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katie1234
New Member

14-day rental rule - single member s corp

Does anyone know if a single member LLC subchapter S-corp can legitimately rent their home to their business under the 14-day rule per 280A? This would be in lieu of the typical deductions associated with business use of home.

6 Replies
MMTaxMM
Level 10

14-day rental rule - single member s corp

So it's more clear.....you own the home and want to rent it to your LLC that you've made an S corp election for but the rental period is less than 15 days under the rule in Sec 280A(g)?

Doesn't look like there's a specific prohibition against that in that section but it definitely defies the spirit of the law which is for incidental residential use by other parties. Not only would this be for business use by your LLC but you also own the home and 100% of the business so might not be a good idea to try this maneuver.

katie1234
New Member

14-day rental rule - single member s corp

Thank you!

 

To answer your question, yes, I own the home and want to rent it to my LLC that I've made an S corp election for but the rental period is less than 15 days under the rule in Sec 280A(g).

 

I've read a number of articles that seem to indicate it's okay to rent your home to your own business, as long as you note the purpose of the rental (such as a meeting or other event); ensure you don't exceed a reasonable price based on what nearby venues charge; and issue yourself a 1099.

 

My only hesitation in doing this is because of my single shareholder status and if renting space for meetings for one person to meet is valid. Would this be flagged? Interestingly, though, even single shareholder S-Corps are required to hold shareholder meetings, which seems weird to me. But if that's a requirement, then can I justify renting meeting space to hold these meetings?

MMTaxMM
Level 10

14-day rental rule - single member s corp

The requirement to hold meetings......usually annual.....is a state law requirement and has nothing to do with the feds or taxes. 

The thing is here is that you can hold meetings at your home and have the S corp pay you rent......and not report it as income per 280A(g).......and you will probably NEVER be audited even if the IRS disagrees with it. I'm not even sure how it would be flagged unless you had your S corp send a 1099 to you as an individual for the rent amount. 

Anyway this is going from one pocket......your S corp's.....into what is pretty much the same pocket.......yours.....so I can't see where there's much to gain either way.

katie1234
New Member

14-day rental rule - single member s corp

Thanks for this, very helpful!

Perrinrw
New Member

14-day rental rule - single member s corp

Where do I do this exactly, Trying to find the correct location when doing my own personal LLC taxes via turbo tax

Mike9241
Level 15

14-day rental rule - single member s corp

this is from IRC 280A

(2)PERSONAL USE BY SHAREHOLDERS OF S CORPORATION
In the case of an S corporation, subparagraphs (A) and (B) of subsection (d)(2) shall be applied by substituting “any shareholder of the S corporation” for “the taxpayer” each place it appears.
(d)(2)PERSONAL USE OF UNITFor purposes of this section, the taxpayer shall be deemed to have used a dwelling unit for personal purposes for a day if, for any part of such day, the unit is used—
(A) for personal purposes by the taxpayer or any other person who has an interest in such unit, or by any member of the family (as defined in section 267(c)(4)) of the taxpayer or such other person;

 

further areas of the home that are used for both personal and business use are treated as personal-use areas. no portion can be considered business-use  - Anderson TC Memo 2006-33.

 

what this may imply is that even if the S-Corp pays fair rental to you, the S-Corp could be denied any deduction. as to the S-Corp issuing your a 1099, this may be required because you have a business paying rent to a non-corporate entity - yourself. 

 

 

 

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