error in tax service on qualified residence

[morrisliberty]

hello,


I quote from tax service, "Example Second Residence
T has a leasing agent who rents out T's second residence, which is a beach house, for about the six months per year. T has a $50,000 debt secured by a mortgage on the beach house, and would like to deduct the interest on the debt as qualified residence interest. If , in 2009, the beach house is rented for 180 days during the year.T must occcupy the beach house for his personal purposes for at least 18 days during 2009 in order for it to be a qualified second residence. If however, T holds the beach house for rent in 2009,but is totally unsuccessful in renting it, then he must use it for personal purposes for 14 days during 2009 in order for it o be a qualified second residence."


I believe this incorrect , it should read T must occupy the beach house for his personal purposes for more than 18 days ....
then he must use it for his personal purposes for more than 14 days during 2009 in order for it to be a qualified second residence.



Which is correct ? Can anyone explain why? Is it 280A{d}{1}?

[mwcpa]

Morris.... if I can understand fully what you typed there is no error, there is a two part test...

from IRS www.irs.gov/taxtopics/tc415.html

"If you rent a dwelling unit that you also use as a home, there are different limitations on your deductible rental expenses. You are considered to use a dwelling unit as a home if you use it for personal purposes during the tax year for more than the greater of: 14 days or 10% of the total days it is rented to others at a fair rental price. It is possible that you will use more than one dwelling unit as a home during the year. For example, if you live in your main home for 11 months, your home is a dwelling unit used as a home. If you live in your vacation home for the other 30 days of the year, your vacation home is also a dwelling unit used as a home unless you rent your vacation home to others at a fair rental value for 300 or more days during the year"

So, one needs to "uses" the higher of the vacation home 14 days or 10% of the time rented.

In the example you note, the home is rented 180 days, so, the higher of 14 days or 10% of 180 days rented is 18 days and therefore the residence must be used 18 days to qualify.

In the second example you note, the home his rented 0 days, so the higher of 14 days or 10% of the 0 days rented is 14 days and therefore the residence must be used 14 to qualify.

[morrisliberty]

hello,


I agree with your analysis except for the application of the word EXCEED, however according to Section 280A{d}{1} In general For purposes of this section, a taxpayer uses a dwelling unit during the taxable year as a residence if he uses such unit {or portion thereof} for personal purposes for a number of days which EXCEEDS the greater of {A] 14 days or
{B}
10 percent of the number of days during such year for which unit is rented at fair rental.
For purposs of subparagraph{B}, a unit shall not be treated as rented at a fair rental for any day for which it it is used for personal purposes.

In order to exceed the greater of 14 days or 10 percent rule in the first case of rental for 180 days you would need to EXCEED the greater of 14 days or 10% of 180 days which is 18 days,the greater is 18 days, and to exceed the greater of 18 days is 19 or more days to qualify as a residence.

In order to exceed the greater of 14 days or 10 percent rule in the second case of held out for rental all year and was unsuccessful in renting , you would need to EXCEED the greater or 14 days or 10% of 0 days, the greater is 14 days, and to exceed the greater of 14 days is 15 or more days to qualify as a residence.


The way i read 280A{D}{1] is if the number of days used for personal purposes is equal to or less than the greater of 14 days or 10% rule then the dwelling unit does not qualify as a residence.

Therefore the tax service is incorrect . Where am I going wrong?

[mwcpa]

maybe you want to discuss the matter with the service you are using....

[morrisliberty]

hello,

thank you for the reply and the advice.