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Article Date:
November 2015

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Renting Property to Your Business? Avoid This Trap That Destroys the Tax Deduction

You probably know owning real estate and leasing it to your business sends up a smoke signal to the IRS reading “Audit adjustment required here!”


In fact, in its guide for tax audits, the IRS notes that self-rented property is a frequent audit adjustment.1 Why is that?


The guide says that “it is a common practice for many professionals to own the property personally and lease it to a corporation or partnership where they conduct business.”2 The concern is that you might improperly jack up the rent to generate income you can then use to incorrectly absorb your passive losses.


So if the IRS sees you have this kind of arrangement, an alarm goes off and you could end up losing big-money deductions—even if you use a separate entity like an S corporation to rent the property to your business.


Luckily, you have two ways to avoid this disastrous result. ... Log in to view full article.

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