I have a client who bought a property that was supposed to be a fix and flip in her S-Corporation (she owns the corp with her husband). The flip fell through and they decided to move into the property and live there as their primary home. The S-Corporation is now renting the property (at FMV) to her and her husband. There were a bunch of rental losses generated on Form 8825 and I wasn’t sure if the losses can be used on the personal return (i.e. passing through on the K-1) or if the self rental rule kicks in here or 280A? Wife is a real estate professional so there is no concern over the limits for passive activities. I tried to research but cannot find an answer here. I know we may have issues with 280A but cannot find a definitely answer. I will post to general tax too.
USA S-Corporation owns home and rents to shareholder
- Thread starter sflonglaw
- Start date
Self rental does come into play, but her being a real estate agent should negate that. But I have one question for you. Who is providing these people with guidance? S-corp holding real estate; crazy man crazy. The owners living in and renting that real estate, super duper crazy.
It actually wasn't crazy for her to put the fix and flip into her S-Corp. She bought the property in the S-Corp thinking she would flip it, so this made sense. Only rentals should not go into an S-Corp. The issue is she decided to move into the property as her personal home and now I do not know what to do with it. Is it a rental, is it under the vacation home rules, etc.? Again, she is paying fair market rent to the S-Corp.
It is self rental. Irrespective of why you put real estate into an S Corp, the longer it stays there, the bigger the problem will get.
If it is an LLC or other non-corp entity electing to be taxed as a corp, you might want to remove that election if the real estate is to remain in the entity.
If it is an LLC or other non-corp entity electing to be taxed as a corp, you might want to remove that election if the real estate is to remain in the entity.
Hi, thanks, but this still doesn't help me decide what to do with this going back in time. Sure, maybe we can do some restructuring going forward, but it doesn't help me for the 2017 taxes, etc. I have to decide what to do with it. I will reach out to my prior tax professor (LLM program) to get more guidance. I literally have posted on multiple forum boards, did about 12 hours of my own research, and none of us can come up with an answer. This is a tough one.