Thank you for your responses.

Well I found the balance sheet, trail balance for 2003. It
appears that the amounts for OIH were being credit to Loan
From Shareholders and then debit as office expense.

This isn't correct either is it? Does amended returns need
to be done?

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techiegirl wrote:

<<SNIP> > Now to my thinking this is incorrect that it was taken off
- quote -

You are correct.

- quote -

If the shareholder/employee has no salary income, he has no
deduction.

Good luck.

Regards,
Bill

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"techiegirl" <techie[at]techiegirl.com> wrote:

- quote -

For the books to balance there has to be some account
involving the shareholder: "Owed to Shareholder" or
something like that. Otherwise it would be a contribution to
the capital of the corporation. So make sure that the client
is maintaining a proper double-entry accounting system (e.g.
QuickBooks or MYOB).

But you're right that the corporation can only reimburse
based on an accountable plan, if its employee is required to
have a home office as a condition of employment. Without the
company paying a salary, that would be tough to argue.

--
Tom Healy, CPA
Boulder, CO
Web: http://www.tomhealycpa.com

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I have received a new customer. Former accountant did 2002 &
2003 returns. He did a OIH(office in home) worksheet and
included utilities, property taxes, mortgage interest, and
depreciation. Came up with a percentage to be deducted. Told
the client that OIH could be taken off each month off the
Scorp.

There is one shareholder in the SCorp and is not receiving
payroll. But there also isn't any distributions taken. The
OIH expenses were deducted under office expenses and
amounted to quite alot for both years.

What I've found is that the SCorp never did actually
reimburse the OIH expenses to the shareholder. There is no
check written through SCorp to the shareholder for the
expenses. They were just taken off as if a Schedule C.

Now to my thinking this is incorrect that it was taken off
in this manner. Should there not have been a accoutable
reimb plan setup and the Scorp reimburse through check this
way? I just don't see how they can be deducted directly off
the Scorp with no money passing between it and the
shareholder.

Is the next step to deduct these Office In Home deductions
off Schedule A on a 2106? But can that really be done since
the shareholder does not have a W-2 from the Scorp?

Thank you for any help
Techie Girl

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