Renting Part of Our House and Warehouse to Our Business SCENARIO

[Glenn Hirsh]

Scenario:

We are considering the purchase of a property that is approx 10 acres with a house and warehouse on it. The house is approx 4000 sq/ft with 1000 sq/ft that could be utilized as separate office space and there is a warehouse that is 2500 sq/ft. We are looking for the best strategy to have my wife's single member LLC (taxed as S corp) rent both the warehouse and office space at a fair and reasonable rate.

What are the challenges and opportunities with this scenario?

I’m reviewing material on self rental rules, having the business buy the property (not ideal), Schedule E applicability, entity differences if her business was a C Corp, and others.

Seeking the optimal way to structure this investment with tax efficiency in mind.

Many thanks for your perspective in advance.