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Best Answer Click here
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Unless I'm misunderstanding something, your prior method doesn't work, as you can't rent to yourself on the same tax return. Or are they filing separate tax returns?
At any rate, it seems like the Schedule C depreciated 37.5% of the cost of the building directly on Schedule C (not a Home Office).
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While it may depend on how the title is held and/or if in a Community Property State, from what I understand Joint ownership usually means they both own 100% of the property, which would mean you are renting to yourself (which is not allowed).
But not getting a letter from the IRS does not mean it is acceptable.
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You can't do this. I am in the midst of an IRS audit, and this came up one day when I was talking to the auditor. We weren't doing it on my client, but somehow we got on that subject, and he was adamant that it not allowable.
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I looked into this years ago (but not as far back as 1987 ) and you couldn't *move* the income between spouses particularly with self employment tax involved. I'll see if I can find my research but it won't be by Monday.
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You could never do this: "in past I would have her pay husband rent," when you Also told us this: "Bought commercial building with apartment jointly w/husband." for a Sched C business. Even filing separate returns, we've been told she is the Owner of the property.
Don't yell at us; we're volunteers
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Himself or herself is irrelevant on a joint return.
You converted SE income to rental income and that's is incorrect.
Amended returns need to be done.
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Does anybody have Rev. Rul. 74-209 in full?
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