I am a musician and was a sole prop through 2019. As of 2020 I am a single shareholder/owner S-Corp. I rent a commercial music studio but also remodeled my home garage in 2019-2020 to be a home studio for my business as well. This was significant construction, $100,000, spread evenly across the two years (50k/50k) and the space is used only for business. I paid for the construction directly from the business account -- half in 2019 and half in 2020. So this construction and payments stretched across my being a sole prop AND s-corp. In 2019 as a sole prop my CPA accounted for this as a fixed asset "home studio" which we deducted the full amount of. In 2020 now an s-corp, the remaining $50k I paid on finishing the construction was similarly paid from my corporate bank account and my CPA recorded it as "improvements" as a fixed asset. As an S-Corp now, Is this 2020 accounting incorrect? if so what is the correct way to account for this expense? i'm reading about an accountable plan for s-corp where the corp reimburses the employee for home office expenses, but that doesn't seem quite right here--firstly I did not pay for this construction out of a personal account--it was paid by the corp account--and secondly I'm under the impression that the accountable plan home office is for things like mortgage, utilities etc for the main house which you pay personally (not corp) and can deduct a percent of for the home office use. So that seems different than what I did which was build a music studio 100% for my business, but it does happen to be part of my home which I own personally (not the corp).
Thanks for your input!
