All Forum Posts by: John Malone

@Ankit Biradar there are a few long threads on this over the last few years. As always, your CPA should advise on this

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

@Andrew Yu the LLC is irrelevant. Interest tracing rules apply here but an LLC makes no difference

@Stephen Sayles stuck in the Senate. Looking worse every day

@Josh Davidson if a lawyer intent on litigating wants to get to you, they will get to you

@Ryan Leake Id agree with others, it is not a loophole, rather, the correct application of the law. In fact, the USTC has found in favor of the IRS when a taxpayer did not apply the law correctly (what everyone deems the loophole).

We've published blogs and courses on this topic for a few years but unfortunately we still see the incorrect application of law on 70% of incoming STR prospects!

@Hong Zhu most likely schedule E, although we routinely review returns that are incorrect.

See IRS CCA 202151005

@Nate Meeker yes! Completely agree. From IRS audit experience, think of it this way:

If the auditor views the hours as “unnecessary” OR over the top that had no bearing on the successful operation, they will disallow.

Real world example: You live in Colorado and have a STR in Arizona. You drive twice per month to work on them and count all travel time. Experienced auditors WILL disallow these hours and your CPA may successfully be able to argue for a few hours (equivalent of a flight).

Zillow browsing, podcasting, over the top travel will be disallowed 10/10 times.

@Zachary Jensen transient rentals are directly addressed in the tax code. Loophole is a fun term, but its really just applying tax law correctly. Did they intend this? Who knows, but these laws have addressed transient rentals since the 80s.

There is a case where the judge actually applied the "loophole" which hurt the TP as they wanted to use STR hours as REP hours. So it works both ways sometimes!

@Michael Margarella yes. We have multiple clients with multi family STRs.

@Julian Martinez correct, no accelerated depreciation!