Discussion:Real Estate Professional Combining Properties
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Discussion Forum Index --> Advanced Tax Questions --> Real Estate Professional Combining Properties
Discussion Forum Index --> Tax Questions --> Real Estate Professional Combining Properties
| 10 October 2009 | |
| Hello,
I have looked through several posts and seem to glean from the regulations and the posts that if I elect to aggregate several LLC properties (for which my client really controls the activities and materially participates), I need to make that election on the return, which is fine, but my main concern is that if I do that, I MUST aggregate ALL of the real estate interests of the taxpayer, is that correct? Or can I pick and choose which ones to aggregate as there are some truly passive ones they own and there are some truly active ones with which they participate. BTW, aggregation is the ONLY way to qualify over the 750 hours or more than half of their income, etc. Thanks, Ken | |
| 10 October 2009 | |
| Let me modify this a bit and ask this question. Assuming I can get away with selecting certain properties to be treated as passive and others as material participation, can I simply indicate which properties are material participation on the input sheets (proseries) and let it fly or do I have to aggregate them all into one huge single activity with an aggregation code? In other words, when I aggregate for the 750 hours, is that something that has to be done via the tax return or is the aggregation really more for the passive loss situations? Obviously, trying to get creative here.
Thanks, Ken | |
| 10 October 2009 | |
| you can pick and choose which properties/activities form which group. You may have several groups. | |
Laketahoecpa (talk|edits) said: | 10 October 2009 |
| You don't have to make election to aggregate to meet the 750 hours test for real estate professional. As long as your client spends 750 hours on activities in total, your fine.
If your client is a real estate professional, you then look at each real estate activity (i.e., each LLC) and determine whether he meets material participation test for that activity - the two most common are 1) does he spend 500 hours or more on the activity or 2) does he spend at least 100 hours on the activity and does he spend more time than anyone else. If you want to elect to aggregate properties, it will be for the purpose of applying the material participation test. And no, you can't pick and choose. There must be some sort of common factor used for aggregation. | |
Laketahoecpa (talk|edits) said: | 10 October 2009 |
| I stand corrected on picking and choosing part - I was writing while Kevin was posting. | |
| 10 October 2009 | |
| Can't you guys get your timing down right? SMILE...thanks a mill, both of you....so sounds like I can keep each one separate as long as they spend the 750 hours total on all the LLC's combined......Ken | |
| 10 October 2009 | |
| of course you can pick and choose, LakeTahoeCPA. For example, you might group all properties out of state together, and not group the in-state local properties. | |
Laketahoecpa (talk|edits) said: | 10 October 2009 |
| Lets say I have a client with 5 rental properties here in Lake Tahoe. All single family homes. Can I elect to aggregate three of the five? Or do I need to find some factor that differentiates those three properties from the other two? | |
| 10 October 2009 | |
| You can group the properties as you see fit under the -4 regs as long as the grouping makes sense.
I think that the election to aggregate is an all or nothing election. I think it applies to all of the rental properties. I'll check for you, but not until after the deadline. | |
Harry Boscoe (talk|edits) said: | 10 October 2009 |
| Kentaxman, are all these properties rental real estate?
Is your client a "real estate professional" by satisfying the two tests in IRC Section 469(c)(7)? [Caveat: "Grouping" and "aggregating" are irrelevant for these two tests...] When you wrote "BTW, aggregation is the ONLY way to qualify over the 750 hours or more than half of their income, etc." you tipped us off that you didn't really glean enough about the 750 hour test from reading the regulations and the posts to this forum. | |
