All Forum Posts by: Mel Selvidge

Can you get a zoning variance and operate 100% legitimately?  

The TOT regulation includes any structure used for transient sleeping per poses and states that you must register said place and remit taxes or be subject to a misdemeanor and a fine of up to $1K and/or up to 6 months in jail.  While I doubt they'd send you to the pokey for illegally renting an RV on airbnb (unless there was a grave injury or some other high profile badness on the premises), Orinda seems like the sort of place where people care quite a bit how their neighbors' actions affect their property values.  

Insurance might be tricky as well.  I'd worry that you'd have liability if something bad happened (like a fire or serious injury), and it came to light that the accommodation was not legal.

@Dave Toelkes , 

Thanks a lot!  

I put it in service almost immediately as the contractor who is also from a distance signed a lease, paid rent, and lived in it  during the rehab.   

I'd love to talk about this with my CPA but I'm still looking for one with vacation rental experience in my area.  I have a couple of out of area references, but I'd prefer someone I can sit down with if need be.   If anyone wants to reach out or recommend someone...

@Jon Holdman, I wanted to add thanks for taking the time to respond.

I do get the at furniture and silverware depreciate over 5 years, but 5 years from now when they are fully depreciated, I don't anticipate needing to buy a whole house full at once, so the expenses are higher to start.  Plus with a place that is brand new, every bottle of windex, sponge, etc. which is immediately extensible needs to be bought, and I've made way more trips there than I will need to once it's been running for a while.

My point is that the first year in a vacation rental is going to have more expenses and less income than future ones, and I'm likely losing money at after depreciation this year.  

re: grouping from the IRS:  http://www.irs.gov/Businesses/Small-Businesses-&-S...

A real estate professional may file a written election to group all rental real estate activities as one activity. As a practical matter, most elections were filed in 1995. However, the taxpayer may file the election in any year, and it will bind future years from that point.

My persistent question is what is this written election to group?

My husband and I purchased a vacation rental property four hours from where we live in January.  It was gutted when we got it.  Working with a contractor who rented it during the renovation, we got it remodeled, furnished, and ready for vacation rental by Memorial Day.  It has rented well, but because of the late start and pile of deductions associated with buying a whole home's worth of furnishings at once, I strongly suspect it will show a loss at the end of the year.  I'm looking at getting a second vacation rental property that would definitely be a loss as there is little time left to recover initial costs.  

My questions:

I've read that activities need to be "grouped" to count together as activities of a "real estate professional" for tax losses.  What is the acceptable procedure for "grouping" activities at different properties?

If I incur a loss on my RE business, can the income only be subtracted from other income that I earned, or can it be subtracted from my husbands' (married filing jointly)?

Is this loss something that could trigger the AMT if we weren't already liable for it?  If we do get the AMT, is the loss still deductible?

Thanks for your insights and time!