AIRBNB Client

[Burke]

Client has been renting rooms in home via AirBNB. Last year they sent a 1099MISC with the income labeled Rents. This year it came on a 1099K showing the gross amts paid in Box 1, and a detail of each months' in Box 5. This is still treated the same -- Sche C?

[JohnH]

Now that I looked up AirBNB, I'm wondering why this would not be reported on Schedule E. I have a similar situation with a client who has adult students (not Foreign Exchange High Schoolers) who stay in her home for 3 months at a time while they study English in the US. I was assuming it should be on Schedule E, but not you have me questioning whether it should be E or C.

[Burke]

I think the difference is that the rentals are less than 7 days. It's a B&B situation.

[JohnH]

In my situation, these are adults who are paying to attend private English language schools (not public schools). A part of their program cost is a home stay, and the school then pays this fee to the homeowner while the student is in the US. So in that sense my client's situation is more like yours, only the term is longer. If I were at the office I'd pull out the name of the program, but I'm home today and don't have access to the files.

(How's that for an edit?)

[Burke]

Sorry about that. I thought I had edited that message to remove the last sentence as I realized what you were talking about, was not what I was talking about. Evidently it didn't take. Or you beat me to the draw with the reply.

[FEDUKE404]

Short-term rental situation likely

I had never heard of Airbnb, Inc., so I went looking.

"Airbnb is a community marketplace where guests can book spaces from hosts, connecting people who have space to spare with those who are looking for a place to stay. Through their experiences on Airbnb, guests and hosts build real connections with real people from all over the globe."

From what I can tell, it is basically a world-wide brokerage service that offers a (somewhat) "safe" way of renting rooms, in a person's residence, for likely very short-term stays.

Probably not too far from a restricted B&B scenario for the actual property owner.

LINK: https://www.airbnb.com/help/question/481

It might make for a most interesting Schedule E, especially "days rented" issues.

If I had one of those to slide across my desk, in the absence of more information, I might lean heavily toward some kind of Schedule C scenario.

FE

[Burke]

That's exactly what it is. TP (who is employed full-time elsewhere) rents out bedrooms in his home usually for weekends and holidays -- 3-5 days at a time at once. In 2012 it was 90 days. In 2013 it was 43. Reservations are made on the Internet thru AirBNB and paid by credit card. Then they remit so much to the homeowner. It's the same as a B&B, where the TP furnishes breakfast, snacks, beverages, maybe wine, cleaning services, toiletries, etc. Popular for wedding parties.

[JohnH]

You guys have me rethinking my client's situation. I know the client must agree to furnish breakfast, but the renter is on their own for other meals. I'm going to go back and re-read their agreement to see if there are other services provided. Maybe this is Schedule C income rather than Schedule E.

The client may not be too happy about this.
If that's the case, I'm going to blame it on you two.
If she wants to discuss this, may I have your phone numbers please?

[Burke]

Hey, if it can be determined it is Sche E, I'm happy, the client is happy, and no SE tax comes into play. But in your case, it's not a "less than 7-day" thing, and I thought that was the rule.

[JohnH]

I did a little more reading on it this morning, and to me it looks as though the determining factor is whether or not the landlord provided "substantial services that re primarily for the tenant's convenience." Examples given are regular cleaning, changing linen, or maid services. Absent the "substantial services", it's a Schedule E item. Interestingly, some things which are not mentioned are meals, transportation, taking the tenant to experience cultural activities, etc. So i's obvious that the Schedule E vs Schedule C decision is very much a matter of facts & circumstances.

In my case, the issuer is ELS Language Centers, this is considered a Homestay, and the income is reported on a 1099-Misc, Box 1 (Rents). The host family agrees to provide a private bedroom, clean linens weekly, and breakfast & dinner. Student is responsible for cleaning their room, making their bed, doing their own laundry, etc.

Interesting tax problem.
I'm leaning toward Schedule E but with a strong disclaimer to the client.
I'm glad I filed an extension.

BTW, although I dislike disagreeing with FE, I think your client's situation is likely Schedule E, regardless of the length of the stay.

[mastertaxguy]

I had never heard of Airbnb, Inc., so I went looking.

"Airbnb is a community marketplace where guests can book spaces from hosts, connecting people who have space to spare with those who are looking for a place to stay. Through their experiences on Airbnb, guests and hosts build real connections with real people from all over the globe."

From what I can tell, it is basically a world-wide brokerage service that offers a (somewhat) "safe" way of renting rooms, in a person's residence, for likely very short-term stays.

Probably not too far from a restricted B&B scenario for the actual property owner.

LINK: https://www.airbnb.com/help/question/481

It might make for a most interesting Schedule E, especially "days rented" issues.

If I had one of those to slide across my desk, in the absence of more information, I might lean heavily toward some kind of Schedule C scenario.

FE

Is this really a trade or business for the taxpayer?

[Burke]

It is ongoing, and he is making a profit from it. Also, he does provide substantial services such as checking people in, carrying luggage, cleaning the rooms, preparing meals, offering materials and information, maybe even gift packages from local attractions, and disseminating information about things to do and see in the area. It's a B&B operation. I stay in them all the time. I just thought it was curious that last year they sent the TP a 1099MISC showing Rents. This year they sent a 1099K showing total payments for the year in Box 1, and month-by-month amts in Box 5. In fact, its the first time I've seen a 1099K.

[FEDUKE404]

More perspective

Is this really a trade or business for the taxpayer?

Is this really a qualifying rental property for the taxpayer?

VIDEO LINK: https://www.youtube.com/watch?v=SaOFuW011G8
Be sure to note all of those "$xyz per night" signs that flash during the video. . .

"You're always in control of who books your place. When you receive a reservation request, you have 24 hours to accept or decline the request or it will expire. We encourage you to reply to every request, even if just to decline it, as expired requests will negatively affect your search results and response rates."

"...we will provide you with the direct contact information for your guest. The guest will receive your contact information, including the address of your listing, as well. It is important that you contact each other and coordinate arrival and departure times, as well as key exchanges."

"Any tax forms issued to you display your total gross earnings, and it’s possible that not all of your income is taxable. Deductible items may include rent, mortgage, cleaning fees, rental commissions, insurance, and other expenses. Other factors you might consider when assessing taxable income include renting vs. owning the space, number of nights hosted, tax status, and total net amount earned."

FE