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California online Form 4562: What You Should Know

Therefore, any rental property (owned by an S corporation) that has long term lease terms is treated as leased real property.  The cost must be depreciated and the capitalized cost of the rental property must be depreciated over the lease terms. This section is only for items of ordinary property of a type of tangible personal property. Therefore, the value of all leased real estate is included. When you enter your rental item on line 26, line 27 of IRS Form 4562 is not needed. This means an S corporation's rental real estate is depreciated, capitalized, and reported as ordinary business property on its summary income tax return. As of  Aug 29, 2018, if you own listed real estate, you may enter it as a depreciable asset on Line 26 of IRS Form 4562. However, if you buy listed real estate, or rent it, the capitalization is a part of the cost of leased property, and therefore you must enter that on line 27. S Corporations can deduct their expenses and capital assets for all their activities, including leased property. To avoid double counting, an S corporation can treat listed property as ordinary business and depreciate, capitalize and report the depreciation and amortization as a part of its ordinary business income in a special way. The S corporation can claim an itemized deduction for any depreciation or amortization incurred to finance the use or occupancy of its leased property. However, this section of Form 4562 only applies to leased property. A leased property that is in any way owned or leased by someone other than an S corporation is not treated as a leased property.  Any leased property of an S corporation that is used for business purposes as a rental property will be excluded from section 179 deductions.  To include the depreciation and amortization amount on line 27, the rent you pay can be a business expense. If you have any leased property, you may deduct the depreciation and amortization on Line 27. However, if you purchase leased property, or rent the leased property, you must apply the depreciation to the capitalized cost using the S corporation's ordinary business depreciation method. The rent you pay, capitalized cost, and the depreciation are all ordinary business expense. They are added together to figure the business expenses on your corporate tax return.

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