Discussion:Business Use of Home - S Corporation
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Discussion Forum Index --> Tax Questions --> Business Use of Home - S Corporation
| 28 December 2006 | |
| I was told that an S-Corporation cannot take the "Business use of Home" deduction.......is this correct? My client uses a section of his residence as an office for his S-Corp. | |
Death&Taxes (talk|edits) said: | 28 December 2006 |
| Discussion: Home Office for S-Corp | |
| 17 January 2007 | |
| Tell me how the S corp has a Home?
The shareholders have a home. The employees have a home. | |
| 17 January 2007 | |
| If the S/H's only place of business is his/her home, then YES the corporation can deduct a home office expense. This needs to be set up as an accountable plan however so that the corporation can "reimburse" the S/H/employee for use of his home.... | |
| 17 January 2007 | |
| Look at the self-rental rules and what can be deducted. SURPRISE! Not such a good idea. Turn a possibly tax-free gain asset into a partially taxable one. | |
| 17 January 2007 | |
| True true true....when you use a tax sheltered asset (primary residence) and then depreciate it, etc. then yes, you can have tax implications. Many times however the s/h rents and does not own...then take the deduction but absolutely see if you are trading $ for $$$$$ :) | |
| 17 January 2007 | |
| See Craft vs Commissioner August 15,2005. Expenses delineated in a corporate resolution are deductible - not voluntarily paid, however. Home office included but shareholder had to deduct them on Sch A Misc. | |
Death&Taxes (talk|edits) said: | 18 January 2007 |
| "Deductions are a matter of legislative grace." How many lost taxpayer cases contain that phrase? Craft is not totally on point, for there is no discussion of the accountable plan, but it does show that if the Board of Directors authorizes such, the percentage of personal expenses for use of home can shift to the corporation. | |
| 18 January 2007 | |
| Section 280A(c)(6) prohibits deductions by employee for any expenses attributable to rental of a dwelling unit to his employer during any period that the employee also uses the dwelling unit in performing services to the employer
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Death&Taxes (talk|edits) said: | 18 January 2007 |
| You raise a good point, JD. Unlike JR and others, I have no clients in this situation but I wonder about the phrase 'accountable plan.' An employee who turns in expenses on an accountable plan gives exact numbers and receipts: my parking was 11.75, my tolls 2.65, my motel 84.00 etc. Here the employee says my electric bill was 180.00 and you owe me 1/6th. Based on what? I use 1/6th of my square feet in my house. But how do I know you use 1/6th of my utilities? Would such reimbursements be governed by the rules of 280A, or more likely by the substantiation rules of 274. That is why I have qualms about accountable plans for the S shareholder/officer. | |
| 18 January 2007 | |
| I believe the accountable plan can work using % square footage but I am not sure if you can include Depreciation on your expense reimbursement form you submit to your employer.
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| 18 January 2007 | |
| A shareholder/employee has a choice of 3 methods:
1) unreimbursed employee business expense (2106 - Sch A subj to 2% of AGI). 2) reimbursed employee business expenses - % of utilities, insurance, maint., etc. like Sandysea wrote. 3) payment of rent which uneder ยง280A(c)(6) is includable as income(as Jdugancpa wrote), with the only allowable deductions those that would be deductible in the absense of any business use (mortgage interest, real estate taxes, casualty losses) on Schedule A - BUT NOT on Schedule E. So PVVCPA is right in correcting me that the depreciation problem I brought up earlier would not occur in this situation. In any case, everyone is correct in that this would probably not result in a big deduction to anybody, and probably not worth the time to calculate. | |
Death&Taxes (talk|edits) said: | 18 January 2007 |
| The irony is that along with health insurance, I suspect this issue is top five on our charts! | |
