The IRS has ruled (PLR 2012-29-007) that an S corporation's
rental income is not passive income under Section
The private letter ruling addresses an S corporation that,
through its employees and other agents, provided certain services
regarding rental real estate property it owned. These services
include maintenance and repair such as cleaning, painting,
electrical, plumbing, roof and structural maintenance, garbage and
recycling, landscaping services, and pest control. Also provided
were operational and management services such as paying all water,
gas, heat, light, power, sewer, and janitorial charges and other
utilities or services needed for the property; maintaining the
structural and exterior portions of the property in good condition;
providing trash removal and window-cleaning services; furnishing
property-related inspections; maintaining common areas; and
furnishing landscaping and snow removal service.
Section 1362(d)(3)(A)(i) provides that an S corporation election
will be terminated whenever the corporation:
has accumulated earnings and profits at the close of each of
three consecutive taxable years; and
has gross receipts for each of such taxable years, more than 25
percent of which are passive investment income.
In general, "passive investment income" means gross
receipts derived from rent, and "rent" is defined as
amounts received for the use of, or for the right to use, property
(whether real or personal) of the corporation. The regulations
provide that the term "rents" does not include rents
derived from the active trade or business of renting property.
Rents are derived from an active trade or business of renting
property only if, based on all the facts and circumstances, the
corporation provides significant services or incurs substantial
costs in the rental business.
The IRS ruled in PLR 2012-29-007 that the rental income received
by the S corporation from its rental property was not passive
income as described in Section 1362(d)(3)(C)(i) based on all facts
and circumstances presented.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
21 Sep 2016, Webinar, Washington, DC, United States
Learn about tax developments and significant tax issues that can affect your financial statements, including accounting for income and non-income taxes. We will focus on the financial reporting implications of these developments.
4 Oct 2016, Webinar, Washington, DC, United States
This webcast will explore how your company’s enormous stockpile of data, both publically available and proprietary, might be used in high-value ways, not only for future risk planning purposes but also to help unlock answers to some of your key business issues and challenges.
Describe how large and midsize life sciences leaders are optimizing their approach by strategically using data analytics for competitive advantage to protect their reputations and maintain a solid standing with health authorities and the OIG
Demonstrate how to build a global lens into analytics by combining existing internal data sources (compliance and others) with external data sources (structured and unstructured data)
The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) accelerated the due date for filing Form W-2, Wage and Tax Statement and Form W-3, Transmittal of Wage and Tax Statements, and any returns or statements required by the IRS to report nonemployee compensation to January 31.
Whether you're still building your business or you're firmly established and looking ahead to the next phase, it's a good idea to be informed about retirement so you can best prepare. - See more at: http://www.gppcpa.com/blog/2016/08/02/2161/#sthash.bjw2IRWS.dpuf
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).