Self-Rental with other tenants?

Forum|Forum|3 years ago
April 28, 2023
1 reply
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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?

Lacerte Tax

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Best answer by Running26

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

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?

PhoebeRoberts

Intuit Community Champion

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.