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

Happy to be of transparent service to you 🙏From "CENTER" field and according to 49 years of experience mate... and the most comments and likes out of 2M+ Bigger Pockets subscribers...Honestly mate, it really stopped being comical and turned sad.

But you may need to review your current holding and fill in the holes so that your ship is tight and can weather storms for you to leave a W2 long-term.The above is regardless of whether you want to do SFR, MFR, Officers, Land, development, or Shopping centers.

If you see a retail shopping center with one or more vacancies, hop on google/yelp/etc to find out what business used to be there (old yelp reviews, for example).

@Craig LesslerYou should work with your tax pro to determine the proper treatment. 

Understand what other development requirements are for the residential units, for example, each unit may require an advanced treatment septic system (if not connected to sewer already.

If it is a normal 70/30 leveraged property, you may end up subject to tax on 70% of your returns anyways - so cost benefit, is that 30% tax free portion worth the high tax rates paid and additional filing fees to get tax free treatment on the 30%?

As I said these "number of days" can change and float as needed but in my world its not only reasonable but common and customary for TT's to have free rent during buildout.for reference we are traditionally doing $500K - $800K build-outs in grocery anchored retail centers. 

Assuming this is proper in your situation, with treatment of a tax partnership, reporting would be as such with a Form 1065 filed, claiming all rental income and expenses, and then issuance of a K-1. 

SEBASTIAN J.SCALORACommitteeTHE SCALORA LAW GROUP100 RIVERVIEW CENTER SUITE 285MIDDLETOWN CT 06457