Home office subs corp

[Lloyd Hudson]

I am sure this is addressed somewhere but I am not smart enough to figure it out.

New client is in sub S. She draws a salary correctly reported on W-2. the "corp" accountant also issued her a 1099-misc for "rent" Rent is for her office equipment used at home. She actually does work from home, they do medical transcriptions. K-1 is clean. Question is how do I report the home office rent??

Sched E personal rental?

[OldJack]

Question is how do I report the home office rent??

Sched E personal rental?

Yes, 1040 Sch-E income, no deduction allowed for the office in the home expense.

[Lloyd Hudson]

Yes, 1040 Sch-E income, no deduction allowed for the office in the home expense.

Thanks I knew that just could not get it together, LOL

[JohnH]

I wonder hy the accountant issued the 1099.

Seems to me the shareholder should just submit a reimbursement request under an accountable plan and write a check to herself.

No further reporting necessary.

[RoyDaleOne]

The rent as stated was for office equipment not an office in home.

You can take depreciation on the equipment if the shareholder has any basis.

Maybe she is doing rent to own.

[JohnH]

Isn't equipment rentall a Schedule C item (rather than Schedule E)?

Still seems to be the accountable plan solves all the problems.

[michaelmars]

sounds like she is being charged for personal use of office equip kept at home - very stupid, and petty

[OldJack]

The rent as stated was for office equipment not an office in home.

You can take depreciation on the equipment if the shareholder has any basis.

Yes.. Sorry...I misread the original post. I would say it should be Sch-C with profit subject to SE tax. Well.. some would say she was not in the business of renting equipment and therefore it would be 1040, line 21 not subject to SE tax. I don't agree with line 21 myself as the taxpayer enters into the rental in a business manor with their own business, otherwise the S-corp payment could be considered taxable as salary subject to payroll taxes.

[taxtrio]

Taxbook 2007 Deluxe Edition

Page 19-12

Misc S-corp issues.

This page addresses the Shareholders use of Home question.

Basically-- shareholder is allowed to deduct expenses for business use of the home assuming the shareholder receives reasonable wages for services rendered. Such expenses are dedcuted as employee business expenses on Sch A sub to 2% of AGI limitation.

Exception for rental: A taxpayer is not allowed to deduct expenses for business use of the home attributable to rent paid by the employer if the employee is providing services. The employer is allowed a deduction for rent paid, but the employee is not allowed a deduction for business use of the home (IRC 280A©(6)

There is also a court case sited on this page where the tax court allowed a shareholder vehicle and office in home expenses because the corporation had adopted a resolution requiring the taxpayer to incur expenses as may be necessary or required and that they would not be reimbursed by the corporation. The resolution also required the taxpayer to supply office space and his own vehicle for his business services which would not be reimbursed by

corp. The court ruled these expenses were deductible as employee business expenses subject to 2% on Sch A.

Well, that's according to taxbook 2007. Hope you can find something useful in there.