Steve_Quinton[at]comcast.net wrote:

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Since the office is not in same building as the residence,
the exclusive use rule does not apply.

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No.

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Why? I've never known the IRS to get upset that an itemized
deduction was smaller than the supporting paperwork.

The only problem I see is failing to get money out of the
C-corp in a form that is deductible by the C-corp.

- quote -

Yes.

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That is my understanding.

- quote -


That is my understanding.

Good luck.

Regards,
Bill

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- quote -

No.

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I do this routinely.

- quote -

Yes.

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I generally put it all under office expense. In most of my
clients' cases the amount is pretty small. The big advantage
is in being able to deduct much more auto mileage.

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It's not that they "should not" exceed the W-2 wages, but
that any expense that exceeds that is carried over to
subsequent years, following the office-in-home rules as
reflected on Form 8829.

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Yes. Often, in the S corp situation I'll adjust income
distributions for the office-in-home expenses.

--
Thomas E Healy, CPA, PC
1650 38th St., Ste 202W
Boulder, CO 80301
Please send email to: tom[at]tomhealycpa.com, since I block all email at my
newsgroup address.
phone (303) 443-1804
fax (720) 489-3772

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I would be interested in this group's opinion on an old
topic with a new twist. I have an architectural firm C-Corp
client. The C-Corp rents a 200 sq ft office in a
professional building on the north side of town for purposes
of a corporate mailing address and a location for the
C-Corps records. The C-Corp's office space has a small
meeting area and allows its employees to use this area to
meet with clients.

The C-Corp is wholly owned by a husband and wife, and
employs the husband as an architect as its sole employee. As
part of the employee agreement, professional employees (i.e.
the husband) must maintain a home office "for the
convenience of the employer" to:

1) Increase public exposure to the business

2) Store the C-Corps client files assigned to the employee, and

3) Perform day-to-day activities, including meeting with
clients when the home office location is in a more
convenient proximity to the client.

The employee purchased a home (in May 2004) on the opposite
side of town (3 miles away) from the C-Corps office. The
home includes a renovated (barn) outbuilding. Approximately
1/2 of the existing finished office space in the barn will
be used exclusively for the home-office business (1000 sq
ft) and the remainder for personal storage until such time
that it may be needed for additional office space.

I have read the many postings made to this forum regarding
the Business Use of Home, where the employee/shareholder is
reimbursed by the S-Corp employer for home office and
related expenses through an Accountable Reimbursement Plan
(ARP) under IRC Sec 62(c).

My questions for this group are:

1. Does the fact that this client is a C-Corp instead of an
S-Corp matter?

2. Could someone give (or e-mail me) sample wording of an ARP?

3. I plan to recommend that my client exclude mortgage
interest and real estate taxes from the ARP, since these
items are subject to their own special limitations and would
only serve to complicate the employee's 1040 (i.e. mortgage
interest less than Form 1098 because % of mrtg interest has
been allocated to and reimbursed by employer under the ARP).
Is there any problem with this exclusion, since they are
otherwise deductible on the employee's personal return?

4. The employee will allocate a % of the property's basis as
the home office and depreciate it over 39 years. The
employee has indicated that they plan on doing some
renovations to the home office space. Would they simply
increase their basis and related depreciation submitted
under the ARP when this is done?

5. Should all expenses covered under the ARP be listed on
line 22 of the Form 1120, and if so, should the ARP expenses
be broken down in a detailed line 22 supporting statement
with the other line 22 expenses, or should they simply be
grouped as an "office expense" in the line 22 supporting
statement. My concern is the appearance of a high $ office
expenses amount relative to the other expenses.

6. Can any proponent of the ARP method confirm my
understanding that to be in compliance of 280A(c)(5), the
ARP expenses should not exceed the W-2 wages of the employee
from C-Corp.

7. Under the proposed ARP, a monthly check is paid to the
employee, who is not required to report the reimbursement on
his 1040. Is this correct?

I'll appreciate your help to clarify these points.
Thanks. Steven Q., CPA

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