What is the Fair market rental value?

Fair market rental value is the amount a property would command for short-term rental in an open and competitive market between knowledgeable, willing parties acting independently without compulsion. This valuation becomes critical for the implementation of the Augusta rule, as businesses must pay reasonable rental rates supported by a comparable property analysis to avoid IRS challenges. Determination involves researching similar properties on vacation rental platforms, consulting with property management companies, and considering factors such as location, square footage, amenities, capacity, and seasonal demand. Documentation should include multiple comparable rentals with similar characteristics.

Related Terms

What is the Augusta Rule?

What is the Augusta rule exclusion?

What are Rent Expenses?

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