Hi,

I'm getting a great deal of conflicting advice regarding the use of a
home office as the sole owner of a Chapter S corporation.  My home
office meets the "regularly" and "exclusively" tests.  I also have an
accountable reimbursement plan in place. Ideally, I'd
like to be able to have the Corporation reimburse me for a pro-rata
portion of my mortgage payment, utilities, taxes, etc.
If it's possible to do so, how should I report these expenses on my
1120s?  Is it just a normal expense, like office supplies, etc.?  If
so, what should I call them?

Thanks,

Stan McFarland

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Request for Question Clarification by siliconsamurai-ga on 02 Feb 2005 10:26 PST

This is just posted so I will be notified if you accept my
recommendation to learn about Chapter C instead.

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Clarification of Question by sfmcfar-ga on 02 Feb 2005 12:02 PST

At this time, I'm not interested in your offer, simply because I need
to resolve this issue for Tax Year 2004.  I'll keep you in mind for
the future, however.

You are asking for a definitive answer on something which is
essentially a moving target. The letter of the law is essentially
meaningless when there are so many rules and regulations - what counts
are IRS practices (meaning how likely are they to challenge your
choice) and tax court precedences (which means how often the court
agreed with the IRS.)

I suggest you investigate the move to a Chapter C corporation which
has a great many advantages over the Chapter S structure which is
little more than a glorified partnership in the eyes of the IRS.

If you would like some details of this option, post the request to my
attention and, as the CEO of a small Chapter C for 20 years, I'll be
happy to post an answer. Google researchers normally respect such
requests, although we aren't required to do so.

Whatever you've heard, a Chapter C is almost always the better choice.
Double taxation, for example, is a myth for closely held corporations.