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Anyone reporting self-rental activity on Sch. E?

 
 
robnyberg@sbcglobal.net
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      02-27-2005, 03:12 PM
This is a common tax-saving strategy: A long-line truck
driver is making payments on his tractor. He is leasing his
tractor to his own S corp. The S corp is paying the
operating/maintenance expenses. How does he report the
lease income/expenses for interest, taxes, and depreciation?

From previous discussion threads here, from the Sch. E
Instructions, from Ch. 16 of the NCPE 2004 Tax Update
Workshop, from Quickfinder (& similar references), it seems
to me the option is Sch. C vs. Other Income/Adj. to Income.
Seems like Sch. E is the wrong form to use.

But a CPA friend of mine tells me that he's used Sch. E to
report self-rental income/expenses, for 25+ years, with no
IRS "response" at all.

And p. 2-18 of the MSSP "Passive Activity Losses Reference
Guide" says: "Under Treas. Reg. section 1.469-2T(f)(6), if a
taxpayer rents real property or equipment to a trade or
business activity (whether in the form of a partnership,
S-Corporation, trust, etc.) net rental income from the
property is treated as nonpassive income. While it is still
reportable on Schedule E, it should not be entered on Form
8582 (thereby allowing pasive losses)." This MSSP goes on to
repeatedly refer to self-rental activity reported on Sch. E.
Seems like Sch. E is not the wrong form to use.

How are you all reporting these situation, please?

Thanks,
Rob Nyberg

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Harlan Lunsford
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      02-28-2005, 07:19 PM
(E-Mail Removed) wrote:

> This is a common tax-saving strategy: A long-line truck
> driver is making payments on his tractor. He is leasing his
> tractor to his own S corp. The S corp is paying the
> operating/maintenance expenses. How does he report the
> lease income/expenses for interest, taxes, and depreciation?
>
> From previous discussion threads here, from the Sch. E
> Instructions, from Ch. 16 of the NCPE 2004 Tax Update
> Workshop, from Quickfinder (& similar references), it seems
> to me the option is Sch. C vs. Other Income/Adj. to Income.
> Seems like Sch. E is the wrong form to use.
>
> But a CPA friend of mine tells me that he's used Sch. E to
> report self-rental income/expenses, for 25+ years, with no
> IRS "response" at all.
>
> And p. 2-18 of the MSSP "Passive Activity Losses Reference
> Guide" says: "Under Treas. Reg. section 1.469-2T(f)(6), if a
> taxpayer rents real property or equipment to a trade or
> business activity (whether in the form of a partnership,
> S-Corporation, trust, etc.) net rental income from the
> property is treated as nonpassive income. While it is still
> reportable on Schedule E, it should not be entered on Form
> 8582 (thereby allowing pasive losses)." This MSSP goes on to
> repeatedly refer to self-rental activity reported on Sch. E.
> Seems like Sch. E is not the wrong form to use.
>
> How are you all reporting these situation, please?


I've no client like this, nor would I advise any client to
do what your CPA friend advocates. Just because IRS has
never responded doesn't mean it's approved by default.

ChEAr$,
Harlan Lunsford, EA n LA

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Gene E. Utterback, EA
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      03-03-2005, 06:33 AM
<(E-Mail Removed)> wrote:

> This is a common tax-saving strategy: A long-line truck
> driver is making payments on his tractor. He is leasing his
> tractor to his own S corp. The S corp is paying the
> operating/maintenance expenses. How does he report the
> lease income/expenses for interest, taxes, and depreciation?
>
> From previous discussion threads here, from the Sch. E
> Instructions, from Ch. 16 of the NCPE 2004 Tax Update
> Workshop, from Quickfinder (& similar references), it seems
> to me the option is Sch. C vs. Other Income/Adj. to Income.
> Seems like Sch. E is the wrong form to use.
>
> But a CPA friend of mine tells me that he's used Sch. E to
> report self-rental income/expenses, for 25+ years, with no
> IRS "response" at all.
>
> And p. 2-18 of the MSSP "Passive Activity Losses Reference
> Guide" says: "Under Treas. Reg. section 1.469-2T(f)(6), if a
> taxpayer rents real property or equipment to a trade or
> business activity (whether in the form of a partnership,
> S-Corporation, trust, etc.) net rental income from the
> property is treated as nonpassive income. While it is still
> reportable on Schedule E, it should not be entered on Form
> 8582 (thereby allowing pasive losses)." This MSSP goes on to
> repeatedly refer to self-rental activity reported on Sch. E.
> Seems like Sch. E is not the wrong form to use.
>
> How are you all reporting these situation, please?


Schedule E is WRONG. This is other income, with expenses
going in the adjustments section. The IRS instructions for
Form 1040 discuss this as a non trade or business of rental
of personal property to a related party/entity.

I don't see too much of this anymore, but used to see it
(and do it) quite a bit.

Gene E. Utterback, EA

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robnyberg@sbcglobal.net
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      03-03-2005, 07:30 AM
I sincerely desire to learn how tax practitioner's are
reporting self-rental activity. I know it's the busy
season. Please reply to me directly if you prefer. I'll
even phone you. I need some answers.

Yes, Harlan, the absence of disapproval is not the presence
of approval. <g> So I hypothecate, arguendo, that a new
client comes through you door today, and that's how she did
it last year? How are you going to do it this year? What
do you explain to her to justify doing it your way and not
the prior way?

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Harlan Lunsford
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      03-07-2005, 08:34 AM
(E-Mail Removed) wrote:

> I sincerely desire to learn how tax practitioner's are
> reporting self-rental activity. I know it's the busy
> season. Please reply to me directly if you prefer. I'll
> even phone you. I need some answers.
>
> Yes, Harlan, the absence of disapproval is not the presence
> of approval. <g> So I hypothecate, arguendo, that a new
> client comes through you door today, and that's how she did
> it last year? How are you going to do it this year? What
> do you explain to her to justify doing it your way and not
> the prior way?


Before I forget it, just want to say I like that word
"arguendo". Is it Spanish?

How am I going to do it this year? The right way, of
course. How do I explain it to her? Simply that it's the
law, and offer to look up a cite for her if needed. And if
she's adamant.. ademint,... a... damn it. about doing it the
"old" way, well, we just have to part company.

ChEAr$,
Harlan Lunsford, EA n LA

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robnyberg@sbcglobal.net
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      03-09-2005, 10:39 PM
Moderator allowing, we'll close this topic by straying away....

No, "arguendo" is Latin. I first heard the word on "Law &
Order" and I liked it so much that I looked it up w/Google,
viz.:

"prep. Latin meaning "for the sake of argument," and is used
by attorneys to make a legal argument without admitting
anything. For example: "assuming arguendo" that the court
decides in our client's favor, the defendant was negligent,
the plaintiff was so contributorily negligent that he cannot
recover damages."

BTW: I found an old post by Helen O'Planick (sp?), who used
a 2106 to report self-rental activity. That makes 4 ways;
they all work.

Thanks to Gene Utterback and to you, Harlan, for your
comments. Anyone want to talk more? Email me:
(E-Mail Removed)

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Katie
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      03-12-2005, 02:19 PM
Harlan Lunsford wrote:
> (E-Mail Removed) wrote:


>> I sincerely desire to learn how tax practitioner's are
>> reporting self-rental activity. I know it's the busy
>> season. Please reply to me directly if you prefer. I'll
>> even phone you. I need some answers.
>>
>> Yes, Harlan, the absence of disapproval is not the presence
>> of approval. <g> So I hypothecate, arguendo, that a new
>> client comes through you door today, and that's how she did
>> it last year? How are you going to do it this year? What
>> do you explain to her to justify doing it your way and not
>> the prior way?


> Before I forget it, just want to say I like that word
> "arguendo". Is it Spanish?


No. Latin. Meaning "for the sake of the argument." A
common bit of legalese <G>.

Katie

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Stuart A. Bronstein
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      03-14-2005, 12:15 AM
"Katie" <(E-Mail Removed)> wrote:
> Harlan Lunsford wrote:
>> (E-Mail Removed) wrote:


>>> Yes, Harlan, the absence of disapproval is not the presence
>>> of approval. <g> So I hypothecate, arguendo, that a new
>>> client comes through you door today, and that's how she did
>>> it last year? How are you going to do it this year? What
>>> do you explain to her to justify doing it your way and not
>>> the prior way?


>> Before I forget it, just want to say I like that word
>> "arguendo". Is it Spanish?


> No. Latin. Meaning "for the sake of the argument." A
> common bit of legalese <G>.


And hypothecate does not mean "pose a hypothesis." It is
also from Latin and means to pledge (as in to mortgage)
property.

Stu

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Katie
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      03-17-2005, 06:51 AM
Stuart A. Bronstein wrote:
> "Katie" <(E-Mail Removed)> wrote:
>> Harlan Lunsford wrote:
>>> (E-Mail Removed) wrote:


>>>> Yes, Harlan, the absence of disapproval is not the presence
>>>> of approval. <g> So I hypothecate, arguendo, that a new
>>>> client comes through you door today, and that's how she did
>>>> it last year? How are you going to do it this year? What
>>>> do you explain to her to justify doing it your way and not
>>>> the prior way?


>>> Before I forget it, just want to say I like that word
>>> "arguendo". Is it Spanish?


>> No. Latin. Meaning "for the sake of the argument." A
>> common bit of legalese <G>.


> And hypothecate does not mean "pose a hypothesis." It is
> also from Latin and means to pledge (as in to mortgage)
> property.


So true! How did I miss that?? I thought I was the
resident stickler here <G>.

Although "hypothecate" does come from a Latin root, the
Latin word (meaning to pledge or mortgage) actually derives
from the same Greek root as "hypothesis." Hypothesis and
hypothecate both come from the Greek root, "hypotithenai,"
meaning to place under, from "hypo," under, and "tithenai,"
to place.

The right word would be "hypothesize": to assume or suppose.

Katie

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