New Client

[Booger]

Client builds cabins and rents them out (SHORT TERM) to the public. He actually bought around 300 acres

and is building the cabins on this site. He formed a LLC with his son. His first year of operations

is 2008. Do I use the 39 year commercial property life or do I use the 27.5 year residential

rental life for the cabins?

As far as the actual business activity is concerned, we will be filing a 1065. Since this is a business,

I'm planning on reporting the rental income and related expenses on Page 1 of the 1065, instead

of reporting the income and expenses on Form 8825. Client has employees at the site working in

the rental office and also maintenance people on the payroll.

Should the income/expense activity be reported directly on Form 1065, or does Form 8825 have to be

used?

Thanks in advance for your input.

[kcjenkins]

I would use the 8825 and just put the 'general expenses on the 1065, if you want to track the expenses by unit. Otherwise, given that this sounds like it is more like running a motel than a rental business, I would agree that the 8825 would not be needed. But the depreciation would be 'commercial', not res rental, so it's 39 years. Other advantage, tho, is that the §179 limitation for res rental property would not apply to the other business assets, including furniture and fixtures, mowers, appliances, etc.

[Booger]

Thanks for your response, KC. I've seen the cabins, and they are top of the line (full kitchens, jacuzzis, washer/dryers).

Client wants to barter my fee with a free 1 week stay for my wife and me. May just take him up on it.

[kcjenkins]

So there may be a clear benefit in not treating them as res rental, even if you had that option, which I don't think you do. You do need to inventory the F&F, etc, tho, so that you can take the shorter depreciation on those items.

Don't forget to report that 'barter' income, too. But if it's a 'working visit' where you are doing some of that inventory, etc, be sure to use the wholesale rate for the barter, not the full price rate.