We (two of us) are considering hosting a foreign student who would be attending a local college.
We would be paid a fixed monthly fee and we would have to provide a furnished private bedroom room, 2 meals a day and use of the kitchen and bathroom,
The fixed fee is reportable as income and I guess we can deduct food and utilities on a Schedule C.
Can I just presume that the student¹s share of the food and utilities and the cleaning lady is 1/3 of our costs or must we go through some more elaborate calculation.
Must we depreciate the bedroom and if so do we use the original cost of the house or its current Fair market value or the assessed value
The agency will allow us to set up rules about smoking, drinking, loud noise and we can return the student if it is a bad fit
From a tax standpoint what else should be considering
I just don't see this as a Schedule C activity, not at all. Maybe a Schedule E transaction, maybe. I doubt you're in it for profit or as a regular trade or business that would land this on any schedule as reportable income.
I'm wondering if what you receive is just to defray your non-deductible expenses.
The agency you are doing this through, did they tell you how to report the income?
It is highly unlikely you have any deductions. To get deductions you would have to show that you are running an ongoing business of hosting foreign students. Then and only then would you have a business that would allow for deductions for your use of your home and your other out of pocket expenses for meals. If you did operate an ongoing business it would probably be Schedule C and not Schedule E because of the services you provide. I.e., it would not be a residential rental.
We would be paid a fixed monthly fee and we would have to provide a furnished private bedroom room, 2 meals a day and use of the kitchen and bathroom,
The fixed fee is reportable as income and I guess we can deduct food and utilities on a Schedule C.
Can I just presume that the student¹s share of the food and utilities and the cleaning lady is 1/3 of our costs or must we go through some more elaborate calculation.
Must we depreciate the bedroom and if so do we use the original cost of the house or its current Fair market value or the assessed value
The agency will allow us to set up rules about smoking, drinking, loud noise and we can return the student if it is a bad fit
============== The fact that this is actually a charitable contribution per 26 U.S.C. 170(g).
170(g)(4) specifically denies any other treatment, including those you considered above.
The section you cite is for FX students in the 12 grade or lower. The OP said the FX student was going to college. See 170(g)(1)(B) for the definition of "certain students."
The section you cite is for FX students in the 12 grade or lower. The OP said the FX student was going to college. See 170(g)(1)(B) for the definition of "certain students." ============== I suggest that you read (g)(4) carefully. The prohibition on any other type of deduction is NOT based on the student being K-12 (which is in paragraph (1)(B)) only.
The section deals with charitable deductions. No charitable deduction is allowed. If you can show you are running a business, then you do get a deduction. The whole reason for sec. 170 was to 1. allow a deduction for a specific type of FX student service and 2. get past that part of the law that would disallow the deduction because it was not made to a charitable organization or made for the use by the charitable organization (See the last words in (g)(1)).
(g)(4) refers to getting a charitable deduction ("No deduction shall be allowed under subsection (a)..."). It does not preclude getting a deduction under some other part of the code.
The section deals with charitable deductions. No charitable deduction is allowed. If you can show you are running a business, then you do get a deduction. The whole reason for sec. 170 was to 1. allow a deduction for a specific type of FX student service and 2. get past that part of the law that would disallow the deduction because it was not made to a charitable organization or made for the use by the charitable organization (See the last words in (g)(1)).
(g)(4) refers to getting a charitable deduction ("No deduction shall be allowed under subsection (a)..."). It does not preclude getting a deduction under some other part of the code. ======================== It also means that it's not something else. Regardless, there's no provision available to the taxpayer whereby he can claim a "loss" on the transaction (except where otherwise provided - cf. IRC 280A).
Schedule C is the wrong place because this is not a business activity. Schedule E is possible, but there is no allowed loss here.
The original post asked what else could it be. I answered that.
What you seem to miss is that there is NO deduction at ALL when the student is in college. IRC 170(g) classifies it as charity, and (g)(4) denies the deduction for college students. I think you misunderstand the IRC as a whole: No deductions are permitted unless there's authority for them. In this case, the authority specifically declares no deduction available.
Then we'll just have to disagree. The clause you cite very specifically refers to taking a charitable deduction per Sec. 170(a). It says no charitable deduction is available. It says absolutely nothing about being able to take a deduction under some other section of the code. Therefore, if you can show that you are a running a business then you can take business deductions for use of your home and any out of pocket expenses for the boarder. I've never run into anyone who runs a boarding home for FX students. Nevertheless, the law would allow the deduction if you were running a boarding house for FX students.
(4) No other amount allowed as deduction No deduction shall be allowed under subsection (a) for any amount paid by a taxpayer to maintain an individual as a member of his household under a program described in paragraph (1)(A) except as provided in this subsection.
END QUOTE
means that there is no double dipping. That is, you cannot deduct the expenses as both a charitable deduction as well as some other deduction. I have no idea what that other deduction could be. It certainly does not look like a business to me.
I don't know why some of you have a problem translating this code section. So let's just replace the references in section 170(g)(4):
The first reference is to subsection (a): That means the first sentence should be read as: No charitable deduction shall be allowed for any amount paid by a taxpayer......
The second reference is to paragraph (1)(A): That means the rest of the first sentence should read as: ..to maintain an individual as a member of his household under an organized student foreign exchange program providing educational opportunities except as provided in this subsection.
The third reference is to "this subsection". I.e., 170(g).
The full translation would be: (4) No other amount allowed as deduction No charitable deduction shall be allowed for any amount paid by a taxpayer to maintain an individual as a member of his household under an organized student foreign exchange program providing educational opportunities except as provided in section 170(g).
The key part is at the beginning of the paragraph. No charitable deduction is allowed. Nothing in there that precludes a deduction under some other code section if you can meet the terms of that code section. If the Congress wanted to preclude a deduction anywhere else, they would have worded it: No deduction shall be allowed under Subtitle A for any amount...
As I have previously said, I have never heard of nor seen anyone running a boarding house in their home for FX students. That doesn't mean you are precluded from doing it and getting your Schedule C deductions because of Sec. 170(g).
(4) No other amount allowed as deduction No deduction shall be allowed under subsection (a) for any amount paid by a taxpayer to maintain an individual as a member of his household under a program described in paragraph (1)(A) except as provided in this subsection.
END QUOTE
means that there is no double dipping. That is, you cannot deduct the expenses as both a charitable deduction as well as some other deduction. I have no idea what that other deduction could be. It certainly does not look like a business to me. ============= No double-dipping is true of everything in the IRC. There's no need to repeat it here.
Note that the prohibition includes college students while the basic deduction in (g)(1) does not. Congress does not write redundant sections. As college students are already excluded per (g)(1)(B) as not being K-12 students, the only purpose to (g)(4) is to deny any alternative class of deduction, charitable or not.
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