Skip to main content
December 27, 2023
Question

Where to report my rental income that I receive from my partnership?

  • December 27, 2023
  • 1 reply
  • 0 views

I leased my vehicle to my partnership and where would I report the income on my 1040? Would it be considered as Misc. income since I do not have another business?

1 reply

December 27, 2023

Personal Property Rentals irs Tax Topic 414 

 

from another source

IT'S A TRADE OR BUSINESS
If a taxpayer is in the trade or business of renting, the rental belongs on Schedule C. The income from the activity is subject to SE tax and belongs on Schedule C. Whether the activity is passive or not depends upon the taxpayer’s participation. If the taxpayer is a material participant, this is not a passive activity. If taxpayer is more of an investor, then it’s passive.

*************************************

IT'S NOT A TRADE OR BUSINESS
It is possible for the activity to fit this category. Look at the taxpayer’s level of services rendered, prior experience with such business activities, whether the taxpayer deals with the general public rather than a single client, and so on. With this type of rental activity, and provided it is done with a profit motive, IRS instructions say that for the rental of personal property engaged in for profit where the taxpayer wasn’t in the business of renting such property to claim the income on Form 1040 Schedule 1 and associated deductible expenses (on Schedule 1. The IRS does not make it clear whether they consider this income passive. It is easy to argue this is less an activity than an investment. 

**************************

the expenses that would be deductible would be based on the % of business use of the vehicle. 

*****************************

continued losses on the rental could result in the activity being classified as a hobby (IRC 183) which would make the income taxable but the expenses would not be deductible

IRC 183

(d)Presumption

If the gross income derived from an activity for 3 or more of the taxable years in the period of 5 consecutive taxable years which ends with the taxable year exceeds the deductions attributable to such activity (determined without regard to whether or not such activity is engaged in for profit), then, unless the Secretary establishes to the contrary, such activity shall be presumed for purposes of this chapter for such taxable year to be an activity engaged in for profit.