cpabsd Posted March 20, 2011 Report Share Posted March 20, 2011 Taxpayer has a rental property that has been rented at times for the past 5 years. They use this property as a means to provide housing to Missionaries or friends that are in need of short term rental, usually one year or less. They advertise to select groups when the house is empty. In order to avoid FMV issues, the taxpayer has reported rental income the past 3 years equal to FMV monthly rent, although that amount was not always received. The rental property is a separate residence. Now, due to work promotion, taxpayer will have their tax return audited by the IRS and they want to make sure of proper treatment. ( I do not prepare their return. ) My research from Pub 527 indicates that since the rent is below FMV, it is all considered personal use and only expenses equal to income received can be deducted. Is this correct? Quote Link to comment Share on other sites More sharing options...
Lion EA Posted March 20, 2011 Report Share Posted March 20, 2011 Depending on how much below FMV it was, you may be able to make a case for selective rentals to known tenants kept the property in better shape than renting to strangers and was, therefore, worth a deduction in rent. Research court cases. Quote Link to comment Share on other sites More sharing options...
cpabsd Posted April 14, 2011 Author Report Share Posted April 14, 2011 Bumping this to the top. Does anyone have any thoughts regarding this? Quote Link to comment Share on other sites More sharing options...
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