Q:

Subject: home rental by my own business

For years I have leased the garage portion of my personal home to my partnership for the purpose of storage.  The garage is approx. 25 percent of the total square footage.

I have taken 25 percent of my mortgage payments and utilities as business deductions.

Now I would like to know if it is  legal to lease my entire home to my business, and then sublease it back from my business, so that my business can deduct the usual deductions for for rental property?

The home is presently titled in my name.  I am hoping that I do not have to get a new title for the house, in the businesses name, to do this.

If yes, are there any federal taxes at the sale of the property?

Could you please email the answer in case I can’t find it on your web site.

Thank you very much.

A:

There are ways to do this, most often by transferring the home to a corp.

You should really give this plan some deep thought, along with some in depth consultations with your personal professional tax advisor.  Most of the people I have seen do this later regret it when they discover that the home no longer qualifies for the Section 121 tax free exclusion of up to $500,000 of profit.  That exclusion is not available for rental property or for property owned by anyone other than an individual.  More often than not, that tax free gain more than offsets the “lost deductions” from not being able to claim the home as full rental.

Good luck.

Kerry Kerstetter

 

Q:

Subject: C Corporation

 

Hi Kerry,

 

Thank you for the excellent advice.  I’ve met with at least 30 attorneys and CPAs to discuss setting up a corporation.  Most tell me to start an S corp..and some an LLC…none of them understand the benefits of the C corp.  Is there an an Accountant you recommend to people who write you?  I would love to work with someone who just know what they are talking about!

 

Thanks for your help.

A:

C corps aren’t always the proper approach; but it is amazing how many tax pros don’t even properly consider how they can be of use.

You will need to work directly with an experienced tax pro who can analyze your unique circumstances.

Unfortunately, we don’t have anyone to whom we could refer you. If you haven’t already done so, you should check out my tips on how to select the right tax preparer for you.

I’m sorry I couldn’t be more help.

Good luck.

Kerry Kerstetter