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Old 09-01-2011, 11:02 AM
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Join Date: Sep 2011
Location: Phoenix, AZ
Posts: 1
Renting personally owned property to business

I need advice from someone creative! My clients own 2 properties outright. These use these buildings in their business, but the buildings are titled to them personally. New clients for 2010 so rather late to change the books here. They paid themselves rent during the year from the C-Corp business, yet the buildings are on the Corporation's balance sheet and being depreciated. The rent expense is critical as a deduction for the corporation to minimize their taxes. If I remove the assets and do a Sch E on the clients' personal returns, there are no mortgage interest payments to offset the income and the property taxes were paid by the business. The only offset they would have is depreciation which is minimal, unless I don't have to take the 27 1/2 yr life??? Not to mention that the Corporation did not 1099 them for the rent. I tried doing an 1120-S instead of the 1120, hoping if I brought all income and expenses over to the 1040 it would help, but its actually worse. Now I'm looking at carryback financing....I'm not sure an installment purchase would work. And I think I've worked on this too long and thought about it too much, I can't come up with a scenario in which the company can deduct the "rent" paid as an expense (installment or carryback it would go to the asset purchase on bal sheet and not reduce income) and nothing to offset the (unreported) payment or rent on the owners' returns. Please help!

Last edited by hometaxprep : 09-01-2011 at 11:04 AM.

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