Hi -- I've been hitting my head against this exact issue for quite some time now (ie, if I run a less-than-7-day average rental with no substantial services out of my home do I file sched C or E and do I pay SE tax?) and I seem to be getting at the root of it with your comment, @AmeliesUncle:
That comment/rule is for determine if it is a rental for purposes of the Passive Loss Rules. Short term rentals ARE still a "rental activity" for other purposes.
To be clear, the rental definition applied to passive loss rules in pubs 925/8582 (IRC 469) that states a rental on average 7 days or less is considered a business DOES NOT apply to determining whether the rental is a "business" or a "rental" for Sched E vs C purposes? And IRC 1402, which excludes rentals from being subject to self employment tax, would apply to the short term rental, as long as no substantial services are rendered?
I'm pretty sure that's what you're saying here, and I've found that interpretation elsewhere online as well (https://www.taxprotalk.com/forums/viewtopic.php?f=8&t=5504&p=55688&hilit=airbnb#p55688). What I REALLY want to know is what's the basis for saying the definition doesn't carry over? Is there a statement somewhere from the IRS about this specific definition, or in general that definitions only apply within certain sections of the code...? There is so much confusion online and the best way to be sure is to ground it in actual code/pubs/case law... but I'm a total novice when it comes to taxes, so I don't really know how to track that down!
