Discussion:C-Corp shareholder/employee's deduction of home office
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Discussion Forum Index --> Tax Questions --> C-Corp shareholder/employee's deduction of home office
| 29 June 2007 | |
| I know that there are a few threads here about this issue, but I am still confused.
Owner of C-Corp has a home office, which is a separate structure in his backyard. He will be meeting with clients there, and it’s used exclusively for business. If I understood right, C-Corp can pay rent (and deduct it from corporate income) to him for the use of office space. But employee/shareholder can only deduct mortgage, property taxes and casualty loss from the rental income. The only advantage would be less FICA, FUTA taxes paid. And the rental income is considered not passive activity income, so no passive loss can offset it. If the C-Corp has an accountable plan, then, in addition to the rent paid can reimburse the employee for utilities, insurance, office equipment maintenance, supplies, and other expenses for the home office. Did I get it right? | |
| 30 June 2007 | |
| Lavla, you should also ask if, upon selling his residence, the separate structure rented to his C corp will qualify for Sec. 121 treatment or whether he will have to pay capital gains tax. This just might negate the tax benefit of the self-rental. | |
| 30 June 2007 | |
| Thank you Kevin, that's a good point.
Is everything that I mentioned correct though? | |
| 30 June 2007 | |
| If net self rental is positive, considered not passive. If net self rental is a loss it is considered passive. In other words, you can't offset other passive losses from net income from a self-rental. In this example, it would be positive. I don't see any other problems with your scenerio. | |
| 30 June 2007 | |
| Kevin, I think you mis-typed. If net self rental is income, recharacterized to not passive. If loss, then passive. | |
