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S Corp ownership of personal residence.

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Level 2

Taxpayer purchases home in a corporate name. 

Corporation is an S corp.

S Corp pays all interest, real estate taxes, etc for the property. 

How does the interest, real estate taxes get to the taxpayers return?

NEIL ROTH
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8 Replies 8
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Level 12

It doesn't?

There is no reason to put a personal residence into a corporation.  And if it was done, it is not a business and I don't see why those should be passed on the to taxpayer.

But *IF* they are allowed, they would be passed through via the K-1.  The corporation DID file a tax return, right?  If not, there are high penalties for late filing.

I think the taxpayer needs to bring this mess to the crazy lawyer that talked him into this.

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Level 12

"How does the interest, real estate taxes get to the taxpayers return?"

Well, it seems your taxpayer, an employee of the corporation, has Taxable Fringe Benefit for the Fair Market Value of the employer-provided housing, which is supposed to run through Payroll. Then, it is part of the taxpayer's 1040, because it is part of the W2.

Isn't that what you are asking?

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"Level Up" is a gaming function, not a real life function.
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Level 2

No! The taxpayer purchased the house in an S corp to protect it from creditor attacks.  The real estate taxes and interest are being paid by the S corp. Would like them to be on the 1040. Save having the taxpayer make the payments directly, Is there any way this can be done?

NEIL ROTH
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Level 15

Since they are not business or investment expenses, they could be treated as nondedcutible expenses. Then maybe shareholder could deduct them. 

Where does S Corp get money to pay the expenses?

Seems like an SMLLC would have been a better idea.


ex-AllStar
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Level 12

See the last two paragraphs of my first answer.

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Level 12

"Save having the taxpayer make the payments directly, Is there any way this can be done?"

Your client cannot pay personally for something they don't own. That would prove the point that the property isn't really the corporation's, so that would be "piercing the corporate veil." An argument can be made that this person already did that type of shenanigan. Is the property insurance and the mortgage and the deed all in the name of the corporation, and is this person not also on the hook as personally guaranteed? And does this person have tenant insurance, because they are living in a property they don't own. If you intend to try these tricks, at least do them right.

Again, your Client is benefiting, so that makes it Taxable Fringe income to the person, assuming this person lives in that house. Taxable through the W2 as payroll. Did this get done? Is this person the only shareholder?

You cannot try to hide all of this in a corporation, expect the corporation to pay the costs, and also live in it personally. Then, you cannot get to use it For Free, and you cannot get it as a Tax Write Off for personal taxes.

You seem to feel this person has the right to triple dip the tax rules.

Everyone here is telling you that nothing in this arrangement makes sense.

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"Level Up" is a gaming function, not a real life function.
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Level 2
 
NEIL ROTH
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Level 15

and why is client subject to creditor attacks? Or did he attend some seminar?


ex-AllStar
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