Question

Vacation home rules apply to which of the following taxpayers?
Mercy rented her beach house to tenants for 210 days during the year for fair rental value. She used the beach house herself for 45 days during the year.
Tom bought a new home. He converted his old home into a rental property. The tenants use it as their main home and Tom charges a fair rental value.
Amber rents an apartment all year to her mother at less than a fair rental value.
Xavier rents out a room in his house at a fair rental value. The room was rented out for the entire year.

Answer 1

Vacation home rules apply to Mercy and Amber.

Brief reasons:
- Mercy: Rented 210 days and used it personally 45 days. Personal use (45 days) > greater of 14 days or 10% of rental days (10% of 210 = 21), so the vacation-home rules apply.
- Amber: Rents to her mother at less than fair rental value. Rentals to a related party for less than fair market rent are treated as personal use — vacation-home rules apply.

Tom and Xavier: rules do not apply.
- Tom converted his old home to a rental and has no personal use, so it’s treated as rental property (vacation-home personal-use tests not met).
- Xavier rented a room at fair rental value for the entire year (no personal use of that rented space), so the personal-use threshold isn’t met.