How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Lev Your Own Question

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 23193
Experience:  Taxes, Immigration, Labor Relations
870116
Type Your Tax Question Here...
Lev is online now
A new question is answered every 9 seconds

I have a condominium that adjacent to another condominium,

Resolved Question:

I have a condominium that adjacent to another condominium, that i own, I live in one and spend much of my day in the the other doing my business work, i have a number of chapter s corps that i run from that condominium, basically it is my office, , i haven't as yet paid myself a salary, i bought the condominium about 10 years ago, but never rented it always kind of used it for my leisure and office, can i deduct the utility bills the common charges,and whatever expenses from the at on schedule E, also depreciate the property ?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

Lev :

Hi and welcome to Just Answer!
If the condominium is used 100% for business purposes by S-corporation - expenses should be deducted on the corporate tax return - 1120S.
If there are several S-corporation - the cost must be prorated between them and deducted on separate tax returns.
You will depreciate a property and deduct utilities and other related expenses.
You may not deduct such expenses on schedule E.

Lev :

Another option would be to deduct such expenses as employee business expenses - assuming you are an employee of the S-corporation. However - such deduction is limited by your income as an employee - thus if you are not receiving any wages - you may not actually deduct any business related expenses.
In additional - employee business expenses are subject of 2% floor limit and you should itemize to claim such deduction.
So - claiming deductions on corporate tax return would be better option.

Customer:

The condominium is in my name , not in the corp name , it is not rented but it is like an apartment not like an office, its actually a 3 bedroom, as for 100 percent of the time , i go there in the eve evenings to watch TV and stuff, and there also is a planted terrace that i take care of, but i do use it almost all day as my office

Customer:

Did i have to pay the expenses with my corp, if i want to deduct expenses, i paid it personal checks

Lev :

If you own S-corporation and you own the condominium - and that condominium is used 100% for business by the S-corporation - it is OK to deduct expenses related to that condominium as business related. If business activities are run via S-corporation - these expenses should be deducted on corporate tax returns.
Expenses may be paid directly by S-corporation or may be paid by you personally and then reimbursed by S-corporation - so they would be constructively paid by S-corporation.

Customer:

so what if the condominium is not used 100 percent of the time for business, and what do i do if the corp was not reimbursed

Lev :

If the condominium is not used 100% for business - your only option - to deduct some expenses as employee business expenses using form 2106 and schedule A.

Lev :

Or S-corporation may reimburse such expenses via accountable reimbursement plan.

Customer:

if the corp did not reimburse? if it is used 100 percent than what about it being residential property with 3 bedrooms, is the IRS they going to accept that it is an office?

Lev :

Well - there are certain requirements to deduct business use of you home (or second home as in your situation)


To deduct expenses for business use of the home, part of your home must be used as one of the following:


Exclusively and regularly as your principal place of business for your trade or business
Exclusively and regularly as a place where you meet and deal with your patients, clients, or customers in the normal course of your trade or business;
It is possible that the IRS audit you and will verify how the property is used. For instance if you claim 100% business use - but the auditor finds beds in your property - means it is used for personal purposes - the risk is that deduction could be disallowed. However - if it would be clear used for business purposes as office, storage, etc - there should not be any issues.
You do not need to provide any additional documents with your tax return unless specifically asked or audited.

Customer:

ok i dont get it , you say that it clearly has to be used as my principal office ,if it is a second home,it is, but also used 100 percent of the time?

Lev :

ok i dont get it , you say that it clearly has to be used as my principal office ,if it is a second home,it is, but also used 100 percent of the time?
If the property is NOT used 100% for business purposes - you may ONLY deduct expenses related to the part of your home which is used exclusively and regularly as your principal place of business for your trade or business.
The fact of having bedrooms is not relevant - but HOW these bedrooms are used is important.
For instance - you claim that the condominium is used for business purposes 100% - and assuming you got audited - and the auditor wants to verify that claim. The auditor will look into your condominium and will verify if there is any evidences of personal use. If there is NO personal use - I do not see any issues with claiming deductions.

Customer:

what if it is used both personally and for business ?

Lev :

what if it is used both personally and for business ?
If the property is NOT used 100% for business purposes - you may ONLY deduct expenses related to the part of your home which is used exclusively and regularly as your principal place of business for your trade or business.
For instance - you are using one bedroom as your home-office - and that is 20% of your total area - therefore you will deduct 20% of indirect expenses related to your property.

Customer:

ok , so i deduct that on my corp return? or personal,

Lev :

ok , so i deduct that on my corp return? or personal,
If that is your property AND the property is used partially for business and partially for personal purposes - you only deduct expenses related to the part of the property which is used exclusively and regularly for business.
Because you are using the property as an employee of S-corporation - there are two options.
The S-corporation reimburse you such expenses via accountable reimbursement plan - and will deduct on corporate tax return, OR you deduct such expenses on your personal tax return. Generally, in this case - you must use Form 2106 to figure your deduction for employee business expenses and attach it to your Form 1040 Your deductible expenses are then taken on Form 1040, Schedule A, as a miscellaneous itemized deduction subject to the 2% of adjusted gross income floor.

Customer:

ok so i will deduct it on my corp return and the corp will give that money to me, does that mean i have income from my corp, and if it does, then i have more personal income , and therefore more tax

Lev :

ok so i will deduct it on my corp return and the corp will give that money to me, does that mean i have income from my corp, and if it does, then i have more personal income , and therefore more tax.
Reimbursements to an employee made under an accountable reimbursement plan are not included into taxable income of such employee because these are reimbursements for business related expenses - not compensation for services. Such reimbursements are NOT reported on W2 and not classified as taxable income of employees.

Customer:

got , so you ow whats going on , can you tell me exactly how you would do this situation if it were for tax purposes?

Customer:

if it were you

Lev :

got , so you ow whats going on , can you tell me exactly how you would do this situation if it were for tax purposes?
Assuming S-corporation generate income - I would set an accountable reimbursement plan for business related expenses and S-corporation would pay you - for instance monthly. You will provide itemized report of your expenses and supporting documents - S-corporation will keep these documents with other business related documentation - and will deduct such reimbursements on its tax return.

Customer:

ok great , what about depreciation on the property does that fit in anywhere?

Lev :

Yes - depreciation is type of allowable expenses.

Lev :

Publication 587 has detailed information on rules for the business use of your home, including how to determine if your home office qualifies as your principal place of business.

Customer:

i had the property for more than 10 years, i haven't depreciated it yet ,so can i start now, on what form do i depreciate ?

Lev :

i had the property for more than 10 years, i haven't depreciated it yet ,so can i start now, on what form do i depreciate ?
You need to convert the property from personal to business use. The basis for depreciation is the lesser of your basis and the fair market value at the time of conversion.
Specifically for calculating depreciation see IRS publication 587 page 10 - http://www.irs.gov/pub/irs-pdf/p587.pdf
If 2012 was the first year you used your home for business - there is a different method for calculations.
Generally - depreciation is calculated on form 4562.

Lev :

Please be aware of recent changes - the IRS allows an optional safe harbor method that individual taxpayers may use to determine the amount of deductible expenses attributable to certain business use of a residence during the taxable year.
See here - http://www.irs.gov/pub/irs-drop/rp-13-13.pdf

Customer:

4562 on personal or corp , you say convert , how do i do that?

Lev :

If you are using not more than 300 square feet for a qualified business use of the home


- you are allowed to deduct $5 per square foot without providing details for expenses.

Lev :

4562 on personal or corp , you say convert , how do i do that?
The same form is used for both purposes.
Convert - means start using for business purposes. How to convert? Start using the property for business purposes.

Customer:

so i can use the 4562 depreciation on my chapter s return and allocate it to the percentage of the condominium , so if is 1/3 then i can depreciate it 1/3 , of the total depreciation for that year on my corp return that doesn't make sense, it has to be on my personal its in my personal name?

Lev :

That is correct. If the property is used by S-corporation - deduction will be claimed on S-corporation tax return - if S-corporation reimburses you as an employee. If S-corporation doesn't reimburse you - you will be able to claim such deduction on your personal tax return.

Customer:

so im going to claim it on the personal 4562 without any rental income?

Lev :

so im going to claim it on the personal 4562 without any rental income?
You will use form 4562 to calculate depreciation. Then - the depreciation and other related expenses are reported on form 8829 - Expenses for Business Use of Your Home.
Then the deductible amount will be transferred to form 2106 Employee Business Expenses and will be combined with other deductible expenses. And finally will be transferred to schedule A.
Employee business expenses are not related to any rental activity - so having rental income is irrelevant. But you should have income from S-corporation as an employee - wages reported on W2.

Customer:

, i dont, the company hasn't made enough to pay

Lev :

Then - if there is no income from that activity - you would not able to deduct your home-office expenses. Such deduction will be carried forward to following years.

Customer:

so im going to deduct the office expense percentage wise on my chapter s, then depreciate it on my personal 4562 and transfer that number to te other form you mention ,

Customer:

im getting confused again, the chapter s had the office deductions and after that if there is no income then i cant deduct it,

Customer:

don't i pay myself after the expenses? if there is any left?

Lev :

im getting confused again, the chapter s had the office deductions and after that if there is no income then i cant deduct it,
If the corporation has allowable business expenses - it may deduct such expenses - that is not an issue.
You personally may not deduct if you have no income - that is correct.

Customer:

so ill deduct on the chapter s but on the personal it would not be allowed, ok i think i got it, thanks were done for now ill rate you well goodbye

Lev :

You are welcome.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 23193
Experience: Taxes, Immigration, Labor Relations
Lev and 2 other Tax Specialists are ready to help you
Customer: replied 1 year ago.

I need help again on understanding the topic of depreciation and where it gets filed, on the s corp. return or the personal, The corp. is reimbursing me for the use of my home which is in my name , that I got ,with the percentage and all, but where am I going to claim depreciation of the home, if I’m not claiming deduction for the home office on my personal return then I cant claim it on the personal, I have to claim the deprecation on the s return, the condominium belongs to me how ,can the s corp.claim depreciation on something it doesn’t own


thanks

Expert:  Lev replied 1 year ago.
If you use part of your home for business, you may be able to deduct expenses for the business use of your home.
When S-corporation reimburse you as an employee of said S-corporation for use of your home - you need to provide adequate report to the S-corporation about all your business related expenses including business use of your home.

Please be aware about new Simplified Option available for taxable years starting on, or after, January 1, 2013 (filed beginning in 2014) - you now have a simpler option for computing the business use of your home (IRS Revenue Procedure 2013-13, January 15, 2013). The standard method has some calculation, allocation, and substantiation requirements that are complex and burdensome for small business owners. This new simplified option can significantly reduce record keeping burden by allowing a qualified taxpayer to multiply a prescribed rate by the allowable square footage of the office in lieu of determining actual expenses.

I mentioned above a new Simplified method that you may use starting this year - if you choose so - no need to calculate depreciation or any other actual expenses. The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet.
In this case - you do not need to claim depreciation and will not need to recapture the depreciation when you sell your home.
Customer: replied 1 year ago.
It can't be on the s corp cause it doesn't own it and it can't be on personal cause I'm not deducting there where do I depreciates the condo ?
Expert:  Lev replied 1 year ago.
In this case - you will claim deductions on your personal tax return - including depreciation.
- you must use Form 2106 to figure your deduction for employee business expenses and attach it to your Form 1040.
You will report the amount which S-corporation reimbursed you - and assuming you are fully reimbursed - there will not be any additional deduction to claim.
Because you own the property - and the property is used for business purposes - you as an owner will report depreciation deduction on your tax return.
Because actual deduction is claimed by S-corporation - assuming reimbursement is under accountable method - you are required to provide adequate accounting to the S-corporation which must keep the record with other tax related receipts.
Customer: replied 1 year ago.

on form 2106 What is my my gross income from business, is it the reimbursement amount for my expenses from the corp, is it the k1 income of the corp or my salary?

Expert:  Lev replied 1 year ago.
Form 2106 is to deduct employee business income.
Because you are an employee of that S-corporation - your employee business income is your wages.
Reimbursements paid under accountable reimbursement plan are not your income - that amount is not reported as your income and is not included into your taxable income.
Amounts passed top you from S-corporation is your investment income - not earned income.
So - only wages paid by S-corporation are used on 2106 as your income from business activities.
Customer: replied 1 year ago.

I cannot get a deduction on my expenses for my home office if the s corp is giving me the money that i am spending!!!

Expert:  Lev replied 1 year ago.
That is correct - you may not claim the deduction for the same expenses twice.
However - because you are an employee - you are entitles to deduct your employee business expenses.
If some of these expenses were reimbursed to you by your employer (S-corporation in your situation) - your deductible employee business expenses are reduced by that amount.
You may only claim deduction for not reimbursed employee business expenses (if any).

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
 
 
 
Chat Now With A Tax Professional
Lev
Lev
Retired
19314 Satisfied Customers
Taxes, Immigration, Labor Relations