Room and Board Income

[TaxMom12]

I have a client that has a personal service contract with an elderly parent.  This contract includes payment for room (FMV) and board.  Do I report both income sources on Schedule E? Or is board considered cost sharing and not reportable? 

[BobKamman]

The elderly parent no doubt is trying to spend down assets in order to qualify for Medicaid (or similar welfare program).  There is a basic discussion of this strategy here:

https://www.carolinafep.com/library/could-your-family-benefit-from-a-personal-services-contract-for-...

Which includes this advice:

Finally, remember that whenever a person is hired to perform services in exchange for compensation, that person is required to report the income. In other words, if you enter into a personal services contract with a child or family member, they are obligated to report the payments received from you as income on their annual income tax return. It is recommended that you consult with your accountant to ensure compliance with all tax rules including any applicable income tax withholding rules, social security rules, and employee compensation rules.

[TaxMom12]

Thank you for the additional information.  I'm still unclear if the "room and board" should all be reflected on Schedule E.  The taxpayer has grocery expenses to offset the "board" portion.  The renting of a room is self explanatory and there is reportable income for care-giving, I'm just hung up on the board if you have any additional thoughts?

[BobKamman]

I'm not sure it goes on Schedule E, rather than Schedule C.  Preparing meals is a business.   And now, are you telling us she's also receiving a W-2 from a public agency that pays people who care for their relatives?  

[TaxMom12]

She receives no documented income - W2 or 1099 as she is compensated directly by the elderly parent.  We are reporting the income regardless of the documented income.  As part of their personal service contract, it is defined that X amount is paid for Room, X amount is paid for Board and X is paid for caregiving.  They used FMV to determine the rent so their is some income generating by this Schedule E.  Again, my only question was where is the board income/expense best suited.  I will continue to research if no one has come across this scenario.  

[BobKamman]

This is like the old game show "I've Got A Secret."  Or maybe it's just like dentistry.  With that additional information, not included in original post, I would put the amount allocated to the room on Schedule E, and the amount allocated to board and caregiving on Schedule C -- deducting the cost of groceries on Schedule C.