Accepted Answer

Hi XXXXXXXXX

Thank you for using justanswer.Rental income is reported on Schedule E, and I see that you have done your homework on this already since you are familiar with vacation home rental rules.

You cannot file this on Schedule C since you are not in the real estate business and you would not make the majority of your income from this type of income.

What you can do though is have your tax preparer prepare all 6 Schedule E forms which your wife's siblings will then blend into their individual income tax returns if you like. This should not be all that complicated really as long as everything is equal. Although Schedule E cannot be filed by itself (meaning it must be filed as part of your individual income tax return and is always attached to the Federal 1040) you do not actually calculate any tax on Schedule E. Any limitations, such as income limitations for example, would still be calculated on the individual level by filing 2008 Form 8582 Passive Activity Loss Limitations, are calculated after the Schedule E is completed.

This approach is slightly unconvential, and you would have to get all of your siblings tax pros on board (some just don't like taking completed forms from an outside source) but these are usually small problems compared to setting up a partnership for the 6 of you, filing a partnership return, and filing the K1's . K1 is the individual income statement from a partnership, and just like a completed Schedule E, it too needs to be blended into each individual tax return. Setting up the partnership, and paying for the additional tax return and the 6 k1's would cost more than finding someone willing to do all 6 Schedule E's , which as I said, shouldn't be very complicated if you split everything equally. (A really good tax pro can handle some things not being split equally, but if you have very much of that, you're probably looking at forming a partnership)

I hope this helps.

Expert:	Anne
Pos. Feedback:	100.0 %
Accepts:
Answered:	10/13/2009

Master Tax Preparer

Enrolled Agent with 20 Years Experience specializing Individual and Small Businesses