Sammy and Sally Spartan loved the beach. After graduation they accepted jobs in the Washington, DC metroarea where they have called Northern Virginia home for the past 20 years. Along the way they haveowned three homes, two of which are now Airbnb short-term rental properties. Rather than sell ahome, they have turned their old homes into rentals. The Spartans loved the sunsets along the beach.The visits to the Bay Area became more frequent since their youngest child followed in their footstepsand became a Spartan in the class of 2018.On September 16, 2015 the Spartans purchased what was left of a beach house located in Indian RocksBeach for use as an Airbnb rental. A late season storm had flooded the place leaving it with nearly afoot of sand inside the house along with significant damage to the house. The owners had notpurchased insurance on the property and parted with the badly damaged place at what seemed to be abargain price of $280,000. The entire purchase price was funded by a loan secured by a first mortgageon the property from a bank in Northern Virginia.Without electricity, functional bathrooms or air conditioning, the place was truly a mess. Sammy hadrenovated two prior homes back in Virginia turning them into rental properties and was between jobs soSammy moved in to the place and worked on the house every day (except Sundays when he played hisweekly round of golf and watched football) from September 16, 2015 through January 31, 2016. Sallyjoined Sammy from January 24, 2016 through January 31, 2016 to help get the place ready for theirAirbnb customers. The total renovation and repairs to the house cost $220,000. The funds for repairswere advanced by the same Northern Virginia bank. The Spartans were overjoyed when certificate ofoccupancy allowing rentals was issued by the City of Indian Rocks Beach on January 31, 2016. This wasespecially important since they had a rental booked for the next day.The Spartans flew home to Northern Virginia the evening of January 31, 2016.The beachfront location was very popular and was rented continuously from February 1, 2016 throughJune 30, 2016. The Spartans celebrated the first week of July (1-7), 2016 along with their family in thehouse completing some cleaning and minor repairs getting the house ready for the remaining 2016(they carefully documented the work done each day). Rentals began again July 8, 2016 and rancontinuously (except for a total of ten open days) through the end of 2016.The Spartans timely filed their tax returns in 2015 and 2016 deducting the costs of ownership in 2015(mortgage interest, taxes, insurance and related costs) as losses on their Airbnb property. Similarly, theSpartans deducted all the costs of ownership in 2016.The IRS selected the Spartans’ 2015 return for examination and expanded the exam to include 2016. Anewly commissioned IRS agent was assigned to the case. The agent disallowed all of the 2015deductions and both the January 1-31 and July 1-7 periods of deduction for 2016 even though theSpartans had detailed records of the work done each day and the expenses incurred. The Spartans paidthe IRS’ assessment and sued in US District Court for the Middle District of Florda for a refund claiming,among other things, that these were valid deductions for their business of short-term rentals. How would i word the result
Sammy and Sally Spartan loved the beach. After graduation they accepted jobs in the Washington, DC metro
area where they have called Northern Virginia home for the past 20 years. Along the way they have
owned three homes, two of which are now Airbnb short-term rental properties. Rather than sell a
home, they have turned their old homes into rentals. The Spartans loved the sunsets along the beach.
The visits to the Bay Area became more frequent since their youngest child followed in their footsteps
and became a Spartan in the class of 2018.
On September 16, 2015 the Spartans purchased what was left of a beach house located in Indian Rocks
Beach for use as an Airbnb rental. A late season storm had flooded the place leaving it with nearly a
foot of sand inside the house along with significant damage to the house. The owners had not
purchased insurance on the property and parted with the badly damaged place at what seemed to be a
bargain price of $280,000. The entire purchase price was funded by a loan secured by a first mortgage
on the property from a bank in Northern Virginia.
Without electricity, functional bathrooms or air conditioning, the place was truly a mess. Sammy had
renovated two prior homes back in Virginia turning them into rental properties and was between jobs so
Sammy moved in to the place and worked on the house every day (except Sundays when he played his
weekly round of golf and watched football) from September 16, 2015 through January 31, 2016. Sally
joined Sammy from January 24, 2016 through January 31, 2016 to help get the place ready for their
Airbnb customers. The total renovation and repairs to the house cost $220,000. The funds for repairs
were advanced by the same Northern Virginia bank. The Spartans were overjoyed when certificate of
occupancy allowing rentals was issued by the City of Indian Rocks Beach on January 31, 2016. This was
especially important since they had a rental booked for the next day.
The Spartans flew home to Northern Virginia the evening of January 31, 2016.
The beachfront location was very popular and was rented continuously from February 1, 2016 through
June 30, 2016. The Spartans celebrated the first week of July (1-7), 2016 along with their family in the
house completing some cleaning and minor repairs getting the house ready for the remaining 2016
(they carefully documented the work done each day). Rentals began again July 8, 2016 and ran
continuously (except for a total of ten open days) through the end of 2016.
The Spartans timely filed their tax returns in 2015 and 2016 deducting the costs of ownership in 2015
(mortgage interest, taxes, insurance and related costs) as losses on their Airbnb property. Similarly, the
Spartans deducted all the costs of ownership in 2016.
The IRS selected the Spartans’ 2015 return for examination and expanded the exam to include 2016. A
newly commissioned IRS agent was assigned to the case. The agent disallowed all of the 2015
deductions and both the January 1-31 and July 1-7 periods of deduction for 2016 even though the
Spartans had detailed records of the work done each day and the expenses incurred. The Spartans paid
the IRS’ assessment and sued in US District Court for the Middle District of Florda for a refund claiming,
among other things, that these were valid deductions for their business of short-term rentals.
How would i word the result
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