Discussion:Real Estate Courses for Non Professional
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Discussion Forum Index --> Tax Questions --> Real Estate Courses for Non Professional
| 7 July 2007 | |
| I have a client who has a well paying advertising director job. In addition, he currently owns 5 rental properties, and is planning on continuing to add properties in the future. He does not claim or qualify for the "real estate professional" designation, so his losses are currently suspended.
He took $15,000 of real estate courses in 2006. Not to become a realtor, but rather help him to invest further into real estate, and probably a portion of the courses (I will find out for sure) was for managing properties as well. I was going to claim on schedule "A" subject to 2% threshold, as an investment expense, but have started to doubt myself if that is the proper treatment. Any ideas? Thank you. | |
| 7 July 2007 | |
| How about allocating $15,000 over the 5 properties on schedule E? | |
| 8 July 2007 | |
| Sec 274(h)(7): "No deduction shall be allowed under section 212 for expenses allocable to a convention, seminar, or similar meeting." -- Larry Hess, CPA | Albuquerque, NM | Talk to me | |
| 8 July 2007 | |
| Agree that no deduction would be available under Sec. 212. However, if the taxpayer's rental activities rise to the level of a trade or business, then the cost of the classes may be deductible under Sec. 162. | |
Michaelstar (talk|edits) said: | 8 July 2007 |
| JD - Riley2 is again on point - as always.
Your client was only able to pay this kind of $$ for hotels, airfare, t-shirts and whatever else for these classes because he has money to burn. No one in their right mind would spend this kind of money (or really believe they could) for r/e classes and expect to be able to ride uncle sam on the other side by taking a tax deduction. Unless of course, these 5 properties are hotels costing millions and this is as Riley2 states - a trade or business..... Good to see you have clients with this kind of $$. Their return ought to be worth at least $5k at a minimum for the 1040 - unless it is really complicated and then it the cost should go ^^^. DZ - your not really serious - right ???? Unless this t/p is investing so much coin that $15k is but 1% (at the most) of rents. If that was the case, sounds like they should be forming LLC's for each property and the LLC's funding the CPE for this well to do advertising director. | |
| 8 July 2007 | |
| I also concluded no deduction under Sec 212, but as Riley had mentioned, I thought maybe a possibility under 162. I got hung up on that issue though because he was not claiming self as "real estate professional". So whether it rose to the level of a trade or business was at issue for me.
Regarding DZ, if the courses were just to better manage the real estate properties, I do not see why they could not go against the properties themselves on the E. But I cannot imagine spending that kind of $$$ on courses to help manage properties. Actually I cannot imagine spending that kind of $$$ on these kind of courses, then again I do not make nearly what this client makes. The properties are standard flavor residential properties. | |
| 8 July 2007 | |
| Ownership and management of rental real estate can rise to the level of a trade or business -- even though the owner is not a real estate professional as defined in Sec. 469. | |
| 10 July 2007 | |
| I suppose then it comes down to the typical gray area of exactly what would comprise rising the level of a "trade or business". And, if it did, would the deduction then take place on the schedule "A" under misc expenses, or then to the "E" schedule? | |
| 10 July 2007 | |
| Tax Court says that a taxpayer with as few as 6 single family dwellings is in a trade or business. | |
| 10 July 2007 | |
| Sec. 162 expenses attributable to rental properties is claimed as an above the line deduction. Sec. 62(a)(4). | |
