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- 8825: How much is too much?
8825: How much is too much?
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Benton
Level 1
03-11-2024
10:55 PM
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A new client owns a large commercial property with only one tenant that pays $6,000 a year in rent. The client takes a massive loss on this property paying utility bills, property tax bills, etc., as two partners (out of 3) own separate businesses on this same property rent-free and have for decades. The loss on this property has been used as a "tax strategy" to offset large gains on other properties. The property is now for sale.
I do not feel comfortable with this arrangement. Despite the $6,000 in rent from the one tenant, should the expenses on this property instead be capitalized and increase the basis of the property, especially since it is now listed for sale? The property is technically "in service", but this feels like an unethical hedge.
1 Comment 1
Strongsilence-C
Level 10
03-12-2024
09:54 AM
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I don't know. There are rules about renting homes to family/friends at less than FMV (income must be other income, some deductions are on Schedule A, etc.) I wonder if something similar applies in this situation.
Also, it appears that this is an investment and not active rental.
