Discussion:Conversion of personal residence to senior homecare
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Discussion Forum Index --> Advanced Tax Questions --> Conversion of personal residence to senior homecare
Discussion Forum Index --> Tax Questions --> Conversion of personal residence to senior homecare
| 9 March 2009 | |
| I have a brand new client that formed a corporation in 2008 as an adult home care facility. So here is the kicker, she converted her personal residence into the senior home facility to the tune of over 80K. So they plan on living in part of the home and the rest that was converted will be for the seniors residing there. She will provide them with 24-hour care, meals, etc. So my question is since the business is a corporation and the house is her personal residence what do I do? Can the corporation rent part of her home? What about all of the money that was used to convert the house with ramps, ADA requirements, remodeling expenses? I tried searching and could not find anything that fit this particular situation. I'm at a loss on this one, any help would be greatly appreciated. | |
| 9 March 2009 | |
| Although this won't answer all of your questions, take a look at Adult Home Care Facility Deductions - and note that while the top part of the discussion is from 2007, if you jump down to the question from LisaC you'll be looking at something from last week; you might want to start with the newer stuff first. | |
| 9 March 2009 | |
| Your problem is that the client created a corporation...if a return has not been filed with the corporation you might suggest that she undo the corporation. Most people that run care homes, in my experience, form a single person LLC for liability purposes and file a Sch C. taxea | |
Death&Taxes (talk|edits) said: | 9 March 2009 |
| Then there is the question of whether they live there for the convenience of their employer | |
| 9 March 2009 | |
| Taxea, why is there a problem with a corporation in this situation? | |
| 9 March 2009 | |
| Thank you Taxea. This is the first year she will be filing. She does not have any clients yet but all of the remodel was done in 2008. I think forming an LLC would certainly uncomplicate things and give them the added liability. They have already filed their personal return so hopefully they'll be receptive to this. But . . . how do I treat all of the remodel expenses? They were all paid for out of her personal account as the facility is still in the process of getting final permits. The house is their personal residence, remodel was done for the corporation. | |
| 9 March 2009 | |
| Loan from owner for any out of pocket expenses (capital into business) should always be recorded so the owner can pay back the loan when the business is making money. The owner needs to create a promissory note from the business for the total amount of principal, and include interest to be paid. The payments are recorded on the Sch C as an expense. The interest paid is Sch B on the 1040 interest on loan (not interest income on the Sch C. This is not "owner draw".
Improvements to the home to facilitate the business would be either added to the basis prior to business opening or depreciated separately on the Sch C. I would depreciate it separately because it is 100% business and adding it to the residence basis would allocate out a part of the expense. taxea | |
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