IRS RV Lot rental income?

[rgvtexan]

Info and ideas on TAX implications. what forms to use where to find info.

if I were to buy a RV lot and build a Casita (day house) with bath, laundry no kitchen or sleeping area. Concrete slab and full hookups, and rent it to a Winter Texan (snowbird), how do I handle the IRS.

The expenses without any deprecation would be more than the income.
No interest exp. Power, water, property owners, tax, and insurance.

Rented 5 mo. of the year, used by me 1 mo., and tools and other stuff stored year round.

Any ideas or suggestions ?

[StevenNSteph]

For liability reasons you should hold the property in a LLC.

Rental Income/Loss would be reported on schedule C. Any loss would reduce your AGI (taxable income)
Keep complete records of everything because business entities that are operated at a loss year over year are a red flag for audit.

Since the loss might be small I would still hold the property in a LLC but you could "forget" to report the income or claim a loss. This will allow you to not depreciate the property and keep it at the original cost basis + improvements when you sell it, ergo pay less in capital gains taxes then.

[rgvtexan]

Thanks
The property will likely not be sold but inherited so the basis would be readjusted.
The LLC is a good idea.
It would be easy to forget as the paperwork would not justify the small loss, but the IRS might not agree. I know a loss for years shows up as a red flag.

[wnytaxman]

Originally Posted by StevenNSteph

For liability reasons you should hold the property in a LLC.

Rental Income/Loss would be reported on schedule C. Any loss would reduce your AGI (taxable income)
Keep complete records of everything because business entities that are operated at a loss year over year are a red flag for audit.

Since the loss might be small I would still hold the property in a LLC but you could "forget" to report the income or claim a loss. This will allow you to not depreciate the property and keep it at the original cost basis + improvements when you sell it, ergo pay less in capital gains taxes then.

The rental income would be reported on Schedule E, not Schedule C. You also have other issues when you use the property yourself for more than 14 days a year. Generally your use for more than 14 days will limit your loss. Rentals are generally operated at a loss and do not in and of themselves generate audits. If you can limit your own use to less than 14 days you can increase your loss deduction.

Under no circumstances should you report the rental income under Schedule C. That form is used for what is referred to as a "trade or business" and rentals of real property are not trades or businesses.

[wnytaxman]

Here's the specifics on vacation rentals. This is directly from the IRS website.
Tax Topics - Topic 415 Renting Residential and Vacation Property

If you'd like any clarification, let me know.

[rgvtexan]

Wnytaxman

I did not think it met the requirements for a dwelling unit, it has no kitchen or sleeping area. It has 2 garage doors, a walk door. a 3/4 bath and washer dryer. I would store woodworking tools and car parts in it. I also would store a car and golf cart in it during the summer. Is this considered personnel use? My MH would park there less than 14 days a year as I have a House 2 blocks away and put the MH in storage when I am in TX.
The rental income would be less than $1800 a year loss only a few $100. A lot of paper work to keep the IRS happy.
Thanks for your replies.

[wnytaxman]

Originally Posted by rgvtexan

Wnytaxman

I did not think it met the requirements for a dwelling unit, it has no kitchen or sleeping area. It has 2 garage doors, a walk door. a 3/4 bath and washer dryer. I would store woodworking tools and car parts in it. I also would store a car and golf cart in it during the summer. Is this considered personnel use? My MH would park there less than 14 days a year as I have a House 2 blocks away and put the MH in storage when I am in TX.
The rental income would be less than $1800 a year loss only a few $100. A lot of paper work to keep the IRS happy.
Thanks for your replies.

Sorry, I misunderstood and thought you were also living there for about a month every year. Based on what you are saying you would have a straight rental loss that you'd report on Schedule E. It sounds like any personal use would be minimal so I'd take the loss. It won't save you enough for the trip to Barbados but every dollar helps.