Rental Non PAL

[Randall]

Client rents out a cabin, average 7 days or less.  Pays the state lodging tax.  It appears this is a rental but not for purposes of passive activity loss.  It is in an two member LLC.  Losses to be reported.  My questions:

Does this go on 1065 page one or Form 8825?

For Sch K-1 input to 1040, do I check at top number 3 (Vacation, short term rental)?

If I check rental activity but not passive activity, ATX doesn't show the loss.  If I don't check the rental activity, ATX shows the loss.

If the two members are husband/wife, can both qualify for material participation if one or both are doing the related work?  Do both have to qualify individually?

 

[Pacun]

7 days a year on average??? that seems to be a hobby or an investment property.

They can pocket the rent and not report it anywhere.

[Lee B]

 He didn't say per year. I assume he was referring to the length of the average rental. It sounds like a short term rental.

 

[Randall]

7 hours ago, cbslee said:

 He didn't say per year. I assume he was referring to the length of the average rental. It sounds like a short term rental.

 

Yes, average stay 7 days or less.  Total receipts for year over 60k.  Spread over all 12 months.  Big loss with depreciation, mortgage interest.

[Terry D EA]

First question, has a partnership been established? I am assuming you are in KY which is not a community property state. Therefore, the IRS says a husband and wife owned LLC must file as a partnership on form 1065 which the rental activity is reported on form 8825.

[Randall]

Yes, KY, 1065.  I agree 8825.  From my reading, it is a 'rental', therefore Form 8825.  But for purposes of the PAL limitation, it is one of the exceptions and they can claim the loss without being a real estate professional.  Short term rentals averaging 7 days or less.

 

[Randall]

I'm still wondering if I put this on 1065 page one or Form 8825.  Instructions in 1065 say it's not a rental if it meets one of the exceptions (avg stay 7 days or less).  From that, it looks like it goes on 1065 page one.  Reg 1.469-1T(e)(3) also words it that it is not considered a rental activity if one of the exceptions apply.  So it appears it should be on 1065 page one and Box 1 in Sch K-1.  Form 8825 (and also K-1 input for 1040) has a place to mark the property type 3 for vacation and short term rentals.  This sort of contradicts itself as to where to report.