Missionary/Business

[geekgirldany]

I have two customers that have been missionaries all their lives. This year (2007) they purchased their first house with a good bit of land with it. I got a call from them last week wanting to know how to setup the following.

My customers own the house and it is in their name. They are going to rent space to fellow missionaries on their land to park their RVs. My customers or the other missionaries will not be living in the house. The house will only be used for "classes". He calls it a learning center for the missionaries before they go out to do their missionary work. Now these missionaries that are going to be renting space from him to park the RVs and live will form their own NonProfit organization. I will not be involved with that. They will get donations from the public then turn around and pay my customer rent. This rent is basically to cover the mortgage payment and upkeep of the house.

My question is what kind of entity does my customers have? Is this a business to be reported on a Schedule C? Or since they are receiving rent for the others to park their RVs is this a Schedule E? I am not sure if he will be charging for these "classes" to be held in the house. If he does then I think that would make it a Schedule C.

I know a long post but my customers want to make sure they are doing this correctly. Good people called before they started doing anything.

Thank you for any help

[taxmandan]

Have they considered establishing a tax exempt organization for this venture? They are in business as a sole prop or partnership at the least. If they are not in this to make a profit and all they do is cover expenses, they run the risk of being treated as a hobby, income goes on 1040, line 21 and expenses on Sch A Misc. deduction. I would explore a 501(c)3 status with them and see how that might meet their goals in this activity.

[geekgirldany]

Thanks Dan. I believe I need to ask him again if they will be in it to make a profit or just to cover the expenses of the house. He spoke of having classes but I am not sure they are going to charge for this. Previously they have been doing missionary work for 38 years. Most of this time anything they sold, like tapes, books, bibles, was put on a Schedule C. I think I need to speak to him again.