1099MISC for R/E Rents Received but Not Yet a Rental Property

Forum|Forum|6 years ago
March 19, 2020
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I just started renting a condo in late 2019 and the property management company sent me a 1099-MISC for a small amount of income from a handful of rental days.

It is my preference to keep my condo as a 2nd home and not a rental property for 2019 and it sounds like this is allowed. Per IRS rules if a 2nd residence is rented for less than 15 days then it's not considered to be a rental and there is no need to report income and expenses on Schedule E.

My question is how do I disposition the 1099-MISC I received from the PM company? In other words, how do I address the $658 in my tax filings that was reported to the IRS by the PM company that I wasn't obligated to report? Can I just ignore it or is there some other way that I should be addressing this tax form?

This isn't about trying to avoid tax on $658. It's more about my desire to delay the conversion of this condo to rental property and being subject to more depreciation recapture and capital gains when I sell.

Carl

Level 11

I just started renting a condo in late 2019

If the rental contract is more than 15 days, you must report the income "as" rental income and show the property 'as" rental property on your 2019 return. It doesn't matter if the contract did not start until Jan 1st of 2020 either. Rental income is reported in the tax year it is received, regardless of what tax year it may be "for".

For example, you will show your date of conversion to rental property as whatever day in 2019 the property was move-in ready and "available for rent" weather there was actually a renter physically in the property or not. Your day count for days rented starts from the first day the property was "available for rent". Again, it just does not matter if a renter was actually in the property or not.

I'm confident that when the property was shownin 2019 to what was then a prospective tenant, it was move in ready. So you can't get out of this legally.

Now you *might* be able to report it as other income. But with the amount being reported in box 1, combined with the fact you will be reporting rental income on your 2020 tax return, there's a good bet you'll get questioned on it in 2021 after you file your 2020 return reporting rental income/expenses. If questioned, you could expect to lose.

kalstrinAuthor

Level 2

This is not the traditional landloard/tenent relationship with a lease. This is a vacation property that a property management company solicits short term rentals for me. The PM company sold 6 nights for me in 2019. Per the rules described in IRS Pub 527 - Residential Rental Property: if the property was rented less than 15 nights then it is assumed that the primary function of the property is not for rental and I have no obligation to report it as such. Also, per the same publication, the day count for days rented has nothing to do with when it was made available for rent. It is only based on the number of nights it was rented. The question was not whether or not this is a rental. I know that I don't have to call it a rental. The question is how to disposition a 1099MISC for income that I was not obligated to report.