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@ShoeBox Taxes wrote:

Honestly, it still sounds to me like you're saying they won't be paying taxes on the benefit they're receiving.

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What "benefit" are you referring to?  The office expense?  Or the fact the business is paying for personal expenses?

If you are referring to an Accountable Plan for the office expense, there isn't really a "benefit".  The taxpayer receives the Accountable Reimbursement that is tax-free and not reportable.  But it is a business expense that they paid, so there is no "benefit".

In the scenario, the taxpayer claims no income from reimbursement.  The business reports the deduction, which flows to the K-1 and office expense ends up reducing taxpayer's income.  Net result:  No reportable income but gets a deduction.

Compare that to a Sole Proprietor.  Taxpayer pays for office expense.  They don't add anything to their income because of the office expense.  They get deduction on 8829.  Net result:  No reportable income, but gets a deduction.