I believe that anytime there is a corporation there should be some reasonable compensation reported - especially if there is any distribution of income. At a minimum, any corporate officer (President etc.) should have reportable compensation. In the case of a rental property, such as you have, the corporate officer compensation is at the corporation level (reported as ordinary loss on the K-1 if there is no other income at the corporation level such as a state income tax refund). If work is done for the rental property....property administration, repairs, etc. then an amount is reported as direct cost in the 8824 expenses. Make sure the corporate minutes reflect the annual approval of the compensation level. Check out the recent LITS seminar on Reasonable Compensation seminar.
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Thomas Lopez EA
Thomas L. Lopez, EA
Woodside NY
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Original Message:
Sent: 11-14-2017 07:51
From: LORI SIRO
Subject: S Corp/Reasonable Compensation
I have a client with rental property in an LLC. The S corporation claims only rental income which is reported on Form 8824.
Is there still a payroll(reasonable compensation) requirement since this is passive income and if reported on her personal return on schedule E there would not be self employment tax?
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LORI SIRO
L J Siro CPA Services PC
EAST NORTHPORT NY
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