How to treat mortgage payments by grown children

[dktax]

Taxpayers two daughters will live in home in another state. Oh darn, gotta file other state return, too. FMV of rent for the neighborhood is $1100. Taxpayer plans to winter in home. How do I treat the rental income (mortgage pmt of $800 per month) and expense? All on Sch E as below market value and so loss is limited? Thanks for your input.

[erchess]

Here Goes

If I understand you correctly your client is renting a home that you believe could be rented for $1100 to his daughters for $800. I also got the impression that the taxpayer plans to spend significant time in the house himself. I honestly don't know how the rules for part personal use interact with the rules for rental below fair market. Maybe one of the super smart people like NYEA or Uncle Sam will weigh in and enlighten us all.

[dktax]

Yes...

The mother purchased the home and is planning to spend her winters there in a warmer climate. The realtor who sold her the house says that homes in the area rent for approx $1100 per month. The children are making the house payments of $800. Any ideas on the best way to handle this?

[Gene V]

I'm not one of the smart one, however see TTB 7-7 and 8, and see if that helps.

Note on right column of page 7-7

Did You Know? Use of a dwelling unit by any individual who pays less
than fair rental value is considered personal use by the owner; therefore,
no expenses attributable to that period of rental are deductible. Rental
income must nevertheless be reported as income. [IRC §280A(d)(2)]

[dktax]

Thank you.

Thanks for the pointer. I should have looked there first.