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I have a rental property in Colorado that was renter occupied

for the year 2011 except...
I have a rental property in Colorado that was renter occupied for the year 2011 except for 23 days. I traveled there from my home in Arizona and used the time to fix up various things and prepare for the next tenant. I can show with receipts and emails and stuff that I was doing exactly that for those days. I used the property itself as a crash pad for those 23 days, sleeping on a blow up bed, instead of paying for a hotel.
My two questions are:
1. - Can I declare the property as a rental for 365 days or do I need to declare 23 days as a vacation home?
2. - Can I declare M&I expense per Diem (at 50%) for those 23 days?

Sincerely, John..........
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Answered in 21 minutes by:
7/3/2012
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

Thank you for your question. It's good that you are asking these questions now.

If you were staying in the property, and you were maintaining it or repairing it (but not improving it) then you don't have to count that day you were in it as a personal use day. As long as your personal use days in your rental is less than 14 days a year or less than 10% of the total days that it was held for a rental then you are fine.

So, as long as you had a tenant in the unit paying you fair market rent for more than 230 days, you are fine even though you used the property for 23 days.

Meals and entertainment is a difficult topic. Because you had to travel to your rental, the general consensus is usually that this is a commuting cost, and therefore isn't tax deductible. Meals and entertainment have to have a valid "business purpose" such as eating a meal with a prospective tenant, etc. My answer would be "no" for the M&E expense.

If this helped, then rate my service as "excellent" so that I can be compensated for assisting you today. Otherwise, click "reply" or "continue conversation" for continued dialog with me.

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Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2,439
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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Hi

I'm afraid that while the above expert was correct that you don't need to worry about the # XXXXX days it took you to make the repairs, I'm afraid that she was wrong about taking your travel expenses.On page 4 of2011 Publication 527 Residential Rental Property (Including Rental of Vacation Homes) it specifically lists travel expenses associated with doing repairs on your property as being fully deductible.

That would also include your meals, since you would be away from your "tax home" which is where you normally live and work.

I truly hope this information is helpful but please do not rate until you are satisfied. If you want to click on 1 or 2 just click on the continue to work with me button instead. You will then be able to add any other info or respond to what I have posted so far. Rating 3-5 gives me credit and a good rating but you can still converse with me."
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Customer reply replied 5 years ago
Relist: Other.
Did not read the question properly. Aspects of the answer were off the point. Experience level seems to be very low.
I apologize that you felt that neither of us addressed your questions specifically, so please let me do that now.

The above expert was correct re: not having to claim the time you were in the home is NOT considered to be vacation use.

You may take full depreciation, mortgage interest, real estate taxes, repairs, etc, as long as the home is "rent ready", so if you were advertising the property while you were working on it, or if the repairs were minor enough that you COULD have rented it without there being a major problem (such as broken furnace, no water, etc) then yes, you may claim the property as a full year rental (365 days)

As for the travel, I think I covered that one.

Again, I truly hope this information is helpful but please do not rate until you are satisfied. If you want to click on 1 or 2 just click on the continue to work with me button instead. You will then be able to add any other info or respond to what I have posted so far. Rating 3-5 gives me credit and a good rating but you can still converse with me."
Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2,439
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
Verified
Anne and 87 other Tax Specialists are ready to help you
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(Edited by Moderator)

The reason I told you not to deduct your M&E It's going to be hard to hold up to the IRS that you ate Breakfast, Lunch, and Dinner in a known resort state, and that each and every meal you ate had a qualified business purpose. If you spent $50 a day on food, and deducted 1/2 of that amount, you would have a tax benefit of only $143.75 if you are in the 25% tax bracket. This is $50 X 23 days x 50% x 25% tax rate.

However, I am sure you could substantiate at least a portion of the meals you ate. For instance, if you took a break in between painting and reparing your property. But the ENTIRE M&E I doubt each meal would meet the 'qualified business' test.

I should have spelled that out in greater detail. Thank you for your patience.

Thanks again for using Just Answer.
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Customer reply replied 5 years ago
My question was Meals and Incidental, not Meals and Entertainment.
My question was not about commuting, since I was staying at the work site.

Anyways, I have just accepted the answer from Anne.

R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 3,375
Experience: Over 20 Years experience
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This question seems to be just hanging in the IN box.

 

Meals & Incidentals Expenses (M&IE) is not the same as Meals & Entertainment (M&E), yes.

 

I am a firm believer that all expenses that you can justify you should deduct as long as you have more than a 50% chance of success in an audit. M&IE expenses taken in a resort area are just as legitimate as M&IE expenses in the middle of Nebraska.

 

Never fear the IRS because they *might* disallow an otherwise allowable deduction.

 

As long as your purpose was *primarily* (not solely) to turn the rental unit around for a new tenant, you are perfectly safe in deducting your travel and M&IE expenses, even if you stopped to see Grandma for a few days. Your trip obviously coincided with the end of the rental of the prior tenant and you did cleaning jobs and improvements to the property.

 

You would indicate that the property was a rental property for the entire period of the year.

 

M&IE can be deducted using the per diem rate in effect for that area. You are not required to have meal receipts for meals under $75 each. Meals eaten with Grandma are not deductible (just as an example--not to imply you are visiting Grandma).

 

Your travel to and from AZ is deductible, as are travel trips to the store to buy materials, etc. in the local rental city. Mileage to visit Grandma is not deductible.

 

Expenses, to be deductible, must meet the "gold standard" of "Reasonable and Necessary". Are the expenses reasonable for the work done? Are the expenses necessary to get the job done? If it meets both tests, you are good.

 

Taxwise, you may still be limited in any losses on your rental activity if your income is over a certain threshold, nut that rule applies to everyone.

 

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Anne
Anne
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