Tax Research Memo

Tax Research Memo

Fred was the owner of a three-bedroom cabin in California. During 2010, he contracted with a property management company to rent the cabin to third parties. In exchange for its services, Fred paid the company a 35% commission on all rental income received. The property management company was responsible for maintaining the property, cleaning the cabin, paying all utilities, providing linens, etc. The cabin was rented three times during the year for a total of 12 days and nights with the average rental period being three days. Fred visited the cabin eight times during the year and stayed 19 nights and 27 days. Fred claimed $15,000 of Schedule E expenses relating to the rental of the cabin on his return under the active rental real estate exception. Was Fred entitled to the deduction?

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