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jgordosea
jgordosea, Enrolled Agent
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Experience:  I've prepared all types of taxes since 1987.
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I am sole owner of a 9 year old S-corp. For the past 9 years

Resolved Question:

I am sole owner of a 9 year old S-corp. For the past 9 years I have been renting space in a commercial building and am now in the process of building a structure on my personal property that will house the business. I have saved money through the business to help fund this project. My question is, can I write checks from the business account for the expenses associated with building this structure or do I have to pay myself the money and then pay for the project from personal funds? The money saved has already been taxed in 2009 and is currently in a business account.
Submitted: 4 years ago.
Category: Tax
Expert:  jgordosea replied 4 years ago.

Greetings,

 

Whether the corporation directly pays the expenses or a check is made to you and then you make another check for the expenses does not matter and does not change the result.

Since these are personal expenses when the corporation pays it will be recorded as an amount that you either owe back to the corporation or that has been withdrawn by you from the corporation. Again, either way can be used and this decision is often made at the end of the year so the best choice can be made.

 

What is vital is that these expenses are tracked and recorded properly so that it is not treated as a tax deduction of the corporation; but rather a payment to shareholder.

 

I hope is helps to know that you can use either method so long as you correctly record the transactions as having been paid for a shareholder and not a corporate expense.

 

Please ask if you need clarification.

Thank you.

Customer: replied 4 years ago.
Ok, that makes sense. Can you tell me why it is classified as a personal expense and not a business expense since the purpose of this construction is to relocate my business?
Expert:  jgordosea replied 4 years ago.

Hello again,

 

From the facts you described the owner of the property is you, personally.

Since you own the property the expenses are yours and you will personally benefit by owning the structure.

 

Presumably you will be renting this structure to your company. In some cases a lessor can pay for improvements; but that is not the case you described.

 

The expenses to improve (unless otherwise contracted) are the owner's expenses; so in this case they are personal expenses.

 

I hope this helps to clarify for you.

Thank you.

 



Edited by John Gordos EA on 7/3/2010 at 7:26 PM EST
jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3073
Experience: I've prepared all types of taxes since 1987.
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jgordosea
jgordosea
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I've prepared all types of taxes since 1987.