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Research Papers

Why Airbnb owners aren’t real estate professionals for tax purposes

September 26, 2017
An image of a home by 'Inspiration de' via Unsplash

A paper by Professor Ausher M. B. Kofsky of Western New England University looks at whether a taxpayer can include time spent on short-term rentals as “hours associated with a real property trade or business” to qualify as a real estate professional for tax purposes.

Although written back in 2014, the paper’s reasoning could be extended to Airbnb operators today.

Abstract

“This Article addressed the surprisingly controversial issue of whether the law allows taxpayers to include hours worked relating to short-term rental real estate as hours associated with a real property trade or business. An example is whether operating a Bed and Breakfast is a business or a real estate venture.

The classification matters because if a taxpayer has sufficient hours, the taxpayer may then qualify as a real estate professional under I.R.C. § 469(c)(7). Real estate professional status usually entities the taxpayer to currently deduct passive activity losses. The Article concluded that hours devoted to short-term rental real estate simply do not qualify for real estate professional status.”

More: Kofsky, Ausher M. B., “Sorry, You Can’t Get There from Here: The Untenable Goal of Using Short-Term Rental Real Estate to Attain Real Estate Professional Status (May 8, 2014).” Loyola Law Review, New Orleans, Vol. 60, p. 57, 2014.

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