Answers · Bookkeeping
How to Record Intercompany Transactions
Related entities should record both sides of a transaction separately and consistently, based on economic substance.
How it works
The rule, and what it turns on.
Genuine rent is generally rent expense to payer and rental income to recipient. Cash advances can instead be due-to/due-from, debt or equity. Related-party tax rules may affect timing.
Example
Operating LLC pays property LLC $5,000 rent: one records rent expense and the other rental income.
Common mistakes
What we see go wrong, and what we do instead.
- Calling every related transfer a transfer.
- One-sided entries.
A better approach
- Use written leases/intercompany agreements and reconcile due-to/due-from monthly.
Authority
Where this comes from, so you can check it.
IRC §§162(a)(3), 267 and 482 as applicable.
Educational information, not individualized tax advice. Treatment depends on your facts, entity classification and tax year, and IRS instructions change. Confirm your own position with us before relying on it. Mint Associates does not provide legal services.
Also asked
The same question, the other ways people put it.
- How to Record Rent Between Related Companies
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