Discussion:S Corp stock holder has office at home
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Discussion Forum Index --> Basic Tax Questions --> S Corp stock holder has office at home
Discussion Forum Index --> Tax Questions --> S Corp stock holder has office at home
| 30 January 2008 | |
| I have a client is a 51% stockholder of an S Corp. S corp has no office since he is the "owner" his wife is the 49% owner. He wants to deduct his office @ home since that is where all the work is done "corporation office". How can he deduct the capital improvements and the expenses as a corporat expense
Neil | |
| 30 January 2008 | |
| lots of discussions on this very topic in the search, Neil | |
| 30 January 2008 | |
| but let's discuss the implications of the corporation owning 'leasehold improvements' in the shareholder's home.
What will happen with the 121 exclusion? Will there be a taxable sale for the corporation's 'investment' when the home is sold? Will the taxpayer have to bifurcate the sale? How much is that depreciation really worth? Remember, the use is non-residential. | |
| January 30, 2008 | |
| And at best, it's an employee expense taken on Sch A, subject to the 2% haircut. And 'office in home" going to a Sch A seems to raise a few audit eyebrows based on my limited experience.
(irsfxr - comments?) | |
| 30 January 2008 | |
| Have a corporate policy for reimbursed employee expenses - Capital Improvements go to basis. Use OIH form 8829 as guidance. | |
| 30 January 2008 | |
| What about having the corporation pay rent to the shareholder for the use of the office? The shareholder would in turn file a Sch E where he can claim the expenses. I too would not recommend the depreciation, but the portion of utilities, interest, etc for the office space "exclusively used" for the business could be deducted here. | |
Death&Taxes (talk|edits) said: | 30 January 2008 |
| Sec. 280A(c)(6) | |
| January 30, 2008 | |
| KJean - do a search on "allowed" vs "allowable" depreciation. Not recommending depreciation on a property where depreciation is appropriate isn't an option. The taxpayer still gets dinged for it when property is sold. | |
| 31 January 2008 | |
My interpretation of Sec 280A(c)(6) is supplemented by TA (IRS Technical Assistance) 200121070 which states that if the S Corporation pays the sole shareholder rental income for the use of the portion of home used as an office for the employee/shareholder, the S Corporation may deduct the payment and:
1-The employee/shareholder must report the income on Schedule E. 2-Per IRS they may only deduct mortgage interest, real estate taxes and casualty losses and nothing else. | |
| 31 January 2008 | |
| I would agree with that. The employee would be able to take home office deductions for mortgage interest, real estate taxes. Any other home office expenses would be taken on schedule A as a misc itemized deduction | |
Death&Taxes (talk|edits) said: | 31 January 2008 |
| I must have missed that part of 280A where the utilities come in. Where is JR to tell you'all about the accountable plan method. | |
| 31 January 2008 | |
| I agree with Mike315 that the remaining expenses, utilities etc., would need to be taken on Sched A. The post above where I stated taking utilities on Sch E was in error. I was pulling this off the top of my head, but upon looking it up, I was reminded that you could only take interest & taxes. | |
Death&Taxes (talk|edits) said: | 31 January 2008 |
| As Kevin tried to say above, this has been discussed before: Discussion: S Corp Home/Office Expenses
Discussion: Home Office for S-Corp Discussion: Office in Home Deduction for S Corp Employee Discussion: S-Corp 100% Owner and Home Office Deduction Discussion: S--corp office in home Discussion: Business Use of Home - S Corporation There are over 100 points raised in these discussions, some are repetitive but I would pay close attention to those of JDugan. | |
| 31 January 2008 | |
| Thanks for those links. Frankly, I don't have time to search through each and every thread and read 3 years worth of posts to see if my specific question can be answered before I post a question for discussion. I appreciate the knowledge that everyone has on the boards and thanks for helping out when needed! | |
| 31 January 2008 | |
| OK, toned down version: Kelly, what makes your time more valuable than all of ours? | |
Death&Taxes (talk|edits) said: | 31 January 2008 |
| Good point, Kevin, because I read through 75% of those threads and can find about twenty different opinions. I came across Riley agreeing about Sch A for the utilities and I found others of the opposite opinion. | |
| 31 January 2008 | |
| I believe you took that the wrong way Kevinh5. I'm not saying my time is more valuable. I just take offense when a question is asked by someone new to the forum and they are treated like they are inconveniencing everyone else. You scare people away from responding or asking questions when they are scolded for asking something that you have already read. Sorry about the confusion. | |
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