Treatment of Campground earnings?

[Hamacher]

I have a new client that runs a campground. I'm hoping someone can settle a disagreement we are having in the office. The campground has 80 lots that it rents May to October and 2 houses it rents year round. Of the 80 lots, 50 are rented by seasonal campers. The remaining 30 lots are available to be rented by the day, week, etc. They also have a small camp store where they sell pop, ice cream, fire wood, rent paddle boats, etc.

How should the income be classified (self employed earnings, rental income, ...)?

Thanks in advance for your input!

[kathyc2]

I have a new client that runs a campground. I'm hoping someone can settle a disagreement we are having in the office. The campground has 80 lots that it rents May to October and 2 houses it rents year round. Of the 80 lots, 50 are rented by seasonal campers. The remaining 30 lots are available to be rented by the day, week, etc. They also have a small camp store where they sell pop, ice cream, fire wood, rent paddle boats, etc.

How should the income be classified (self employed earnings, rental income, ...)?

Thanks in advance for your input!

Obviously the profits from the store are subject to SE. Depending on what services they offer, the camper rent may be or may not be subject to SE.

Has client considered reorganizing as an S-corp? Then they could take a reasonable salary and have the balance not subject to FICA? Since they would have quite a bit of capital, it would seem like it would be "reasonable" to treat a large portion of income as not subject to "reasonable" compensation.

If they don't want to go the S route, you may have to allocate part to C and part to E.

[Hamacher]

Does anyone have a campground as a client?

Obviously the profits from the store are subject to SE. Depending on what services they offer, the camper rent may be or may not be subject to SE.

Has client considered reorganizing as an S-corp? Then they could take a reasonable salary and have the balance not subject to FICA? Since they would have quite a bit of capital, it would seem like it would be "reasonable" to treat a large portion of income as not subject to "reasonable" compensation.

If they don't want to go the S route, you may have to allocate part to C and part to E.

Yes... the lot rent is what has led to the discussions. The question is whether the seasonal lots can be deemed rental income and the remaining 30 subject to SE tax or... can all 80 lots be deemed rental or... do they all have to be subject to SE tax?

Anyone have a campground as a client?

[Hamacher]

No one?

No one has any thoughts?

[BHoffman]

"Trailer park owner. Rental income from a trailer park is subject to SE tax if you are a self-employed trailer park owner who provides trailer lots and facilities and substantial services for the convenience of your tenants.
You generally are considered to provide substantial services for tenants if they are primarily for the tenants' convenience and normally are not provided to maintain the lots in a condition for occupancy. Services are substantial if the compensation for the services makes up a material part of the tenants' rental payments.
Examples of services that are not normally provided for the tenants' convenience include supervising and maintaining a recreational hall provided by the park, distributing a monthly newsletter to tenants, operating a laundry facility, and helping tenants buy or sell their trailers.
Examples of services that are normally provided to maintain the lots in a condition for tenant occupancy include city sewerage, electrical connections, and roadways."

From IRS Pub 334 after google search terms: trailer lot rental income tax IRS