Pacun Posted April 16, 2015 Report Share Posted April 16, 2015 TP has a two bedroom condo. She lives with her boyfriend in one room and she rents the other room through a management company. She wants to amend because previous preparer added $12,000 as rent paid by her boyfriend. Also depreciation for the whole year was $661 (six hundred sixty one). Previous tax preparer also didn't deduct on Schedule A everything that she paid to the state in 2014. The condo cost her $250K and besides "renting" to her boyfriend, she cooks for him, cleans the bed and provides other amenities. For those amenities, she actively participates and even though she has a management company, she cooks and provide other services for her guest. Those amenities are not available to her other "renter" in the other room. But my question is not about the services she provides to her guest... this is my question: Does she really need to report $12K of income because her boyfriend shares a room and they share the food and other amenities? I don't think so. Since the depreciation is so low, should I amend and attach form 3115 or simply amend and take the correct depreciation? If I understand the situation correctly, she should be able to depreciate 1/3 of her condo. Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted April 16, 2015 Report Share Posted April 16, 2015 How much rent did she charge for the other room? Quote Link to comment Share on other sites More sharing options...
Gail in Virginia Posted April 16, 2015 Report Share Posted April 16, 2015 I am still laughing at the "actively participates" part of Pacun's post. 7 Quote Link to comment Share on other sites More sharing options...
Pacun Posted April 16, 2015 Author Report Share Posted April 16, 2015 How much rent did she charge for the other room? The management company has the room available per day. If full month it is about $1200 per month. Quote Link to comment Share on other sites More sharing options...
GeneInAlabama Posted April 16, 2015 Report Share Posted April 16, 2015 The management company has the room available per day. If full month it is about $1200 per month. What kind of room is rented per day . . . oh, I get it. Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted April 16, 2015 Report Share Posted April 16, 2015 By your figures, the boy friend rented the room for 10 months. 12,000/1200=10. Yes she has income and maybe the services she provides to/for him can serve as some expenses. The depreciation calculation is the square footage of both of the rooms for rent divided by the total square footage equals the percentage of the condo to depreciate. Income is income no matter how she made it, it has to be reported. The only other way out claiming it as income is if the boy friend gave her a gift and then a gift return should be done. Quote Link to comment Share on other sites More sharing options...
jklcpa Posted April 16, 2015 Report Share Posted April 16, 2015 The boyfriend wasn't renting the second room, the boyfriend was living in the first bedroom with the owner. The square footage of the home that was rented, in this case its the second bedroom, is compared to the total sq ft of the home and that is the portion of the home that can be depreciated. That is also the % that is used to allocate the other indirect expenses related to the rental. Because this condo is also used as the owners personal residence, there is an additional limitation that says that the expenses are limited to rental income. In other words, because owner lives there, she can not create a rental loss. As far as the first bedroom, she can't deduct any depreciation or expenses based on that room's area because she is using it as her personal space also. I don't know how I feel about the $12000 from the boyfriend yet. If she is really calling it rent and it a set amount of $1,000 each month, then yes, it would be rental income. If she let him move in with her and the $12000 figure is his tally of paying some of their living expenses that they share, where he might go buy the groceries, etc, then maybe it isn't rent. Quote Link to comment Share on other sites More sharing options...
Pacun Posted April 16, 2015 Author Report Share Posted April 16, 2015 She didn't rent to her fiancé (I said boyfriend but he is her fiancé). She didn't rent anything to him he lived with her in the same room. The other room was rented on and off but available. Quote Link to comment Share on other sites More sharing options...
Pacun Posted April 16, 2015 Author Report Share Posted April 16, 2015 What kind of room is rented per day . . . oh, I get it. This room is close to the World bank so maybe it makes sense to rent it by the day. Quote Link to comment Share on other sites More sharing options...
mcb39 Posted April 16, 2015 Report Share Posted April 16, 2015 Oh Boy! Who uses the other rooms in the condo, or do they just stay in the bedroom all of the time? Quote Link to comment Share on other sites More sharing options...
jklcpa Posted April 16, 2015 Report Share Posted April 16, 2015 Oh Boy! Who uses the other rooms in the condo, or do they just stay in the bedroom all of the time? That's why the deductions are limited to only the sq ft of the one room being rented, and further limited to not allow any loss, all because the owner is also living in the property. 1 Quote Link to comment Share on other sites More sharing options...
Pacun Posted April 16, 2015 Author Report Share Posted April 16, 2015 Oh Boy! Who uses the other rooms in the condo, or do they just stay in the bedroom all of the time? If you have an agreement with the management company that you have a room for rent, you give them a key and they can show the room at any time during business hours. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted April 16, 2015 Report Share Posted April 16, 2015 Aren't short term rentals Schedule C? Less than seven days, or something like that? If she rents a room a day at a time, isn't she running a Schedule C business? 1 Quote Link to comment Share on other sites More sharing options...
jklcpa Posted April 16, 2015 Report Share Posted April 16, 2015 Aren't short term rentals Schedule C? Less than seven days, or something like that? If she rents a room a day at a time, isn't she running a Schedule C business? Yes, if the average rental is 7 days or less. You have to know the days rented and how many tenants there were. Many vacation rentals fall into this category and are not reported properly. Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted April 17, 2015 Report Share Posted April 17, 2015 (edited) She didn't rent to her fiancé (I said boyfriend but he is her fiancé). She didn't rent anything to him he lived with her in the same room. The other room was rented on and off but available. Semantics. Not relevant to the situation being discussed. Schedule C business. NOT a RENTAL. Trying to redefine the tax laws does not change the tax laws. Edited April 17, 2015 by Jack from Ohio 1 Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted April 17, 2015 Report Share Posted April 17, 2015 But no, she does NOT have to add 'imputed income" from her bf, but as stated, it should be Sch C, not E because of the time factor. As to the depreciation, use the sq foot rule to see if the ONE rented room depreciation was calculated correctly or not. And depending on the time factor on the rentals, you may need to file amendments because of the wrong schedule used in the past. 1 Quote Link to comment Share on other sites More sharing options...
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