When renting a summer home, can the same day be counted as personal use and rental use if the tenant leaves at 6pm?

[TaxGuyBill]

If you used it that day after they moved out, I think that ONLY counts as a personal day.

[Sky56]

After I posted my question, I read publication 527 that states that as long as your are paid fair market value for the day, then it counts as a rental day (not a personal day).  They gave an example of someone who rented their house for the entire month of July but used it for a weekend and that use didn't count as personal days.

[TaxGuyBill]

Good, that makes sense.

[Jay11]

I was encouraged by Sky56’s post but then delved into Publication 527 and read, immediately under the example that he cited: “Note. When determining whether you used the cottage as a home, the July weekend (2 days) you used it is considered personal use even though you received a fair rental price for the weekend.”

[TaxGuyBill]

@Jay   So when you combine those two thoughts, it is saying that day is counted as rental for purposes of dividing up the expenses.  However, in determining if it qualifies as a "Residence" (which means any losses are carried to the next year) it is part of your personal use.

[Jay11]

I understand your thrust, but I would be careful in definitively concluding that. Based on the example, now that more than 14 days of personal use have occurred, it qualifies as a home. Given that status, the subsequent section, “Dwelling Unit Used as a Home”, states: “If a dwelling unit is used for personal purposes on a day it is rented at a fair rental price (discussed earlier), don’t count that day as a day of rental use in applying (2) above”. So, how could those days be “counted as rental for the purposes of dividing up the expenses”, as they are personal and not rented?

[TaxGuyBill]

They are personal for ONLY that purpose.  The Tax Code specifically says that statement only applies to that specific provision.  The example the Sky56 proves that.

Under "Dividing Expenses", note this key sentence:
"Any day that the unit is rented at a fair rental price is a day of rental use even if you used the unit for personal purposes that day. (This rule doesn’t apply when determining whether you used the unit as a home.)"
<a rel="nofollow" target="_blank" href="https://www.irs.gov/publications/p527#en_US_2017_publink1000285446">https://www.irs.gov/publications...>

[Jay11]

That’s a helpful citation and nearly convinced me until I read this from the section mentioned previously:

“If you use a dwelling unit for both rental and personal purposes, the tax treatment of the rental expenses you figured earlier under Dividing Expenses and rental income depends on whether you are considered to be using the dwelling unit as a home.”

There it explicitly states that the tax treatment of the rental expenses DEPENDS on its status as a home. In light of that, the key sentence quoted—while relevant and helpful—seems less absolute and more relative, depending on its status as a “home”.

Would you cite any other relevant passages or offer any additional commentary that might further clarify this?

[TaxGuyBill]

The tax treatment of the rental expenses differ, but the does NOT mean the DIVIDING of expenses differ.

If the expenses are greater than the income, you have a loss.  The tax treatment of those losses (expenses) differ if it is considered a Residence or not.  If the property has a loss and is considered a Residence, the losses (unused expenses) are carried forward.  If it does not qualify as a Residence, the losses are allowable in the current year.

[SweetieJean · Accepted solution]

See

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, 

https://www.law.cornell.edu/uscode/text/26/280A