Documentation Needed for Rent Deductions

The U.S. Tax Court ruled that a corporation couldn’t deduct expenses for the purported rental of part of the home of its sole shareholder and employee.

A C corporation may be able to deduct payments made to lease home office space from an employee (or its owner) as rent if the expenses are ordinary and necessary and connected with the business.

However, in this case, the court ruled that the taxpayer didn’t produce evidence of a written rental agreement or other documentation to support the position that the amounts claimed were rent payments.