@NCperson IRC 280A(d)
(3)Rental to family member, etc., for use as principal residence
(A)In general
A taxpayer shall not be treated as using a dwelling unit for personal purposes by reason of a rental arrangement for any period if for such period such dwelling unit is rented, at a fair rental, to any person for use as such person’s principal residence.
so the conclusion is if below market rent is charged it's being used for personal purposes.
in other words any day rented at below market value to a family member does not count as a rental day
but s personal use day. so the number of rental days is zero.
I have also consulted various authoritative tax reference material they all say this in one form or another
based on the above code section
any day rented to anyone at less than fair rental price is considered a personal-use day and days rented to family members are personal-use days unless fair rent is charged.
some even contain flowcharts
a) was personal use more than 14 days or 10% of days rented - the answer for this situation is yes even if sis rented for the whole year because the annotation above makes the use by sis personal days and thus zero rental days
b) then it asks was the property rented less than 15 days. again the same annotation with the same answer - yes since the days rented by sis do not count as rental days
c) this results in the conclusion to treat the "rental" as a personal residence.
interest and taxes go on schedule A. rental income and expenses are not reported.
pub 527 page19
Used as a home but rented less than 15
days. If you use a dwelling unit as a home and
you rent it less than 15 days during the year, its
primary function isn’t considered to be rental
and it shouldn’t be reported on Schedule E
(Form 1040). You aren’t required to report the
rental income and rental expenses from this activity. Any expenses related to the home, such
as mortgage interest, property taxes, and any
qualified casualty loss, will be reported as normally allowed on Schedule A (Form 1040). See
the Instructions for Schedule A for more information on deducting these expenses
it's my conclusion after reading many tax manuals that a day of personal use is not counted towards that 15 days of rental.
also look at schedule E. two columns
one says fair rental days and the other says personal use days
so what numbers would you enter in each column for sis's rental
however, you can draw your own conclusion.
