I am a shareholder in a SubS that pays me income and rents a storage building on my property. ten years ago the business was in rapid decline and the shareholders mutually agreed to sell our office building and retain a small warehouse to ship from. I stayed with the company, and it was agreed i would set up an office in my summer home to conduct the business as well as provide additonal storage in an outbuilding on my property to assist in the downsizing. This was not my principal residence. This was a condition of employment.
In 2022 my wife and I sold our principal residence and moved to the summer home. At the same time the company, which also paid me a salary offered to begin rental payments on the rented outbuilding. I also moved the home office into that building so all the company business was in one place. The rental paid on close or below market rate.
I now want to be able to deduct the expenses of the outbuilding that I rent. That will help reduce the effect of the rental income. Since this arrangement is a condition of employment, are my rental expenses deductible?
I can't think of why the expenses would not be deductible. As long as the company is paying Fair Market Value, then you should be good.
The 'condition of employment' does not pertain to this situation. You are receiving rent, not having employee expenses.
I think you are subject to the Self-Rental rules, but in my opinion that isn't a big deal.