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Subject Author Date
Rental Property and fair market rent darcijj 01-02-2007
Posted by darcijj on January 2, 2007, 4:07 am
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 I own a duplex and rent the other side out to my parents.
When my mom retired, I lowered the rent to $150.00 a month.
Since I have a HUD lien on the house the maximum rent i
would charge a stranger is $350.00. So it is fair to say it
is under fair market value. This is what the IRS says:

Fair rental price. A fair rental price for your property
generally is the amount of rent that a person who is not
related to you would be willing to pay.

Are they saying family members are different than general
public and I can deduct expenes even though it is below fair
market rent?

How do I treat this on my return? What do I declare and
what can I deduct, i.e. taxes, interest. etc. I was
deducting half of those expenses prior to this year.

Any clarification on this would be appreciated.

Thanks!

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Posted by Arthur Kamlet on January 3, 2007, 10:49 pm
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> I own a duplex and rent the other side out to my parents.
> When my mom retired, I lowered the rent to $150.00 a month.
> Since I have a HUD lien on the house the maximum rent i
> would charge a stranger is $350.00. So it is fair to say it
> is under fair market value. This is what the IRS says:
>
> Fair rental price. A fair rental price for your property
> generally is the amount of rent that a person who is not
> related to you would be willing to pay.
>
> Are they saying family members are different than general
> public and I can deduct expenes even though it is below fair
> market rent?
>
> How do I treat this on my return? What do I declare and
> what can I deduct, i.e. taxes, interest. etc. I was
> deducting half of those expenses prior to this year.
>
> Any clarification on this would be appreciated.

Renting to a Related Party at less than Fair Market rental
value means you cannot deduct more than your income.

In such a case your income goes on Form 1040 Line 21 and
your expenses, not exceeding income, goes on Schedule A Line
22, subject to reduction by 2% of AGI.

--

Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Benjamin Yazersky CPA on January 3, 2007, 10:49 pm
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> I own a duplex and rent the other side out to my parents.
> When my mom retired, I lowered the rent to $150.00 a month.
> Since I have a HUD lien on the house the maximum rent i
> would charge a stranger is $350.00. So it is fair to say it
> is under fair market value. This is what the IRS says:
>
> Fair rental price. A fair rental price for your property
> generally is the amount of rent that a person who is not
> related to you would be willing to pay.
>
> Are they saying family members are different than general
> public and I can deduct expenes even though it is below fair
> market rent?
>
> How do I treat this on my return? What do I declare and
> what can I deduct, i.e. taxes, interest. etc. I was
> deducting half of those expenses prior to this year.
>
> Any clarification on this would be appreciated.

You should look into the vacation home rules.
Depending on your facts and circumstances, it could be
considered a 2nd personal residence.

___________________________________
<<< Benjamin Yazersky, CPA [NJ & NY] >>>
-----> real address on hobokeni or hobokenx <-----

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Harlan Lunsford on January 3, 2007, 10:49 pm
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darcijj wrote:

> I own a duplex and rent the other side out to my parents.
> When my mom retired, I lowered the rent to $150.00 a month.
> Since I have a HUD lien on the house the maximum rent i
> would charge a stranger is $350.00. So it is fair to say it
> is under fair market value. This is what the IRS says:
>
> Fair rental price. A fair rental price for your property
> generally is the amount of rent that a person who is not
> related to you would be willing to pay.

This merely defines how FRV (fair rental value) is
determined.

> Are they saying family members are different than general
> public and I can deduct expenes even though it is below fair
> market rent?

No, only that IF you rent it for less than FRV, then your
deductions are limited.

> How do I treat this on my return? What do I declare and
> what can I deduct, i.e. taxes, interest. etc. I was
> deducting half of those expenses prior to this year.
>
> Any clarification on this would be appreciated.

looks like you can deduct the real estate taxes at least.

ChEAr$,
Harlan Lunsford, EA n LA

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

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