Airbnb Rentals - Schedule C or E?

would you agree that a short rental period would “generally” require more services to be furnished?

Not me.

I know the pubs are not authoritative, but they have good info regarding schedule C vs schedule E, or something else. Pubs. 527 and 334 are good ones to look at. Don't see anything referencing 7 days or less. From Pub. 527:
Which Forms To Use
The basic form for reporting residential rental income and expenses is Schedule E (Form 1040). However, don’t use that schedule to report a not-for-profit activity. See Not Rented for Profit, in chapter 4. There also are other rental situations in which forms other than Schedule E would be used.
Schedule E (Form 1040)
If you rent buildings, rooms, or apartments, and provide basic services such as heat and light, trash collection, etc., you normally report your rental income and expenses on Schedule E, Part I.
List your total income, expenses, and depreciation for each rental property. Be sure to enter the number of fair rental and personal use days on line 2.
If you have more than three rental or royalty properties, complete and attach as many Schedules E as are needed to list the proper-ties. Complete lines 1 and 2 for each property. However, fill in lines 23a through 26 on only one Schedule E.
On Schedule E, page 1, line 18, enter the depreciation you are claiming for each property. To find out if you need to attach Form 4562, see Form 4562, later.
If you have a loss from your rental real estate activity, you also may need to complete one or both of the following forms.
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Form 6198, At-Risk Limitations. See At-Risk Rules, later. Also see Pub. 925.
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Form 8582, Passive Activity Loss Limitations. See Passive Activity Limits, later.
Page 2 of Schedule E is used to report in-come or loss from partnerships, S corporations, estates, trusts, and real estate mortgage investment conduits. If you need to use page 2 of Schedule E, be sure to use page 2 of the same Schedule E you used to enter your rental activity on page 1. Also, include the amount from line 26 (Part I) in the “Total income or (loss)” on line 41 (Part V).
Form 4562. You must complete and attach Form 4562 for rental activities only if you are claiming:
•
Depreciation, including the special depreciation allowance, on property placed in service during 2018;
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Depreciation on listed property (such as a car), regardless of when it was placed in service; or
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Any other car expenses, including the standard mileage rate or lease expenses. Otherwise, figure your depreciation on your own worksheet. You don’t have to attach these computations to your return, but you should keep them in your records for future reference.
See Pub. 946 for information on preparing Form 4562.
Schedule C (Form 1040), Profit or Loss From Business
Generally, Schedule C is used when you provide substantial services in conjunction with the property or the rental is part of a trade or business as a real estate dealer.
Providing substantial services. If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Use Form 1065, U.S. Return of Partnership Income, if your rental activity is a partnership (including a partnership with your spouse unless it is a qualified joint venture). Substantial services don’t include the furnishing of heat and light, cleaning of public areas, trash collection, etc. For more information, see Pub. 334, Tax Guide for Small Business. Also, you may have to pay self-employment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax. For a discussion of “substantial services,” see Real Estate Rents in Pub. 334, chapter 5.

This is from Bailey v. Commissioner.

https://www.novoco.com/sites/default/fi ... y_case.pdf

The average period of customer use for the Lake Arrowhead property was less than 7 days during 1996 and 1997. Thus, the rental of the Lake Arrowhead property is not a "rental activity" as defined in section 1.469-1T(e)(3)(ii)(A), Temporary Income Tax Regs., supra, not "rental real estate" under section 1.469-9(b)(3), Income Tax Regs., and not included in the election under section 469(c)(7) to treat all interests in rental real estate as a single rental real estate activity. See Scheiner v.
Commissioner, T.C. Memo. 1996-554 (where average period of customer use less than 7 days, condominium hotel activity was not rental activity under section469(j)(8) and not considered a passive activity under section 469(c)(2)); Mordkin v. Commissioner, T.C. Memo. 1996-187.

I think the important thing here is not where it goes, but what you do with the activity. Don't include the activity in the noted 469 computations. And if the services are substantial, file Schedule SE.

Does the "seven days or less rule" have anything at all to do with determining whether or not to report a short average rental period real estate rental activity's net income or loss as SE income on Schedule SE?

I propose that it does not.

Please read the following, taken from IRC Section 1402(a):

... in computing such [SE] gross income and [SE] deductions ... there shall be excluded rentals from real estate and from personal property leased with the real estate ... together with the deductions attributable thereto, unless such rentals are received in the course of a trade or business as a real estate dealer ... [emphasis added]

Chay, if you agree that wearing a seatbelt would “generally” prevent injuries, would you agree that a short rental period would “generally” require more services to be furnished?

I think before I take a position on this, I'd like to know what we mean by "providing services". T.D. 8175, which is what we're ultimately discussing, doesn't define the term. Publication 527 discusses "substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service". Should we assume the Pub. 527 definition applies? Are we including the cleaning that occurs between tenants in the services provided to tenants? Are the "substantial services" with reference to each tenant individually, or are we looking at the total of all services performed throughout the taxable year without regard to who received them?

Also, even if I do agree with this statement, is that enough to take the "seven day rule", which as written applies only to section 469, and prove that it also applies to section 162 and/or section 1402? If not, can the rationale for that rule be transformed into a presumption that applies to those other sections? If so, is the presumption rebuttable, or does it apply no matter the circumstances? If there are indeed cases where the presumption can be shown not to apply, how is the resulting position any different from my position, which is that whether an activity is a section 162 is always a facts-based determination and is not beholden to any bright-line rules such as the section 469 seven day rule?

Perhaps Taxmaster would like to answer these last few questions, as he's the one who introduced T.D. 8175 to the discussion.

I was not in any way suggesting that the 7 day rule applies for self-employment tax purposes. My post was in response to Makbo's comment that the "rationale" for the 7 day rule in the 469 regulations was "ridiculous".

I was not in any way suggesting that the 7 day rule applies for self-employment tax purposes. My post was in response to Makbo's comment that the "rationale" for the 7 day rule in the 469 regulations was "ridiculous".

The question that you raise has larger implications within the context of this thread, which is why I extended the discussion in my response to your post. Feel free to ignore the second paragraph and respond only to the first, where I ask you to clarify what it is exactly I would be agreeing with.

Are the services and level of service required for SE tax the same as the services required for 7 day, or separately for 30 day rental exclusion? Votes please.
1. Services for purposes of SE tax Reg 1.1402(a)-4(c)(2) are discussed in Rev Ruling 83-139.
""When determining whether service is for the maintenance of property, the courts have emphasized that the rental exclusion must be read narrowly and that any service not clearly required to maintain the property in condition for occupancy is considered work performed for the tenant. Delno v. Celebrezze; Johnson v. Commissioner, 60 T.C. 829 (1973). The court in Bobo further pointed out that, once the services that are considered to be for the convenience of the tenants have been determined, it is necessary to determine whether the compensation for these services constitutes a material portion of the payments made by the tenants of the trailer park. If it does, the services are substantial and the income received by the trailer park owner will not be considered "rentals from real estate," but will be "net earnings from self-employment" under section 1402(a) of the Code.
2. With respect to the 7day and 30 day tests T.D. 8175 7 day The rationale for the “seven-day rule” is that a customer's use of property for seven days or less generally will require the person furnishing the property to provide services significant enough to justify the conclusion that the person is engaged in a service business rather than a rental activity. 30 day The second exception provides that an activity involving the use of tangible property is not a rental activity if (a) on the average, the period for which each customer uses the property is greater than seven days but not greater than 30 days and (b) significant personal services are provided. Where personal services are: Section 1.469-1T(e)(3)(iv) provides that only services performed by individuals are treated as personal services. Thus, services such as telephone and cable television service are not taken into account. Section 1.469-1T(e)(3)(iv)(B) also provides that certain specified services, referred to as “excluded services” are not taken into account. The excluded services are (a) all services necessary to permit the lawful use of the property, (b) services in connection with the construction of improvements or in connection with the performance of repairs that extend the useful life of the property, and (c) in the case of improved real property, the kinds of services commonly provided in connection with long-term rentals of high-grade commercial and residential property (e.g., janitorial services).

Has it been concluded somewhere in this thread that if Gamma's ocean block beach rental property [seven or fewer days average occupancy per rental period] has a tax loss for the year, that loss is *not* subject to the PAL limits, and is a self-employment loss at the same time?

This is a totally unexpected double winner: deductible loss not subject to the PAL loss limitation **and** a self-employment loss, too!!

[If you don't remember the scenario, Gamma's beach house is a weekly rental "during the season," to just about anybody who'll pay the rent - think groups of beer-swilling college students - and Gamma provides less service - basically none - to her tenants than some folks would consider appropriate, necessary, required by local code, or just plain courtesy.]

I don't think anyone's taking that position.

Basically my position is that it's possible to have a section 212 rental activity that isn't subject to PAL rules on account of the seven day exception. In that scenario, there would be no self-employment loss because 1.1402(a)-4(c)(2) requires services to be rendered to the occupants for SE treatment to apply, and this fact pattern would also point to a section 162 activity, which would then be subject to the PAL rules.

Gamma's beach house is a good candidate for deductible tax losses from a rental with no material or active participation and no real estate professional election. Party on!

I'm ready to go with Tax Me Up's post #26, above.

If it's a profit it goes on E, if it's a loss it goes on C.