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Discussion Forum Index --> Advanced Tax Questions --> S corp, self rental, no basis and losses
Discussion Forum Index --> Tax Questions --> S corp, self rental, no basis and losses
LJACPA (talk|edits) said:
| 7 May 2009
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| For years client has operated an S corp that perpetually has losses. Although SH loan is significant and most of the losses have been allowed, it's likely that this business will not show a profit anytime in the near future, if ever. This S corp - 100% owned by H - rents office space, which is owned by the H/W. The rent is ~FMV but there was a small, suspended loss in 2007 and may also be in 2008. Because of the losses in the S corp, part of which is created by the rent expense, he may not have enough basis to deduct on 1040. It seems ridiculous to increase the S corp losses, not be able to deduct (now or ever) and also have losses on the self-rental on 1040, which are not deductible. I'd like to have him stop paying rent from the S corp to him, deduct the mortgage interest, as investment interest, and property taxes on Sch A. There must be a reason for not doing this, if someone would please help with this. Thank you.
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Waynecpa (talk|edits) said:
| 7 May 2009
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| Why not reclassify the rent payments to the loan instead? It seems to me that this would decrease the loss and you may have capital gain income from the loan repayment (if you deducted losses against it).
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Riley2 (talk|edits) said:
| 7 May 2009
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| The rental losses would be 100% deductible if the ownership percentages in the rental property were identical to the ownership percentages in the S corporation.
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