Rent or Accommodation

[Randall]

Client rents a house thru the HOMEAWAY service.  It's short term rental like motel accommodations.  They pay the local lodging taxes.  Just want to verify that this is not considered a rental business but a regular business (Sch C not Sch E).  In my case 1065 but no Form 8825.  Also, depreciation would be 39 year non-residential.

[Lee B]

I have the same question. I was at a family gathering last weekend and a nephew cornered me.

He rents out 2 houses thru VRBO and AirBnB with an average stay of 4 or 5 days.

No breakfast or any other services are included. Schedule C or Schedule E ?

[MsTabbyKats]

I do a lot of Airbnbs and always use E.  One client received a notice from the IRS about "C" income.  I had him send in a copy of the E...and so, far no problems or follow-up from the IRS.

Of course....my clients don't rent out houses...more like couches.

 

[jklcpa]

Randall and cbslee, these links below regarding the passive activity rules should help each of you with the proper reporting:

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Passive-Activity-Loss-ATG-Exhibit-2-7-Vacation-Rentals-Condos-B-Bs-Hotels-Reg-1-469-1Te3ii-and-Reg-1-469-5Ta

Also this one has a discussion and lists the 6 exceptions to when an activity isn't a rental under reg § 1.469-1T(e)(3)(ii):  http://www.cmorrisonlaw.com/rental-real-estate-losses-passive-activity-rules/

Finally, a succinct blog by an EA that hits the important points of this issue and what to watch out for. From five years ago but still good info here: https://urtaxlady.wordpress.com/2010/10/21/tax-guide-for-vacation-rentals/

Edited August 19, 2015 by jklcpa
added 2 more links

[Randall]

Thanks for the references.  Seems to support what I thought.  Non-rental.  Client materially participates.  No losses.  Profit so SE tax will apply.

[Abby Normal]

So if a vacation rental belongs on Sch C and shows losses every year, does it become a hobby?

[DANRVAN]

Thanks for the references.  Seems to support what I thought.  Non-rental.  Client materially participates.  No losses.  Profit so SE tax will apply.

While this issue is not black and white, I believe the key words here are "significant services" per the IRS pubs.  Does the client provide food or maid service including changing the beds and cleaning on a daily basis? On the other hand, are the guest left to fend for themselves for the duration of the stay?

My wife and I recently stayed at a "loft" through AirBnB while attending a wedding.  We really did not have any "significant services" provided. Although I thought the place was fine, my meticulous wife decided the place need a little dusting and the bedding changed before we settled in for an enjoyable weekend!

[Randall]

Thanks DANRVAN for comments.   I keep going back and forth.  I'm leaning toward rental now.   There's no meals or dialing cleaning services.

[Lion EA]

There's also a time element.  I don't have any similar now, so from memory, average rental 7 days or less is a biz and not sch E.  So, do check on time as a possible exception to rental activity.

[Lee B]

From my reading of the.links that jklcpa thoughtfully provided, the providing of towels, linens, cleaning services,

utilities, cable TV, WiFi and supplies constitutes enough services, that they are quite likely Schedule C & self employment income.

After all when you rent or lease residential property you normally have to pay for utilities, your own furniture,

towels, linens, cleaning supplies, Cable TV and WiFi.

[Randall]

I've gotten more info.  Some stays may only be 2-3 days but one was 6 weeks.  No cleaning service except in between rentals.  Yes furnishings are there but you can rent furnished apartments, etc.  I suppose you can go either way.  I've decided to go with it as a rental.