@Opus 17 wrote:
There is no prohibition against renting to family at below FMV. What happens is, you lose the ability to deduct expenses if they are more than your rent......
That is actually not what happens. Rather, the owner loses the ability to deduct all typical rental expenses for each day of personal use. Essentially, the property is treated in the same manner as a second home during those personal use days.
I.R.C. §280A(d)(2)(C):
(2) For purposes of this section, the taxpayer shall be deemed to have used a dwelling unit for personal purposes for a day if, for any part of such day, the unit is used—
(C) by any individual......, unless for such day the dwelling unit is rented for a rental which, under the facts and circumstances, is fair rental.
Per Section 280A(d)(3)(A), regarding rental to a family member, rental real estate can be reported as a standard rental provided the family member uses the property as a principal residence and pays fair rental.
