Sublease Tax Question
I own a three-family home. Suppose I lease the house to an S-Corp, which then leases the units to tenants. (The purpose of this is protection from claims by tenants, but leave aside the advisability of this as an asset-protection scheme). It seems to me that there would be no adverse tax consequences--I would continue to depreciate the property, include rents received, etc., on my tax return. Moreover, there would be no tax consequences on the expiration of the lease, at which time the house would again be in my name.
Does this seem right?
Thanks.
Quote:I own a three-family home. Suppose I lease the house to an S-Corp, which then leases the units to tenants. (The purpose of this is protection from claims by tenants, but leave aside the advisability of this as an asset-protection scheme). If you are still the owner of the property, and the S-Corp is simply acting as property manager, then I don't quite see how this strategy will offer any protection from a tenant claim.
Tenants with a legitimate claim will sue both you as the owner and the S-Corp as the manager. As the owner of the property, your personal assets are still at risk.
The concept of asset protection is to conduct your business activities from within an appropriate entity that will shield your personal assets from exposure to a tenant lawsuit. When your rental property is owned by a business entity, your liability exposure is limited to only the assets owned by the entity.
Best visit your attorney for specific details.