Living/work space accounting

[joanmcq]

I have a new s-corp client for whom I'm setting up the books. They have just rented a live/work space part of which will be their personal residence, part of which will be used in the business as a classroom & studio. I believe the space was rented personally, not by the corp, but I'll have to check on it. I was thinking, if not rented by the corp, the best way to deal with the expenses will be an accountable plan.

Does anyone here have experience with live/work spaces that could give me some pointers? This type of arrangement is becoming more popular here, and it's likely this will not be my only client with this issue.

[Gail in Virginia]

I believe, since the business is an S-Corp, they could actually pay rent to the individual for the portion of the space used by the S Corp. Of course, appropriate documentation should be maintained, such as a lease, and a 1099MISC for the rent at the end of the year.

[Lynn EA USTCP in Louisiana]

I'd use the info on the 8829 (Office in Home Expenses for Schedule C) as a worksheet/template for the accountable plan.

Lynn

[joanmcq]

Good point Lynn! The corp can't rent from the individuals under the self-rental rules. This is one of those 'dream clients'. Not only because they want to set up everything right from the start and understand what running a corp entails, but are in the position to do a lot of referrals!