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Article: Taxpayer-lessor in constructive receipt of rental income from wholly owned corporation.
- Article from:
- The Tax Adviser
- Article date:
- January 1, 1996
- Author:
CopyrightCOPYRIGHT 1996 American Institute of CPA's. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Many cash-basis individual taxpayers own real estate that they rent to their wholly or family-owned corporations. The ownership of real estate outside of the corporate legal entity has various advantages, including, for example, the facilitation of estate and gift tax planning, and the insulation of the real estate from the hazards of the taxpayer's business (in the event of bankruptcy).
When real estate is owned by a cash method individual and rented to a related accrual method corporation, the individual will recognize rental income as payments are actually or constructively received. Further, the corporation will claim deductions for rental expense as it accrues ...