Loan or Rent?

[Dude]

Taxpayer is claiming a dependent who is paying her monthly from non taxable income. Taxpayer paid dependents legal bills but says this is not rent. Instead it is a repayment of a loan made for legal bills. What say you?

[ATSMAN]

Depends on facts as we all know. If there was a written or verbal agreement to repay the loan extended for some legal bills and it STOPS once the loan is repaid then it can be argues it is a loan repayment. On the other hand if this continues as long as that dependent lives in the home it is most likely rent OR a share of the household expenses.

I have young people as clients who have one or two room mates. The lease is in one person's name and they split all the bills.

[Dude]

Depends on facts as we all know. If there was a written or verbal agreement to repay the loan extended for some legal bills and it STOPS once the loan is repaid then it can be argues it is a loan repayment. On the other hand if this continues as long as that dependent lives in the home it is most likely rent OR a share of the household expenses.

I have young people as clients who have one or two room mates. The lease is in one person's name and they split all the bills.

Thanks but this begs the question. What is the difference between a roommate and a tenant?

[Uncle Sam]

I would presume that a tenant has an official written lease where a roommate is an informal cohabitant.

[ATSMAN]

I would presume that a tenant has an official written lease where a roommate is an informal cohabitant.

Some times a tenant may not sign a written lease and it may be just month to month tenancy. I think the big distinction is "Intent". If the person renting out or getting roommates has the intention to make a profit, I think it is rent. If the intention is just to split household expenses and no profit motive then it is roommates. But then who am I to opine on these matters!