Name on mortgage

[BOB W]

Look up one post.................

[solomon]

Look up one post.................

Thanks again. That Court case shed some light on it for me.

[BOB W]

Thanks again. That Court case shed some light on it for me.

The problem is, it leaves me unsure of everything.......................hope you can pick out the right pieces.

[solomon]

The problem is, it leaves me unsure of everything.......................hope you can pick out the right pieces.

Well, leaving out the investment or appreciation portion of the case - which I understand - what turned a light on for me was that Sections 280A and 183 are not mutually exclusive. I was trying to make those two Sections an either or proposition.

[BOB W]

Well, leaving out the investment or appreciation portion of the case - which I understand - what turned a light on for me was that Sections 280A and 183 are not mutually exclusive. I was trying to make those two Sections an either or proposition.

Please explain what that was all about............... Do we get to write off up to the extent on income or not?

[skhyatt]

Just when I thought I had it straight in my brain, I'm somewhat confused again. So what is the difference between "not for profit" and "personal use". Are there three categories or two? Biz use, personal use and not for profit or ????

[skhyatt]

The problem is, you have to decide which rule applies to a below market rental. A below market rental could be considered a not for profit activity, depending upon facts and circumstances, and thus Section 183 would kick in and limit expenses to income. However, if that below market rental were to a relative, then Section 280A(d) would kick in and treat it as if it was YOU living there, thus, no expenses allowed (other than mortgage interest and RE taxes) because you can’t pass the exclusive use test under the office in home rules.

THAT is the difference.

This seems to make sense, no?? Facts & circumstances....

[solomon]

Please explain what that was all about............... Do we get to write off up to the extent on income or not?

Only if it is rented at fair market value. If it is less than that, then only taxes and interest based upon Section 164 and 163. However, any disallowed amounts can carry forward. As you recall, one year was completely considered personal use because below fair market and thus only taxes and interest allowed. However, in the next year it was rented at fair market and so was not considered personal use, but 183 came into play. Again, leaving out appreciation aspect which, however, was permitted by the Court.

[BOB W]

That is what I've been saying all along. To read the case left me confused and I didn't want to only pick the pieces that fit my concept. The biggest hurdle I had was taking a jump that "not for profit rental" meant below fair market value rent.

Bees confirmed that that was his concept also. Having the Pub talk about "Not for profit rental" and saying you can deduct expenses up to income made me feel sure that it was allowed.

I was never good at reading court cases due to following their line of thinking and then coming up with a completely different outcome.

Oh well< I'll stick to the Pubs, they are written for people like me.

[solomon]

I read the court case as follows: That is to say, below fmr is personal use regardless who is the tenant and not regarded as a not for profit activity based upon being a rate below fmr - Sec. 280A applies to this situation.

Rent at fmr without a demonstrated profit motive would constitute a not for profit activity subject to Sec. 183.

[BOB W]

I read the court case as follows: That is to say, below fmr is personal use regardless who is the tenant and not regarded as a not for profit activity based upon being a rate below fmr - Sec. 280A applies to this situation.

Rent at fmr without a demonstrated profit motive would constitute a not for profit activity subject to Sec. 183.

WOW, That is kind of what I read, somewhat, but it still doesn't make sense. There still has to be more to this than that. Again, the Pub says BFMR you can deduct expenses up to your income...... And that contradicts what you are saying. How would you explain "Not for Profit Rental" as talked about in the PUB?

Quote:
Rent at fmr without a demonstrated profit motive would constitute a not for profit activity subject to Sec. 183. Quote:

Is this what you mean is "Not for profit rental"> no profit motive????????????

[solomon]

WOW, That is kind of what I read, somewhat, but it still doesn't make sense. There still has to be more to this than that. Again, the Pub says BFMR you can deduct expenses up to your income...... And that contradicts what you are saying. How would you explain "Not for Profit Rental" as talked about in the PUB?

Quote:
Rent at fmr without a demonstrated profit motive would constitute a not for profit activity subject to Sec. 183. Quote:

Is this what you mean is "Not for profit rental"> no profit motive????????????

Yes - that is how I read that court case. A not for profit activity (to deduct expenses up to income) requires FMR - then it is subject to Sec. 183. Note the Court said (in the year the rent was at FMR) the Petitioner met 280A (that is, no personal use because of FMR) but had to cross the hurdle of Sec. 183.

[skhyatt]

Solomon, in TTB, 7-7 under the section, "Did you know?" It says if considered personal use, then no expenses are deductible, but income must be reported. Isn't that talking about only the period during the year where use is considered personal? That's the way I read Sec 280A(d)(2). I'm trying to reconcile this section with the section above on that same page, "Allocating expenses:Personal vs Rental"

[skhyatt]

Wouldn't it be simply referring to 280A(a) AND 280A(d)(2)(C) ??

[solomon]

Solomon, in TTB, 7-7 under the section, "Did you know?" It says if considered personal use, then no expenses are deductible, but income must be reported. Isn't that talking about only the period during the year where use is considered personal? That's the way I read Sec 280A(d)(2). I'm trying to reconcile this section with the section above on that same page, "Allocating expenses:Personal vs Rental"

Yes. Regarding Allocating in TTB 7-7, note the rental is at FMR but because ostensibly there is a profit motive and personal use exceeded the greater of 14 days or 10% of the rental days, allocation is required.