Rental Activities
A rental activity is a passive activity even if you materially participated in that activity.
An activity is a rental activity if tangible property (real or personal) is used by customers or held for use by customers, and the gross income from the activity represents amounts paid mainly for the use of the property. It doesn’t matter whether the use is under a lease, a service contract, or some other arrangement.
Exceptions. Your activity isn’t a rental activity if any of the following apply.
1. The average period of customer use of the property is
7 days or less. You figure the average period of customer use by dividing the total number of days in all
rental periods by the number of rentals during the tax year.
2. The average period of customer use of the property, as figured in (1) above, is 30 days or less and you provide significant personal services with the rentals. Significant personal services include only services
performed by individuals. To determine if personal services are significant, all relevant facts and circumstances are taken into consideration, including the frequency of the services, the type and amount of labor required to perform the services, and the value of the services relative to the amount charged for use of the property. Significant personal services don’t include the following.
a. Services needed to permit the lawful use of the property;
b. Services to repair or improve property that would extend its useful life for a period substantially longer than the average rental; and
c. Services that are similar to those commonly provided such as cleaning and maintenance of common areas or routine repairs.
3. You provide extraordinary personal services in making the rental property available for customer use. Services are extraordinary personal services if they’re performed by individuals and the customers' use of the
property is incidental to their receipt of the services.
