Rents on 1099-MISC from Housing Authority of the Cherokee Nation

[taxmcp]

My client received a 2022 Form 1099-MISC from Housing Authority of the Cherokee Nation with $4,400 reported in Box 1 Rents. She said this was money the Cherokee Nation paid her for her brother to stay with her while the Cherokee Nation tore down his old house and built a new house. Can I report this income on Schedule E and select Other type of property by entering "HACN Rental Assistance" in the applicable field, and not making an entry in Number of days rented?

Note that this generates a Suggestion in my tax software "Schedule E #1: Number of days rented may be required for this rental real estate property.", not a Critical Diagnostic

Note that this also generates a Federal Statement

Statement 1
Schedule E, Part I - (address of property)
Other Type of Property

Type of Property: HACN Rental Assistance

Is this statement sufficient for the Instructions for Schedule E page E-6 to Attach a statement to your return describing the property?

Other. Enter code “8” if the property is
not one of the other types listed on the
form. Attach a statement to your return
describing the property.

[Rapid Robert]

Why do you think this is not Property Type 1, "single family residence", as shown on Schedule E?

She is apparently renting out property which she also uses personally. Expenses would be deductible up to the amount of income. See Pub 527, "Used as a home and rented 15 days or more."

[taxmcp]

Why do you think this is not Property Type 1, "single family residence", as shown on Schedule E?

She is apparently renting out property which she also uses personally. Expenses would be deductible up to the amount of income. See Pub 527, "Used as a home and rented 15 days or more."

I considered selecting Type of property 1 = Single Family Residence. If I choose this, the reporting issues I have are she is not just renting out a room in her home, she is sharing her entire 3 bedroom, 2 bath home with her brother for a period of one year. How do I accurately apportion her expenses to make sure she properly divides any expenses between personal and rental use?

[Rapid Robert]

How were you going to accurately apportion her expenses with property type 8? There is no difference vs type 1. Your scenario is no different than millions of other U.S. taxpayers who rent out part of their home (except many of them never report it on their tax returns because no 1099-MISC involved).

Assuming it is desirable to completely offset the rental income with deductible expenses, the proper way to do this is to determine the part of the home used exclusively by the tenant (typically one or two rooms) and use that as the percent to apply to all 3 categories of expense (direct, mort/prop tax, and utilities, insurance, depreciation). The parts of the home used non-exclusively by the tenant (kitchen, bathroom maybe, front door entrance, laundry) are added to the exclusive area to get your denominator (although counting number of rooms rather than square feet is also sometimes an acceptable allocation method). In most cases, I suspect these expenses will easily offset the income.

The IRS instructions for Sched E and Pub 527 have much more info.