Schedule C or Schedule E??

[Trnr395]

My clients just built two small camps that are used just for renting out to hunters, sledders, etc. Should this be reported on Schedule E or C.

[JanMi]

It depends, do they have a business name? Is it just one person? It kinda sounds to me it would be a rental.

[Trnr395]

They have a business name and it is husband and wife running the business

[Lion EA]

Do they provide services to the renters? Do they rent with annual leases or for short-term? How short?

[Trnr395]

They rent for a week, or a weekend typically. They provide services as far as chopping wood for their fires, laundry and all utilities.

[jainen]

>>rent for a week, or a weekend<<

According to Reg 1.469-1T(e)(3), this is not a "rental activity" because the average period of use is less than seven days. Therefore, it does not go on Schedule E; it is treated as a trade or business on Schedule C (assuming it is not a hobby).

However, it is still a passive activity unless the owners had material participation. That's a higher standard than active participation, probably more than chopping wood and washing up. Do they handle their own bookings, or use an agent?

[Trnr395]

That was the direction I was leaning Jainen, and they handle every aspect of the business from bookings, office work. Know another question is the cost of the camps incurred last year, can I depreciate the cost of building them as business start up or does it have to be real property and expensed over 39 years?

[jainen]

>>the cost of building them<<

Unfortunately, you already know the answer to that. The best I can do is remind you that if the clients can identify furnishings and appliances separate from the building itself, that might be depreciated or deducted faster. Also, fences and other land improvements may be 15 year property.

[Trnr395]

ya ya i thought so....39 years it is.....