Marc,
He can rent a portion of his house to his S Corp but Sec 280A(c)(6) says he can’t deduct any expenses except for RE taxes and mtg interest. Instead of renting, the way this is normally handled is to have the company reimburse him under an accountable plan for the pro-rata share of his housing expenses based on square footage.
John Stevens, EA
Stevens Tax & Accounting, Inc., dba Equi-Tax
651-773-5000
FAX 651-457-4529
equitax@unique-
www.equitax.
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From:
Sent: 10/01/2008 4:48 PM
To:
Subject: RE: [taxchat] Renting to himself: I think I know he can't but I can't explain Why
I have a client who has an S-Corp of which he is the sole owner.
He claims that he rents his S-Corp a portion of his personal home.
I seem to remember some reason he caon't do this, but I can't remeber the citation or section of the code. After thinking about it forawhile, I did not really see any reason for not doing it, except that it will make his tax return have a schedule E, and make it a bit more complicated and he will lose a section 121 exclusion for htat portion of his home and after all is said and done, he gains nothing from the transaction and just complicates his tax return.
So, am I imagining that he can not rent his personal residence to his S-Corp, or is there some rule that prohibits this transaction?
Thanks,
Marc
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