Short-term rental expenses before available to rent

[codeblue123]

Client purchased a duplex and fixed it up and furnished it for months.  It was not available for rent in 2020, but it is available to rent in 2021.

It is a short-term rental, rented by the night, that does not provide substantial services, so it should be reported on Sch E.  

How do we account for the thousands of dollars he spent to supply the house with silverware, appliances, games, wall mounts, pillows and etc.  It took months to get the duplex ready to rent.  How can these expenses be deducted?

[BobKamman]

No one washes the dishes or launders the bedding?

[codeblue123]

I expect he would do those services.  So might this be a Sch C and these expenses would be start up expenses?

[BobKamman]

This Airbnb stuff is definitely a "gray area."  If I come across any clients who want to get into that, I'll send them to you.  

[qbteachmt · Accepted solution]

"and these expenses would be start up expenses?"

You didn't really list "expenses." Some of that stuff is Supplies and some is Assets. You are going to have different classes (types) of Assets in this operation. Building, Furniture, etc, are all treated differently. Supplies expense are things that wear out and are replaced constantly, such as linens. Although, not in service = not using up linens at that point.

Startup Costs are permits, licenses, electricity, things you would deduct as expenses if this was already in place. But assets get depreciation, or fall in the accelerated depreciation category (depends on the tax rules in place that specific year).

Here's a nice article:

https://www.therealestatecpa.com/blog/real-estate-start-up-costs