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Subject:  Re: Roommate rental income Date:  6/15/2001  11:52 PM
Author:  acm4tax Number:  51848 of 127549

I'm not sure why you would even go through the hassle of reporting it.

Perhaps the writer is an honest US citizen who wants to pay his fair share of taxes and wants to know the legal way to collect a portion of the expenses for the home, but that will cost him the least amount in taxes. Besides, if he's ever audited, the first thing IRS will look at will be his bank statements and other sources of income to make sure he
has reported all his taxable income.

- My parents will be paying my brother's share of the rent and are willing to give me a lump sum when I close on the house. Could that be considered a gift instead of rent? My brother will not have a lease, but my friend will.

- Could I arrange for my roommates to pay 100% of the utilities (in exchange for lower rent), reducing the amount of money that I receive? Or are they not allowed to pay more than their 1/3 share?

The "gift" from the parents could be treated as such, but your parents will have to file a gift tax return. Probably no tax will be due, but it will be proof for you that the money received was indeed a nontaxable gift.

As for your roommates paying the utilities and thus lower rent. A least agreement for less than 80 of FMV will mean the maximum you could write off would be the amount of rent you receive - hence no tax benefit.

Actually you would do better if you sat down with a tax professional who could review your whole tax situation to see what tax favored options may be available to you.

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