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How to keep our uncle happy (and me)

Discussion in 'Business Fundamentals' started by carlriv2, Jan 1, 2002.

  1. carlriv2

    carlriv2 Senior Member
    from Mass
    Messages: 126

    My question is for those who have experience with owning the property you work from. I bought a house with a large garage out back and I have been talking to my CPA reguarding how to approach the deduction. He suggests that I simply take the sq ft home office type deduction for the space. I have several problems with that (not that I am a CPA)

    1. I think the garage is worth more that that.
    2. If I were to rent a shop it would cost $1,000 and up
    3. When the tax man comes I still pay S/E tax on that money

    I am under the impression that rental income is not subject to S/E tax being that it is "unearned income". If that is true I feel that I would be much better off structuring this so the business rents the space from me personally therefore the business would take the deduction of the rent paid to me (no S/E tax) I would get the $$$ to go towards the mortgage and all will be happy. Even our uncle. I think...

    I guess the main question is ... Does anyone do this, what type of business structure (proprietorship, partnership, LLC, S corp, or Corp) do you have and how does it work.

    Thank you for your input on this matter, and hopefully if you read this long post you have some useful input.

  2. Plow Meister

    Plow Meister PlowSite.com Addict
    Messages: 1,174

    1. Check zoning laws. Make sure you can rent the space out to a compny that does what you do.

    2. Start a sub-chapter S corp. You are the president.

    3. Then, install a DBA (doing business as).

    4. Have the DBA rent the space from the main corp. (money wash)

    5. The corp. pays the president (you) money = to the amt. of rent. (more washing)

    6. Tax season comes, the corp. looses money. Usually much of the amt of taxes paid via quarterly statements are refunded.

    7. Don't ask me any more than what i just listed out. This is what I do and my accountant waves the magic wand. Presto, my pole barn loses money on paper but makes money by not paying taxes on property.
  3. Doctordo

    Doctordo Member
    Messages: 50

    I have been running a (S) cooperation for a few years now. It is easy to set up . I agree with you that your shop will cost you more than 1500.00 per month. Alot of people do set up them selves to rent space and equipment that way.

  4. Plow Meister

    Plow Meister PlowSite.com Addict
    Messages: 1,174


    I my earlier post I described what I was doing in a similar situation. I ran this by my accountant and he informed me of some mistakes. I didn't write them down as I didn't have the time. s soon as I get the chance I will get you a more accurate description of my business / property strategies.
  5. carlriv2

    carlriv2 Senior Member
    from Mass
    Messages: 126

    I appreciate the responses that I got on this subject, but I know more of you must be in a similar situation. Please let me know how you do it. I am going to see my accountant soon and would like to discuss the matter with him (with some of my own knowledge)

    Thanks carl