Forum Index --> Advanced Tax Questions --> S-Corp Shareholder Home Office AGAIN!
Discussion Forum Index --> Tax Questions --> S-Corp Shareholder Home Office AGAIN!
| 28 August 2008 | |
| Sole s corp shareholder builds a separate shop (100% biz) building (no mortgage) next to his home, with separate metered utilities in his name. Still treated as home office?
EdH 13:21, 28 August 2008 (CDT) | |
| August 28, 2008 | |
| Different rules when it's a separate structure. Not restricted to merely reimbursing...you can go the Sch. E route now. | |
Death&Taxes (talk|edits) said: | 28 August 2008 |
| and get no recognition when Sec. 121 rolls around. | |
| 28 August 2008 | |
| Not sure that you can put this on Schedule E. I would have no problem with deducting this on Sch. A, subject to the 2% limit. | |
| 28 August 2008 | |
| My bad, Kevinh5 - I did mean office in home.
EdH 14:30, 28 August 2008 (CDT) | |
| 28 August 2008 | |
| JR1 - Including depreciation?
EdH 14:31, 28 August 2008 (CDT) | |
| 28 August 2008 | |
| Because it's on the same property I thought Schedule E could not deduct anything other than interest & taxes.
EdH 14:39, 28 August 2008 (CDT) | |
Death&Taxes (talk|edits) said: | 28 August 2008 |
| It is covered by 280A(c)(1)(C) [Edit by me]. With him paying the utilities etc, it would be employee business expense. Why not submit for reimbursement, especially if later the town assesses the structure separately? | |
| August 28, 2008 | |
| Sorry, guess I better look before I leap. I thought with separate structures you were ok...hmmm, what can I look at fast?.......crud. Where did I learn that separate structures were treated differently? Well, I got some research to do, and a client change to make perhaps. Don't mind me. As you were. | |
| August 28, 2008 | |
| Dang, here's an interesting reference: The rule denying home office deductions in cases where an employee rents a portion of his or her home to the employer was motivated by Congressional concern that such transactions would not be negotiated at arm's length and that some taxpayers might be encouraged to arrange sham transactions whereby a portion of salary is paid in the form of rent. Joint Committee Taxation, General Explanation of the Tax Reform Act of 1986, 94th Cong., 2d Sess., 1986-3 C.B. 35.
That WAS kind of the whole point, wasn't it? Still digging, but much less hopeful now. | |
| August 28, 2008 | |
| OK, here's where I have trouble. The rules are clear when any part of the rental arrangement includes any part of the dwelling unit. The separate structure does NOT include any part of the dwelling unit, and therefore, the usual rental rules should apply. So while the building might be on the land that the home is also on, it is not any part of the home, so all the restrictions in 280 don't apply, as I read it. What am I missing? | |
| 28 August 2008 | |
| I think I finally see some light (after re-reading and re-reading etc. Sec. 280(c)(1)(C), and (c)(3)). It appears there is a clear difference between a "dwelling unit" and a "separate structure". The suggestions to reimburse some actual expenses makes sense, and I guess Schedule E will take the depreciation and any separate taxes or interest.
EdH 18:25, 28 August 2008 (CDT) | |
| 29 August 2008 | |
| Ehirrold, there is nothing in the law that would allow a shareholder to deduct on Schedule E costs of conducting S corporation business. Instead, such costs are deductible on Sch. A as an employee business expense. | |
| August 29, 2008 | |
| I trust you 99.98% Riley...are you 100% on this? Separate Structures aren't, by definition, part of the dwelling unit......oh, wait, tho', I have read that the separate structures are covered under the regs as long as rent isn't included. Never mind. Trust now up to 99.985%. | |
| 29 August 2008 | |
| This is not really a 280A issue. Shareholders cannot deduct costs of conducting the corporation's business. However, employees can claim deductions for the unreimbursed costs incurred as an employee within the scope of his employment. Unreimbursed employee business expenses are deducted on Sch. A, not Sch. E.
This is not to be confused with Unreimbursed Partnership Expenses, which are deducted on Schedule E. | |
| 29 August 2008 | |
| Incidentally, if you need a citation for this, see IRC Sec. 162(a)(1) and Rev Rul 57-502. Also, see WALTON O. HEWETT v. Commissioner, 47 TC 483. | |
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