Hello everyone. I have a follow up question. If TP hires a management company to take care of yard, pool, cleaning between guests, etc would that be considered material participation to claim the loss? Thank you for feedback
Year 1 - You mean short-term rental with MATERIAL participation? That is a nonpassive activity.
Year 2 - Converts to long-term rental - becomes a passive activity. If the taxpayer ACTIVELY participates and is under $150k MAGI, they can use up to $25,000 in losses against nonpassive income.
Hello everyone. I have a follow up question. If TP hires a management company to take care of yard, pool, cleaning between guests, etc would that be considered material participation to claim the loss? Thank you for feedback
Would a 3115 be required to move from 39 to 27.5 years or is it a just whole new activity where the depreciation carries over?
It is not a change in the method of accounting; you do have to change the recovery period.
What issues are presented with someone who has a bona fide short term rental with active participation who converts to long term in the second year?
Year 1 - You mean short-term rental with MATERIAL participation? That is a nonpassive activity.
Year 2 - Converts to long-term rental - becomes a passive activity. If the taxpayer ACTIVELY participates and is under $150k MAGI, they can use up to $25,000 in losses against nonpassive income.