Sch E & C

[Donanita]

Client retired and purchased a mobile home park. He rents out mobile home lots and also rents some mobile home at the park and has rental property in other locations. Last year his tax return has Sch E for the rental but my question is would this be a Sch C. He does a lot of work at the park plus has a lot of land improvements that have to be capitalized.He will probably have a profit with a estimate on his income & expenses for 2006 tax return. When would the rental turn into a business for E or C.

[BOB W]

Probably, but....

..... only if he provides personal services to the space renters. Capital Improvements is not services to the renters.

[JoshinNC]

I don't follow your logic

I have a client with over 20 different rental properties. Now, granted they are not in as close proximity as a mobile home park, but there are still substantial rentals, constituting 90% of her income. Rentals are rentals, not a business.

[BOB W]

Personal..........

.......... services provided will change the nature of rental property to being a business. For instance, a bed and breakfast (rooming house) rental is a business, schedule C because personal service is being provided (food). A hotel/motel provides several services like bedding, cleanup services and such, therefore it is a business even if the primary issue is rental.

[jainen]

In a mobile home park

>>services provided will change the nature of rental property to being a business<<

In a mobile home park, you might find services like a laundromat, jitney service, organized recreation, home cleaning/maintenance, or even tax preparation. If provided by the landlord, it is a business. That's why those things are typically bid out to an independent contractor.

[Donanita]

So

If the client does all the repair work on the rentals and does all the grounds work this would be a personal service and he would need to change to Sch C vs Sch E. He prepares all the mobile sites for rental which includes leveling,hook-up,installing meters,etc. I would have the orginal set up as a business but last year the return had everything as investment.Was wondering if I was correct in thinking he now has a business instead of investment.Or would you split the mobile home park as a business and the 7 rental properties as investment?

[jainen]

working on the persons

>>the client does all the repair work on the rentals and does all the grounds work<<

This is not "personal" service in the way that laundry, transportation, recreation, or tax prep are. Working on the property is not the same as working on the persons.

[Joe Btfsplk]

Why would he want it on Schedule C?

If he has losses in excess of $ 25,000 or his income is too high to write of a Rental loss, he might want to get around these limitations by switching to Sch C. Otherwise, he would be better off filing the Schedule E, which, it appears, would be the correct way regardless of which way would provide better tax results.