The latest PPP loan forgiveness guidance brings some good news for minority shareholders, Schedule C borrowers with home office expenses, and self-renters:
- Owner-employees with less than a 5% ownership interest in a C or S corporation: These owner-employees are not subject to the owner-employee compensation rule (which generally limits the amount of compensation eligible for loan forgiveness to 2.5 months of compensation reported on the 2019 return);
- Home-office expenses: Deductible home-office expenses are qualified expenses, but only to the extent they were deductible on 2019 tax filings (or if a new business, the borrower’s expected 2020 tax filings);
- Self-renters: Rent or lease payments to related parties (defined as any ownership in common between the business and property owner) are eligible for forgiveness if:
- The amount of loan forgiveness requested for rent or lease payments to a related party is no more than the amount of mortgage interest owed on the property during the covered period that is attributable to the space being rented by the party; and
- The lease and the mortgage were entered into prior to February 15, 2020.
- Borrowers with tenants or subtenants: Amounts attributable to a tenant or subtenant of the PPP borrower are ineligible for loan forgiveness (e.g., a tenant with a monthly rent of $10,000 who subleases a portion of the space for $2,500 will only be eligible for $7,500 of forgiveness).
The interim rule can be found at:
Attend Spidell’s 2020/21 Federal and California Tax Update webinar and get all the latest PPP information. Click here for a list of available dates.