All Forum Posts by: John Malone

@Chris Seveney for some** for others it becomes complex. For ex, do you have a CFO with 0% equity? Well that may be a BO. Most SMLLCs are basic but syndicates, funds and larger businesses have complexity

@Mike S. Depends on the auditor. Some will want full tracing proof.

@Max Smetiouk yes when in service.

@Jason Watson a good one is Lucero. Judge said: “However, an activity that involves the use of tangible property is not a rental activity if "[t]he average period of customer use for such property is seven days or less" in a taxable year (short-term rental). Sec. 1.469-1T(e)(3)(ii)(A), Temporary Income Tax Regs., supra. On average the Sea Ranch property was used for short-term rentals in both of the years in issue, so petitioners' short-term-rental activities were not rental activities under the statute.”

@Theresa McGallicher https://www.biggerpockets.com/forums/530/topics/1056436-clearing-up-confusion-on-tax-treatment-of-short-term-rentals

@Rachel Karl yes, this can be done on MIL sweet. However, there are actually been some court cases surrounding this topic with a slightly different application. We have been able to do this with several of our strategy clients, but the facts and circumstances matter, as well as the location and characteristics of this attached unit.

@Jonathan Snider another con may include the fact that you will now have multi state nexus and tax liabilities, which often times increases complexity for unaware investors

@Matthew Kauk I would suggest reading some of the in-depth forms in blogs on this topic, as it comes up quite a bit. Having executed this strategy, nearly 100 time with our clients there is more than meets the eye, and there is an audit risk which we have seen. Here is a good forum: https://www.biggerpockets.com/forums/530/topics/1056436-clearing-up-confusion-on-tax-treatment-of-short-term-rentals

@John Lim yes because segregation most likely would be worth it if you’re taking advantage of the short term rental tax strategy. Your cost basis in the property is defined as the purchase price plus any improvements. Remember you must also back out the land value. Cost seg studies have many different price points, depending on the complexity of the property but I would budget a few thousand dollars for a property the size.

Regarding material participation, you should check with your CPA or tax advisor but generally speaking yes that would be enough time. If you adequately follow the MP rules in IRC 469.

@Jason Watson there actually are quite a few STR cases. Most are back in early 2000s and 90s. We covered some in our STR course so will tey to post one... In reality, the IRS has WON in tax court converting passive LTR to STR!