I own a small business in New York City. We are incorporated as an LLC. My partner commutes into the city and wants the company to pay for an apartment in the city for him to stay in during the week. Is this a deductible expense for the business? Is it considered personal income for him?
2007-07-02 08:28:53 · 4 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
no this is not an ordinary business expense.
2007-07-02 09:48:51 · answer #1 · answered by ainger452 3 · 0⤊ 0⤋
Well, technically under the circumstances the apartment is not a business expense. Thus, if business pays for the apartment, than it's like paying salary or it's a distribution to partner, depending of the status of LLC(corporation vs partnership). If it's corporation, than it's a salary to partner and therefore LLC has to pay FICA and all employment taxes on the amount it pays for the rent. If LLC is a partnership for tax purposes, the rent is considered to be a distribution to partner to be shown on line 15 of K1. Anyway, your partner will show this as income. You can cheat of course if you are being audited, that you need the apartment for meetings with clients or other related to your business, but it's all up to you.
2007-07-03 05:38:43 · answer #2 · answered by alikmal 2 · 0⤊ 0⤋
It is true that the company can deduct the expense, and the employee has to declare it as taxable benefit. It also depends on the duration of the stay and whether or not it is on a continuous basis. If he just come in for a week or a month, then it would not be taxable on him; but it would still be deductible by the company.
2007-07-02 08:45:18 · answer #3 · answered by Anonymous · 0⤊ 1⤋
Check with your accountant. You should be able to set this up as tax deductible, and you should also be able to set it up so that it's not considered personal income for your employer.
2007-07-02 09:06:00 · answer #4 · answered by jdkilp 7 · 0⤊ 2⤋