Poll: How many of us are reporting ABB/VRBO on Schedule C?

Technical topics regarding tax preparation.
#1
Posts:
2611
Joined:
24-Jan-2019 2:16pm
Location:
North Shore, Oahu
It seems like I'm seeing more of this than ever.

Clients with short term rentals where the guests stay only for a few days, the room(s) are cleaned, and new guests arrive.

Poll: How have you been handling this?

A) I put most of them on Schedule C.
B) I still put most of them on Schedule E because I think it's OK to report it that way.
C) I still put most these on Schedule E, but maybe I should be putting them on Schedule C.
 

#2
Posts:
1018
Joined:
10-Jun-2019 4:20pm
Location:
WESTERN USA
viewtopic.php?f=8&t=10040&hilit=airbnb&start=50
 

#3
Posts:
8155
Joined:
4-Mar-2018 9:03pm
Location:
The Office
Option D: I put most of these on Sch E, because I know it's correct.

STRs would only fall on Sch C if hotel-like services are being provided with the rental.

Most AirBnBs, VRBOs, etc don't offer hotel-like services.
 

#4
Posts:
6043
Joined:
22-Apr-2014 3:06pm
Location:
WA State
"Because I know its correct."

That's an awfully presumptuous statement as proper reporting is completely based on facts and circumstances.
I have a handful and they're about split.
~Captcook
 

#5
Posts:
8155
Joined:
4-Mar-2018 9:03pm
Location:
The Office
CaptCook...

That quoted statement of mine was meant to convey that I don't things because I "think it's OK" but rather there is research involved and I'm comfortable with the position...

I didn't state that all STRs belong on Sch E, rather "most", as that has been my experience in practice. Perhaps your experiences have been different.
 

#6
Posts:
824
Joined:
28-Apr-2014 9:53am
Location:
Eastern United States
After reading the "recommendations" in the AirBnB agreement, I lean towards Schedule C. AirBnB recommends providing new linens (sheets, towels, etc.); a coffeemaker, preferably one that does single servings; bottled water in the room, among other items. To me, these qualify as amenities, and not normal items provided under a standard rental agreement.
 

#7
Dennis2  
Posts:
816
Joined:
18-Feb-2016 11:08am
Location:
New York State
Where i live a schedule C would make the rentals subject to the hotel room tax
 

#8
Dennis2  
Posts:
816
Joined:
18-Feb-2016 11:08am
Location:
New York State
Actually we apparently caught up to airbnb and they collecct and remit the tax
 

#9
Posts:
824
Joined:
28-Apr-2014 9:53am
Location:
Eastern United States
Yes, here AirBnB collects and remits the tax. Counties advise the host(s) to make sure AirBnB identifies the property because the counties will go after this tax if they don't see where it has been credited to the address where the service is provided. Counties regularly peruse these sites to check local addresses advertising/ listed on these sites. Very easy to do.
 

#10
Dennis2  
Posts:
816
Joined:
18-Feb-2016 11:08am
Location:
New York State
I guess the question becomes, at least in occupancy tax jurisdictions, is there any justification for Schedule E?
 

#11
Posts:
2611
Joined:
24-Jan-2019 2:16pm
Location:
North Shore, Oahu
When I read the publication (of course I know it's not the tax code), I can't justify putting any of them on E.

In Hawaii, all of these are subject to a pretty heavy hotel tax (called Transient Accommodations Tax) in where the owner must file and pay these taxes.
 

#12
HowardS  
Posts:
2820
Joined:
21-Apr-2014 3:12pm
Location:
Southern Pines, NC
Hotel and occupancy taxes imposed locally determine Federal taxation???
Retired, no salvage value.
 

#13
JR1  
Posts:
6043
Joined:
21-Apr-2014 9:31am
Location:
Western 'burbs of Chicago
Mine have been Sch. E....mostly because its rental property that they just switched over to AirBnB....so it's the same thing other than they clean it more often now. Whoopee. That just does NOT rise to the level of services necessary to move it to Sch. C in my mind....these are recreational areas or anything....just clients realizing that they can earn more this way on the same property.
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 

#14
Nilodop  
Posts:
18759
Joined:
21-Apr-2014 9:28am
Location:
Pennsylvania
Hotel and occupancy taxes imposed locally determine Federal taxation???

And, HowardS, Federal taxation determines hotel and occupancy taxes imposed locally?

Both good questions.
 

#15
HowardS  
Posts:
2820
Joined:
21-Apr-2014 3:12pm
Location:
Southern Pines, NC
NC charges sales tax on reservations of less 90 nights. Our county charges hotel and occupancy taxes on stays of less than 90 nights. I would never let those facts influence my schedule C or E decision, the topic of this discussion.
(not a response to any particular post, just my position on the matter)

Regarding the 7 day "rule". Let's try an example:
Joe owns two airbnb-type rental properties. He provides minimal service, namely changing sheets and towels and cleaning between guest stays.
Rental A is near DisneyWorld. 12 stays. The stays range from 3 day weekends to 7 days, averaging 4.6 days.
Rental B is on Jacksonville Beach. 12 stays. The stays range from 3 day weekends to 14 days, averaging 9.2 days.
Schedule C or E? Why?

To throw in some flak, one year Joe's DisneyWorld rental has one renter who stays 30 days and the average that year is skewed, now averaging 9.9 days. Does it alter the decision?

My position (just mine) in all cases...schedule E...these are not hotels or bnb's, they are rentals.
Retired, no salvage value.
 

#16
Posts:
8155
Joined:
4-Mar-2018 9:03pm
Location:
The Office
Howard, I agree with your position, but what 7 day "rule" are you referring to? The one contained in the IRC Sec 469 temp reg that deals with average period of customer use?

I'm not aware of any authoritative guidance suggesting length of stay influences the Sch C vs Sch E decision. The decision deals with the provision of services. Treas Reg Sec 1.1402(a)-4(c)(2) and Rev Ruling 57-108.
 

#17
Posts:
824
Joined:
28-Apr-2014 9:53am
Location:
Eastern United States
If not providing services, why would they "change" the sheets and towels? Shouldn't the tenant just take his own sheets and towels with him when he leaves? If the landlord is providing the sheets and towels, is he now providing amenities which might elevate the endeavor to a Business (Schedule C.)?
 

#18
HowardS  
Posts:
2820
Joined:
21-Apr-2014 3:12pm
Location:
Southern Pines, NC
Yes, the reason I put "rule" in quotes. The PAL definition of rental activity is being misused to classify a 7 day or less rental as a business to be put on schedule C, ignoring the all important "for purposes of this section". Part of this is due to the confusion of such statements as:
1.469-1T(e)(3)
(ii) Exceptions. For purposes of this paragraph (e)(3), an activity involving the use of tangible property is not a rental activity for a taxable year if for such taxable year -
(A) The average period of customer use for such property is seven days or less;


And the PAL ATG:
• Six exceptions exist to the definition of “rental” (Reg. § 1.469-1T(e)(3)(ii)).
Certain activities normally thought of as “rentals” are specifically treated as
non-rental businesses under this section.

and:
Under Reg. § 1.469-
1T(e)(3)(ii), six types of activities normally defined as rentals, are treated as nonrental activities, i.e. as businesses, in most cases

Retired, no salvage value.
 

#19
HowardS  
Posts:
2820
Joined:
21-Apr-2014 3:12pm
Location:
Southern Pines, NC
If the landlord is providing the sheets and towels, is he now providing amenities which might elevate the endeavor to a Business (Schedule C.)?


Or for that matter, if the landlord provides a bed, a sofa, a coffee pot, dishes, toilet paper....a furnished rental? :roll:
Retired, no salvage value.
 

#20
Posts:
8155
Joined:
4-Mar-2018 9:03pm
Location:
The Office
HowardS wrote:The PAL definition of rental activity is being misused to classify a 7 day or less rental as a business to be put on schedule C, ignoring the all important "for purposes of this section".


Agree.

Yellowdog wrote:If not providing services, why would they "change" the sheets and towels? Shouldn't the tenant just take his own sheets and towels with him when he leaves? If the landlord is providing the sheets and towels, is he now providing amenities which might elevate the endeavor to a Business (Schedule C.)?


Yellowdog, isn't the provision of clean sheets and towels not the provision of services but of property? There shall be excluded rentals from real estate and from personal property leased with the real estate IRC Sec 1402(a)(1). It's not dissimiliar from a furnished rental, as Howard noted.

A maid coming in regularly to change the towels and launder items would be provision of a service.
 

Next

Return to Taxation



Who is online

Users browsing this forum: Coddington, EstatesAndMore, Google [Bot], HowardS, JoJoCPA, MilesR, Nilodop, rbynaker, Trailman423 and 130 guests