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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121585  
Subject: Re: Vacation vs residential rental business Date: 2/2/2012 8:39 AM
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It's real estate dealers that would use C, or motels and hotels, though the criteria there seems to be additional services, like maid service, which some VRs do supply, so then where does it lie?

As best as I can tell, in the eye of the beholder.

When I hear "vacation rental" I think of residential real estate that's rented out on a short-term basis. It's been standard in my experience that it's professionally cleaned after each rental, but there are no such services provided during the tenancy. It may or may not be "bring your own linens." Booking and rent collection may or may not be handled by an agent.

There's been some touching on the active v. passive issue in this thread. By definition residential real estate rental is a passive activity. Unless otherwise provided in the law, passive losses are deductible only against passive income. However, there's a special provision for rentals if you "actively" participate. In that case you can deduct $25,000 in loss against nonpassive income if you meet the AGI restriction ($100K?). Active participation, as described in Pub 527, isn't a terribly high bar to clear.

Finally a caution about books. I haven't read the one mentioned, but a mention about all its fabulous deduction ideas rang my "uh-oh" bell. This is, no doubt, because I was an avid follower of the Renaissance--the Tax People case. Always remember "ordinary and necessary" and your mother's advice that "if it sounds to good to be true, it is."

Phil
Rule Your Retirement Home Fool
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