Discussion:Rental Property - Passive
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Discussion Forum Index --> Advanced Tax Questions --> Rental Property - Passive
Discussion Forum Index --> Tax Questions --> Rental Property - Passive
Chicagocpa1 (talk|edits) said: | 4 April 2008 |
| Hello - Is there any situation when a rental property should be classified as a passive activity and not rental real estate with active participation? I have MFJ return. Both spouses work fulltime and have 5-6 rental properties on the side. Assuming they are making management decisions, is there a situation when these should be classified as passive? If they weren't rental real estate activities, it would certainly be passive activity, as they would not meet hour requirements. Thanks. | |
| 4 April 2008 | |
| Is a CRP (or any kind of gubment boondoggle) available for timber land? I got a 76 year old who is land poor. She's related to me, I won't say how. Ugh, I have no idea what I just did... | |
| 4 April 2008 | |
| Crow, this is the wrong discussion for that - look for that post on Methuselah | |
| 5 April 2008 | |
| ChicagoCpa - Are the Rental Propterties producing significant Net Income? | |
Chicagocpa1 (talk|edits) said: | 6 April 2008 |
| Yes, the properties have carry-foward losses for years. I want to take the losses this year on the properties that were sold to reduce gain and, potentially, carry-foward losses on properties that were not sold. An associate insists that they need to be reported on 8582- passive - all other activities as client works fulltime job elsewhere. He was activily participating in managmement of the buildings, so I don't understand why it would not be rental activity with active participation. | |
| 6 April 2008 | |
| passive audit guide I suggest you review the audit guide on passive losses to make sure. I assume these are apartment properties? | |
| 6 April 2008 | |
| Chicago CPA - all rentals that don't rise to the level of a trade or business are passive activities. That's why I suggested you read 469. You might need to brush up and take some good CPE on rentals and passive. | |
Chicagocpa1 (talk|edits) said: | 6 April 2008 |
| Thanks all! I have read 469 inside and out and the audit guide (though no CPE, as of yet). I understand that rentals are all passive and they are definitely not trade or business in this case. However, an associate (whose opinion I respect) states that since hours requirement is not met, client hasn't met active participation in real estate. He too suggested I read 469. :-). I guess in these last few days, I am really missing something, because I can't find anything that states an hours requirement for active participation. Thanks again! | |
| 7 April 2008 | |
| Its my understanding the Hour Requirement (very strict) is 750 hours annually, a Tax Case on this is recent, there a Teacher (full time) had rental properties - the Tax Court opined that it was "impossible" for her (the Taxpayer) to meet the requirmeent given her full time employment - and she did not have itemized hours to substantiate the 750-test. | |
| 7 April 2008 | |
| Chicago, there is no hours requirement for the "active participation" standard. Every associate is entitled to one mistake. | |
Death&Taxes (talk|edits) said: | 7 April 2008 |
| People are mixing apples and oranges here, confusing real estate professional with active participation, which is a different kettle of fish. That is the device that permits those with income under 150K to deduct up to 25K of losses, depending on their income before the losses. No part of active participation has anything to do with hours at all....simply be active in management: approve leases, contractors, pay bills, talk to the rental agent etc. Read the definitions given back in TRA '86....they haven't changed.
If I am following this correctly, Chicago's client has piled up unused passive losses on rentals. If a property with unused losses was sold this year, this frees all the unused losses on that property, assuming Chicago was smart enough not to lump all his rentals together. If there was a gain, and the gain exceeds the unused losses on that property, the excess gain will free other passive losses on a pro-rata basis. If this is the case, your associate has no idea what he is talking about. | |
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