Part 1 Rental, Royalty, Passive and Pass-Through Income question: personal use by Bea

Part 1Rental, Royalty, Passive and Pass-Through Income

Bea rents a house she owns to her son at a fair rental price, and he uses it as his main home all year. Is his use treated as personal use by Bea?

A Yes, unless Bea also charges a security deposit
B Yes; any use of the house by a family member is personal use
C No, but only if he is not her dependent
D No, as he pays fair rent for his main home

Show the answer and explanation

Answer: D. No, as he pays fair rent for his main home

Use by a family member is personal use unless the property is rented at a fair rental price to someone who uses it as his or her main home. Fair-rent use as a main home by the son is not personal use by Bea, so the rental is not limited as a vacation home. Below-market rent to a relative would count as personal use. Source: IRC 280A(d)(2)-(3); Pub. 527 (2025), Personal Use of Dwelling Unit. Tax year: 2025 (law as of 31 Dec 2025).

Common mistake

Treating every rental to a relative as personal use.

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Original study material mapped to the public IRS SEE content outlines; not a real exam question.Not affiliated with or endorsed by the IRS or PSI. Verify figures and rules against current guidance before relying on them.