Seth Breidbart wrote:

- quote -

That's the problem I've seen with these loft/studio
subrentals. The tenant typically is entitled to "desk space"
that is arguably "exclusive," but usually NOT in a
separately walled off area. The tenant is also entitled to
non-exclusive use of the studio space, and generally all
equipment and facilities in it, save only that the tenant
provides his own materials/supplies.

So, to really properly compute this, you would have to pro
rate depreciation deductions on equipment, etc., etc., ad
nauseam. Plus, you would likely end up with a rental of
PERSONAL property as well as a rental of REAL property.

As I noted in another message, my state views these
relationships as a "license to use" real estate, rather than
a "rental." I typically follow that approach for income tax
purposes by simply reporting the sublease as "other income"
(not rental) on the business return in question.

MTW

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JanZtax <janztax[at]aol.com> wrote:
- quote -

Wouldn't that depend on whether the sublease is at a profit
or loss?

- quote -

If the sublessee has 10% of the space private, and access to
75% of the space (the OP has 15% of the space private), then
how much should be considered subleased?

Seth

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JanZtax wrote:

- quote -

I don't know where the poster is located. But here in WA
state there would be an additional issue as to whether the
income is subject to the state's business gross receipts
tax. Bona fide "rentals" of real estate are exempt from the
state tax, but a "license to use" real estate is not. The
state regulations make it clear that a situation such as the
one discussed (shared space that the "tenant" does not
EXCLUSIVELY control) is a license, NOT a rental.

I have followed a consistent approach for federal purposes
because I assume that state law definitions of "rental" are
relevant.

MTW

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MTW" mtwingcpa[at]yahoo.com
- quote -

I, on the other hand, tend to put this income on schedule E
to avoid self-employment tax on it. The key point, however,
is whichever way you do it, be consistent. In other words,
if 10% of the space is subleased and you put that income on
schedule E, then 10% of the rent and utilities paid should
go on schedule E, along with 10% of maintenance and repair.
It may not be worth it to you to figure this all out, in
which case, put the sublease income on schedule C.

Jan Zobel EA

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Peter Kronenberg wrote:

- quote -

I have seen situations like this and have typically reported
the sublease income on the "other income" line of Schedule
C.

MTW

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I just started renting a place for use in my business
(Schedule C). It is essentially an artist's studio/workshop.
I formerlly worked out of my own. Now it will be about 50%
home and 50% studio. Utilities are included.

I am thinking of getting a sublesee to share part of the
space to help offset some of the rent. The sublesee would
have a small area to call his own, but would essentally have
free use of the space while he is there. There are no
expenses to share, since utilities are included. Any
expenses I have to fix the place up I would consider, as I
do now, to be normal business expenses that I deduct on
Sched C. So how do I handle the rental income? Can I just
use it to offset my rent? Or must I file Sched E?

thanks,
Peter

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