My client owns and operates a machine shop as an S-corp. It is very profitable. Last year he purchased a building in his name, indvidually, which is used solely by the S-corp. The S-corp pays him rent. The Schedule E on his return shows a significant loss, primarily due to depreciation. Can he offset the Schedule E rental loss against the S-corp K-1 income?
The CPA in the office says “No”. I (the EA) say “Yes”. You have the swing-vote. We have been going “round and round” in IRC Sec. 469, Self-Rental rules, etc.