Vacation Properties With Average Rentals of Less Than Seven Days

Losses from vacation properties that qualify as rental properties but have an average customer-use period of seven days or less do not qualify for the special $25,000 rental real estate loss allowance under the passive loss rules. This type activity is treated as a trade or business, and the owner's ability to claim a loss without restrictions depends on whether he or she materially participates in the management of the property. Because vacation property rentals are typically managed by third-party management companies, an owner will normally not be able to qualify as a material participant in the activity.