Level 7

Solved

VRBO Rental

Forum|Forum|2 years ago
May 16, 2024
2 replies
28 views

H & W clients own a property that they rent through VRBO. They are not real estate professionals and they say they don't stay at the property for vacations.

So that total losses can be deducted on Sch E, do I check box G "Other passive exceptions" on the Sch E worksheet? Or is there another box that should be checked?

If, in a future year, they do use the property more than 14 days, or more than 10% of the days rented, then I would think the rental changes from non-passive to passive. Therefore, the reporting can change from non-passive to passive each year based on if the property is subject to the vacation home rules. Is this correct?

Thank you.

ProSeries Professional

This topic has been closed for replies.

Best answer by TaxGuyBill

Thanks, everyone for your help with this.

My head is hurting. 🙂

TaxGuyBill, thanks for the Pub. 925 link. Based on the Rental Activities Exceptions #1, if the average period of customer use of the property is 7 days or less, then it isn't a rental activity.

This appears to support Lisa's position that it isn't reported on Sch. E but on Sch. C. Everything I have read says that it still goes on Sch. E because no substantial services are provided. Also, the activity is considered nonpassive and the full loss is deductible.

Also, the TPs don't use the property for personal use and they don't meet the material participation test but they do meet the active participation test.

So, if I check the "other passive exceptions" box and not the material participation box but I check the active participation box, will this be the correct treatment? Does the rental qualify for deduction of the full loss on Sch. E?

Boy, this has turned to confusing.

Thanks for your help.

@david3 wrote:

then it isn't a rental activity.

This appears to support Lisa's position that it isn't reported on Sch. E but on Sch. C.

Also, the TPs don't use the property for personal use and they don't meet the material participation test but they do meet the active participation test.

Does the rental qualify for deduction of the full loss on Sch. E?

No, as I said in my original comment, it is not a "rental activity" ONLY for purposes of passive income/loss purposes. For other purposes, it *IS* still a rental that belongs on Schedule E.

If they don't Materially Participate, it is a Passive Activity. That means you DON'T check the "other passive exceptions" because it *IS* passive. It will be subject to the usual Passive Activity rules.

sjrcpa

Level 15

Why isn't it passive?

The more I know the more I don’t know.

D

david3Author

Level 7

They spend at least 100 hours, and more than anyone else and the average rental days are 7 days or less.

Just-Lisa-Now-

Intuit Community Champion

Sounds like it belongs o Sch C, not E

Schedule C Requirements for Airbnb and VRBO Hosts

Generally, you will file Schedule C for your short-term vacation rental if: The average guest rents the property for fewer than 7 days, OR The average guest stay is fewer than 30 days AND you provide guests with “substantial services”

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

BobKamman

Level 15

Last time I checked, the closest guidance from IRS or the courts was a case involving a trailer park, decades ago. For now, Airbnb and VRBO rentals are either a square peg that might fit in a round hole, or a round hole that might fit into a square hole. Anyone who thinks the answer is something other than "depends on the facts and circumstances" is, well, at least entitled to an opinion.

D

david3Author

Level 7

Lisa,

The reason I mentioned that the average days rented was less than 7 days is to state that it qualifies as nonpassive.

That doesn't require the VRBO to be reported on Sch. C and, therefore, be subject to SE tax.

Only if substantial services are provided will the rental property be reported on Sch. C and be subject to the SE tax.

If my understanding isn't correct then please give me a cite that says that renting for less than an average of 7 days and not providing substantial services, requires the rental property to be reported on Sch. C and is subject to the SE tax.

Thank you.

Just-Lisa-Now-

Intuit Community Champion

Im not digging for an IRS cite, but ANY website you read, explains that if your average guest stay is 7 days or less, it goes on Sch C, regardless of substantial services, its only when the average stay is 30 days or less then the substantial services comes into play. Sch C takes care of your non-passive situation.

https://financialsolutionadvisors.com/blog/do-rental-property-owners-file-schedule-c-or-schedule-e/

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

Sign up

Login with SSO

Let's get you signed in

Login with SSO