Self-Rental with other tenants?

[Running26]

Client owns an office building through his LLC and collects rents from his business (50% of rents) and two other tenants who combine to pay the other 50 % of monthly rents.

Is this rental still considered a self-rental when he is not the sole tenant?  The handling of this effects passive losses, net investment income tax and the QBI deduction.

Can you help me here?

[PhoebeRoberts]

The last I looked it up, I concluded the right answer was to bifurcate the property into 2 Sch E entries, one for the self-rental and one for the remainder. It's not all or nothing based on percentages, the way residential vs non-residential is.

That said, if the "his business" is not something that files a separate tax return (that is, if the business is a Sch C), and if "his LLC" also does not file a separate tax return (that is, the rental goes straight on Schedule E, rather than Ep2), actual expense for 50% of the building goes directly on Sch C, the 50% rented to other tenants is normal rental income and expense on Sch E, and the self-rental income / expense is entirely eliminated.

[Running26]

Client business is an S-Corp and the rental is reported on Sch E (Single member LLC) for clarification.

[PhoebeRoberts]

For my client with a similar situation, including entity type, I have one Sch E column for the self-rental and one for the remainder.

[Running26]

Did you allocate the expenses based on the allocation of self-rental income to total rental income for that property?

[PhoebeRoberts]

The only client I have in that situation currently gives me square footage, so I allocate based on that. Any reasonable method is reasonable. 

[Running26 · Accepted solution]

I took your advice and split the rental into two columns on Schedule E.  The self-Rental had a $11,000 in net income but since the S-Corp is a Specified Service Trade or Business (SSTB) the self-rental should be also.  Yeah, the S-Corp made $250k and taxable income is $482K (MFJ) so there is zero QBI Deduction here.  Rats!

Do you agree the in the self-rental (Sch E) input, that I would check the box as the rental being SSTB?

[pat]

Here is an article that references the final QBI regs. You should read through both the article and the regs to answer your question about the self rental and SSTBs. https://www.withum.com/resources/do-self-rentals-qualify-for-the-20-qbi-deduction/

[Running26]

Great article...........thank you.