Question

Sophie lives in Pasadena, California. Every year, she rents her home for a total of seven days to out-of-town guests attending the Rose Parade and Rose Bowl. Where should this rental income and any rental expenses be reported on Sophie's tax return?
The income and expenses are reported on Schedule C (Form 1040).
The income and expenses are reported on Schedule E (Form 1040).
The income is not reported on her tax return and she cannot deduct rental expenses.
The income is reported on Schedule 1 (Form 1040), line 8z, and rental expenses are deducted on the Schedule A (Form 1040).

Answer 1

The correct choice is: "The income is not reported on her tax return and she cannot deduct rental expenses."

Explanation: Because she rents her personal home for fewer than 15 days in the year (7 days), Section 280A(g) applies — rental income is excluded from gross income and rental expenses are not deductible. (Mortgage interest and real estate taxes remain deductible as personal itemized deductions if she itemizes.) If she rented the home 15 days or more (or provided substantial services), different reporting rules (Schedule E or possibly Schedule C) would apply.