1120 Asset

Forum|Forum|3 years ago
January 11, 2023
2 replies
23 views

I have a client who files an 1120. They have an asset that I need to list for cost basis, but not depreciate out. How do I do this. Asked another accountant and their system offers like a memo line. Can someone please help me!

Its a house bought by the corporation, but is used as his personal residence at this time.

ProSeries Professional

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BobKamman

Level 15

No such animal as personal use of corporate asset. The house is being used as compensation for his services -- it should be depreciated, and the value of the housing added to his W-2 unless there is a business reason for his living there. Or, he can rent it from the corporation, which also makes it a business asset.

Just-Lisa-Now-

Intuit Community Champion

I dont work with corps at all, but isnt it a bad move to put your house in a corporation like that?

You lose the 121 personal residence exclusion when its sold, dont you?

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

sjrcpa

Level 15

@Just-Lisa-Now- Yes to both of your questions.

The more I know the more I don’t know.

dascpa

Level 11

I agree with the two posts in reply to your question, but they did not answer your question. Can a corporation own a house? Yes. Is that a wise idea? Yes, no and maybe. Their feeling most likely is it's cheaper than paying hotel or other fees. We do see this with certain businesses that need overnight housing for traveling staff or consultants. Does it create other tax issues like taxable fringe benefits, etc.? Most likely yes. But to answer your question - it could be classified as an Other Asset (long-term asset) and not put on the Fixed Asset schedules. There will be others who disagree with this and state if it's used in the business it must be depreciated. They have justification in that answer too. We all would need to know more about the situation so further research could be done.

BobKamman

Level 15

@dascpa "We all would need to know more about the situation so further research could be done."

I don't need to know more. The corporation is owned by someone who thinks rules are made to be broken. But, have they figured out what happens when the house is sold at a gain? Or distributed to the shareholder as a dividend? And, do they plan on reducing basis then, by depreciation "allowed or allowable?"

dascpa

Level 11

I will not disagree since the owner is using it as his personal residence. But that could be - for now. I had two clients who bought homes. One, a scientist who regularly had other 1099-scientists come to their location for one or two night stays. After spending over $100k in hotel costs he found it cheaper to purchase a residence. Yes, that was a depreciated business asset. The other was a small airline who also spent tons on housing crew so they purchased a residence. So on the surface Bob, I agree with you. But the situation as it is now could be (doubtful, maybe, who knows) be temporary and the real reason will come out.

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