Renting to yourself

[Scott Morris]

I've been thinking about this for quite some time. It seems like renting from yourself (or through an entity you own) would be a great way to reduce expenses/taxes overall. Renting from yourself would have a few of advantages over owning:

Depreciation deduction of the property,

Deductions of repairs (this is different than improvements),

Privacy/Risk (you no longer own a property in your own name)

It would have some disadvantages:

Loss of tax protected appreciation when sold (although a 1031 exchange handles that)

The only question remains is this frowned upon (audit risk) by the IRS? Has anyone done this? It seems to me that it is often done in the commercial world. A company buys a large building in a holding entity. Leases out part of it to itself (the other parts are leased to other companies). Why would residential be any different?