Barn rental on a farm
MFJ return, has 80 acres and started a farm in year one of purchase of property (2021). Rental of barn 1 to an individual who lives in the upstairs barn and uses the rest of the first floor of barn stalls for horses owned by the renter. Barn also has a small arena. Property owner received 60k of rental income in 2022. Rest of farm is used by owner for breeding livestock (horses, cows, etc). Built another barn for about $300k to house their livestock. Typical farm expenses of feed, vet bills, property taxes, etc. Questions are how to treat the following. 1. Is barn 1 rental income schedule E and income is passive or is it possible to be included in schedule F? 2. Is barn 2 eligible for bonus depreciation? (barns are 20 year life so thinking bonus depreciation is an option). 3. New barn also has an apartment upstairs. Taxpayers are thinking either short term rental for horse shows (Airbnb) or long term (standard rental) in later 2023 or 2024). Does this impact 2022 taxes or not an issue until they actually have a tenant then what are the future tax issues? Husband is a physician. High income earner ($2M K1). Farm had minimal income but a lot of expenses in year 2 (2022)
