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How to report rental income on a lock-out condo

nms

We purchased a vacation condo which we are renting out through the management company that owns the building. The condo is actually three rooms, which can be rented out separately or in combinations.

How do I determine the "fair rental days" and "personal use days" for such a thing? Sometimes one room is rented but the other two aren't, or are rented by different people. I get a monthly summary of how many days each room or combo was rented, but I don't know what dates those are.

I considered dividing these into separate properties, except that the management company only sends me one 1099-MISC for the whole thing, so if I did this, how would I "attach" that 1099-MISC to them?

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Accepted answers

MatthewD

Hi NMS,

I recommend that you report it as one rental unit and for the number of days rented as a formula of (days available to rent in the year - personal days used). Even when one room is rented the unit is being rented. Or even if it is available to be rented, that counts as a rental day. Only when you are using it personally then it is not a rental day.

Just because each room may be rented out separately, this is still just one unit. Treat it as one unit for tax purposes.

Then when you enter depreciable assets (like: beds, chairs, dressers in each room), enter them all as separate "depreciable assets" on the same rental record. Enter all the rental expenses on the same rental record too.

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nms

Okay, I see from another comment that I can leave out the 1099-MISC as long as the totals add up to at least the amount on there. (https://community.freetaxusa.com/discussion/2087/can-a-1099-misc-of-the-total-rent-of-multiple-properties-be-allocated-per-property)

So for future readers, I'm going to divide these into separate properties. When the management company reports monthly rents, I'll divide the combinations up evenly among the rooms that make up the combination. All units in the combos will be counted as rented when the combos are rented. Other expenses will be divided evenly among the rooms where they apply to each room.

nms

Okay, so my question is now: How do I divide a depreciable asset among the three units, specifically the purchase of the condo? Will it be work to just attach the depreciation to one of the units, or am I missing something? I did get a warning "Rental Missing Depreciable Rental Property".

And if I do have to divide the assets, how do I do this considering that I declared them last year when I was treating this as one unit?

nms

Okay, now I'm leaning away from doing that, as other research says it is better to keep it as one economic unit, since it is all one property and won't ever be sold or managed separately. Argh. Is there anyone out there who can help me?

MatthewD

Hi NMS,

Just because each room may be rented out separately, this is still just one unit. Treat it as one unit for tax purposes.

nms

Thank you for your help. It's good to know that I can just list it as one.

So, if I personally used the condo for 5 days, and spent 1 day on some repairs and maintenance, then the personal use days are 5 and the fair rental days are 360 (366 days in leap year - 5 personal days - 1 work day). This is probably what was bugging me the most.

I see so much online that says I have to put the actual number of days rented, and I assume that meant "occupied by a renter paying a fair rent". It sounds like I can interpret that instead as "occupied or available for renting at a fair rent" instead.