Per IRS Instructions, a not-for-profit rental home that has not had a loss in the past 5 years is considered a "for-profit" rental. However, T Tax asks me to enter the number of days that the home was rented out at fair market value (which is 0) and the number of days it was rented out as "personal property" which would be 364 days, according to the T Tax instructions.
Since the IRS would consider this property as a "For-Profit" now, I need to use schedule e but, because of the requirement in T Tax to list the # of days at fair market value, I cannot use schedule e unless I (incorrectly) list the number of days that the home was rented out at fair market value as 365. Am I allowed to do this and how would I inform IRS why I did it?
Also, since it's considered a "for-profit" rental now, can I deduct the repair expenses since they did not exceed the rental income?
You can deduct rental expenses if you're entering the income on Schedule E.
Whether that is proper or not I will leave up to you as much of this involves the intent of the owner.
But will turbo tax allow me to do this without entering incorrect data?
Q. But will turbo tax allow me to do this without entering incorrect data?
A. No. The workaround, in TT, is to say you rented it at fair market value for 365 days.
As you said; If your rental income is more than your rental expenses for at least 3 years out of a period of 5 consecutive years, you are presumed to be renting your property to make a profit. TT just doesn't provide that entry option.
Reference:
“Presumption of profit. If your rental income is more than
your rental expenses for at least 3 years out of a period of
5 consecutive years, you are presumed to be renting your
property to make a profit.” https://www.irs.gov/pub/irs-pdf/p527.pdf (pg 25)
Q. Am I allowed to do this?
A. Yes.
Q. How would I inform IRS why I did it?
A. Only by showing on Schedule E that you have a profit. Keep good records of your expenses and income, if you ever have to prove the 3 of 5 years rule was met.
Q. Since it's considered a "for-profit" rental now, can I deduct the repair expenses since they did not exceed the rental income?
A. Yes. You must deduct the expenses even if they are more than the rental income, until you no longer meet the 3 out of 5 years rule. Be sure you are including depreciation, mortgage interest and all other allowable expenses in your profit calculation.