I bought a house near my firm for business purposes only and have used it as such. I am now renting it to a manager at the firm at a reduced rent so she would accept a job at the firm. Is this a business expense or a simple rental.
Hopefully a CPA will chime in on this, but I'll take a stab at it. Is any of this in writing? Sounds to me like rent subsidy is part of the employment package, so I'm thinking the reduction is a business expense. The next question I would be asking is the rent reduction taxable to her?
Keep in mind, I could be out in left field on this. Can somebody else chime in here?
Deni
I think you're on the right track, Dennis.
There's an exclusion from income (meaning it wouldn't go on the employee's W-2, but would be deductible on the business return) for on-premises lodging furnished for the convenience of the employer. You haven't provided enough information to know whether your situation has any hope of qualifying.
If it doesn't qualify, the reduction in rent below FMV is wages to your employee, and income to the rental activity (which I believe would be a rental activity).
