Tax treatment of Office Bldng Purchase

Yes. Schedule E (for at least the 3/4 that you rent). As for the 1/4th to your S-Corp, treatment may vary according to the details - Schedule E or Schedule A.

Same as above.

All four rentals appear on schedule e in this case. Just be sure your corporation has a written lease from you, the landlord, to the corporation and a fair market value is paid.

The answer to which I'm responding doesn't apply as to the 1/4 because this is not a home office situation. That's the case when an S corporation rents a portion of one's home.

ChEAr$, Harlan Lunsford, EA n LA

But until we know that the Scorp's rent is at FRV, we can't say that it's a transaction for profit, and therefore cannot rule out Schedule A treatment (per IRC 183). That's (one reason) why I left the Schedule A treatment possibility open. Two entities controlled by the same person make them related and thus profit motive is always suspect.

Interesting that you kept us in the dark as to your thinking.

"Gil Faver" >> corporation rents a portion of one's home.

So, I considered something that you didn't think of. The reason I have to justify any comment that constitutes free advice is what? Don't worry - I "turn the lights out" on the IRS too.

========================================= MODERATOR'S COMMENT: OK -- enough sniping. You each got your shot in. Tax related messages only, please.

FRV is definitely a factor with residential rentals, the majority of cases with which we come in contact. But commercial property FRV is so much harder to determine unless we know the facts, so you're right on that point.

if it's retail space and adaptable to any number of business uses, it's easier to assess FRV. However with a building with four service bays and lift equipment installed with oil pits, you get the picture. The

Also I would add that FRV might be influenced by the corporations' ability to pay, given marginally profitable operations in business conditions like we have today. A lower monthly rental could easily be justified as FRV today than a year ago. Again, F & C!

ChEAr$, Harlan Lunsford, EA n LA

text -

Thanks to all who have replied. I read your replies soon after the thread got going, and it gave me a LOT to do. I was hoping to reply with some "intelligent follow-up questions", but I don't have any yet. So, rather than let too much more time go by, I'd justlike to express my gratitude for all who took the time to respond.

Let's say you treat the building and the business as two separate entities. The business pays rent to the building. Does the building and the business have to have separate bank accounts, with rent money being physically transfered, or can the rent simply be an accounting entry. If money is physically transfered to the building, can the building loan it back to the business without interest?

In OP's case the business is owned by his wholly owned corporation, and the building is owned by him personally. In that case he needs to have separate bank accounts, and make actual rent payments. This is true not only for tax purposes, but for other legal purposes in case he ever wants to get the legal benefits of having a corporation in the first place.

As to non-incorporated businesses, it's a good idea to keep them separate, too. But it often won't make any difference if you do or not from a tax standpoint.

Stu

Hi Stu and everone: I am the OP..

Yes, Stu, what you wrote above is all correct. I do keep the S-Corp business (that occupies 1 office) separate from the owner ship of the building (owned by me as an individual). And I do have separate bank accounts.

My Schedule E is almost done. Soon, I'll take all my documentation to a CPA to be completed for my 2007 Corp Income Tax. ...(and my 2008 record-keeping is in very good shape now...)

But, as I said in my last post, I was hoping to think of an intelligent question. I am trying to catch up and get on track. (note: I intend to be fully compliant with the IRS and have intention of avoiding any taxes).

I do have an important question, but I'm afraid it may not be a very intelligent one ....it has to do with payments by the Corp for the individual account (me as the owner) for rental cost of the office.

I moved in in Jan 2007, but have never made any rental payments by the Corp to myself as the building owner.

For the 2007 Tax Year, should I write a check from the Corp to me, for the full FRV for the entire annual rental cost? I realize that the expense would be incurred in 2008. Can I deduct it for my 2007 taxes? Am I too late?

I do realize this is now nearly the end of 2008. Can I still do that for 2007, and claim it as an expense on my 2007 taxes?

Thank you in advance.

There is often at least one advantage to paying rent to yourself in a case like this. Most income you receive for working for your corporation is subject to self employment tax. Rent payments by the corporation to you generally are not.

Unfortunately I don't know the answer to your question. Normally you can't pay in one year and deduct it in another. One of those here who actually prepares returns will be along soon to give you a better answer.

Stu