topic Real estate purchase in Investors & landlords

Real estate purchase

Blue Gaucho — Tue, 03 Nov 2020 18:50:38 GMT

Hello -

In February 2019 I purchased a manufactured home. I paid for it in full with money from an inherited IRA. It is a fixer upper and I have been doing the improvements myself and have been using it as a production studio/office space at the same time.

Question? - On my tax return should I consider the property as a rental or office space/production studio?

Thank you,

Breck Philip

Re: Real estate purchase

Critter-3 — Tue, 03 Nov 2020 19:49:32 GMT

have been using it as a production studio/office space at the same time.

Is the entire house being used for the business or are you living in part ? Is the business use for a Sch C or corporation or are you an employee ?

Re: Real estate purchase

Carl — Tue, 03 Nov 2020 23:59:29 GMT

Was or is this home your primary residence since you purchased it?

Did this purchase also include land of which the house still resides on? Or was it relocated to land you already own? Maybe it was relocated to land you don't own?

Have you been using the entire house for your business? Or only a percentage of the house?

What type of business? Sole proprietorship? Single member LLC? Multi-member LLC? S-Corp? C-Corp? Joint Venture? Something else?

should I consider the property as a rental or office space/production studio?

That depends. Have you been making income by renting it out to a third party? Maybe you rent it out to a business you own and you can prove that business actually paid rent to you personally or to some other entity that you have a personal and direct financial interest in? Things get more complicated when a business you own or have an ownership interest in, rents from you personally, or from some other business entity that you have a direct financial interest in.

Re: Real estate purchase

Blue Gaucho — Wed, 04 Nov 2020 22:17:44 GMT

Was or is this home your primary residence since you purchased it? No.

Did this purchase also include land of which the house still resides on? Or was it relocated to land you already own? Maybe it was relocated to land you don't own? Purchase included the land.

Have you been using the entire house for your business? Yes.Or only a percentage of the house? 100%

What type of business? Sole proprietorship? Single member LLC? Multi-member LLC? S-Corp? C-Corp? Joint Venture? Something else? S Corp

should I consider the property as a rental or office space/production studio?

That depends. Have you been making income by renting it out to a third party? No. Maybe you rent it out to a business you own and you can prove that business actually paid rent to you personally or to some other entity that you have a personal and direct financial interest in? Things get more complicated when a business you own or have an ownership interest in, rents from you personally, or from some other business entity that you have a direct financial interest in. Interesting point!

Re: Real estate purchase

Blue Gaucho — Wed, 04 Nov 2020 22:22:11 GMT

Is the entire house being used for the business or are you living in part ? Yes Is the business use for a Sch C or corporation or are you an employee ? S Corp. Owner.

Re: Real estate purchase

Critter-3 — Wed, 04 Nov 2020 22:39:04 GMT

Ok ... for the big question ... WHO owns the home ... you or the corp ?

And are you paying yourself wages as an employee and filing the proper payroll tax forms timely ?

If you are new to being a corporation then I highly recommend you seek local professional assistance to get educated on all your filing requirements for both fed & state as well as learning the ins and outs of possibly renting to the business and reimbursement plans for employees.

Re: Real estate purchase

Carl — Wed, 04 Nov 2020 23:13:16 GMT

Since your business is an S-Corp, I'm going to bow out here and let you continue with Critter. Things get really tricky here with your situation and I'm just not as knowledgeable about your situation with an S-Corp as Critter is. Overall though, I would suggest you seek professional help. While I have all the confidence in the world with Critter, one little teeny tiny misunderstanding or misinterpretation by either one of you has the potential of costing you dearly. So in my view, face-to-face professional help is in your best interest for at least your first year of dealing with this situation.