Commercial Rental Storefront with STR above.

[Jevon Reile]

Has anyone purchased a commercial retail space property with living space above and used to living space as a short term rental? From a tax perspective can the building be divided by square footage with the retail space on the bottom being passive income in the short term rental on top being non-passive income? The hope would be to materially participate in the short-term rental above (since REPS isn’t required and not an option). How would a cost segregation  analysis be handled in a situation like this where there are two different uses within the same building?

[Yonah Weiss]

@Jevon Reile From a depreciation and cost seg standpoint the property would be treated as one. A mixed use property is typically based on an 80/20 rule, but in this case both of the uses are 'commercial' since STRs are treated as 39-year depreciation since they have a transient usage.