Having an S-Corporation rent realty to a related company may not net a tax break.
The owner cannot always use the rental income to offset other passive losses, according to the Williams case in which two people set up an S corporation to rent real estate to their closely held regular corporation. Because they were material participants in the regular corporation, the S firm’s rental income is treated as nonpassive income.
So that income was not allowed to eliminate other passive losses
Williams, TC Memo. 2015-76
- 1.469–4 and its interpretation can be complicated. Call our office for an appointment to discuss your personal situation.