The deduction is not allowed against schedule E income, correct? And the expenses are directly related to the running of the business. Say, a shareholder uses a large space in the home and has no other office space anywhere? Is the only option to use the employee business expense rules?
I’d recommend establishing an accountable reimbursement plan whereby the office-using-shareholder measures the home office vs total space (Form 8829 worksheet) and then requests reimbursement for actual expenses as incurred based on the %.
I am aware of practitioners who include an allowance for depreciation in this calculation. I do not include such an allowance when I help S-corp folks start up an accountable plan because it is a non-cash expense so nothing really to be reimbursed.