Real estate losses from active income?

[Sajimone]

https://www.cnn.com/2020/03/28/opinions/stimulus-bill-tax-break-for-1-mccaffery/index.html

anyone have thoughts on this article? As a result of this new stimulus package, Are we now able to write off real estate losses against active clinical income?

[jfoxcpacfp]

The passive loss rules from 1986 still stand. This is for real estate professionals. The slant of that article really steams me (and the NYT link) because most everybody reading this has not idea about the PAL rules and what it takes to be a RE professional. Certainly, neither of the pieces clarify, at least on a brief read. For ex, the NYT article is titled "Bonus for Real Estate Investors" rather than the more accurate title "Bonus for Real Estate Professionals".

[Sajimone]

Thank you for the clarification! Having to be REPS was not clear in the article. What are legitimate examples of what folks log as RE hours ? I hear folks logging hours researching a property leading to contract or the time traveling to and from the rental property in Hawaii? Etc.

[Tim]

Thank you for the clarification! Having to be REPS was not clear in the article. What are legitimate examples of what folks log as RE hours ? I hear folks logging hours researching a property leading to contract or the time traveling to and from the rental property in Hawaii? Etc.

IRS has examples.

https://www.irs.gov/pub/irs-utl/33-Real%20Estate%20Professionals.pdf

And court cases

https://www.forbes.com/sites/anthonynitti/2019/01/02/the-top-tax-court-cases-of-2018-who-qualifies-as-a-real-estate-professional/

[StarTrekDoc]

Even if you log that. 750 hours = 15 hours a week without vacation. It's a significant bar. Redin searches AND plane travel to rentals 'overseeing' isn't going to get you there let alone past the audit when it comes

[jfoxcpacfp]

Thank you for the clarification! Having to be REPS was not clear in the article. What are legitimate examples of what folks log as RE hours ? I hear folks logging hours researching a property leading to contract or the time traveling to and from the rental property in Hawaii? Etc.

You pretty much cannot have that status when you have another full-time job. I don't like those games, anyway.

[Sajimone]

Yes.. im full time physician. My wife is part time. She legitimately spends a lot of time in managing, operating, rehabbing, leasing, acquiring new properties. Creating a llc entity, notarizing forms and submitting to the clerk of courts can take all day. We have 5 commercial buildings and 2 SFHs... sold 2 homes this year. She is the property manager for the rental home and two of these commercial MOB properties as these pure NNN properties. At her current monthly log rate.. she will have more than 1000 hrs for the year and be more than 50% of her time in RE.

Just info for all else who reads this post that i think it’s doable to legitimately be REPS.

Joanne how many clients do you have that are REPS? And if you do have clients... what did you see that worked in regard to irs audits.? Appreciate the responses! St

[Sajimone]

Even if you log that. 750 hours = 15 hours a week without vacation. It's a significant bar. Redin searches AND plane travel to rentals 'overseeing' isn't going to get you there let alone past the audit when it comes

agree.. but if it counts.. we want every legitimate hour possible to completely go way above this 750 hr rule!

[jfoxcpacfp]

Yes.. im full time physician. My wife is part time. She legitimately spends a lot of time in managing, operating, rehabbing, leasing, acquiring new properties. Creating a llc entity, notarizing forms and submitting to the clerk of courts can take all day. We have 5 commercial buildings and 2 SFHs... sold 2 homes this year. She is the property manager for the rental home and two of these commercial MOB properties as these pure NNN properties. At her current monthly log rate.. she will have more than 1000 hrs for the year and be more than 50% of her time in RE.

Just info for all else who reads this post that i think it’s doable to legitimately be REPS.

Joanne how many clients do you have that are REPS? And if you do have clients... what did you see that worked in regard to irs audits.? Appreciate the responses! St

Out of all of our physician clients (>300) I think only 1 qualifies. 30% - 40% invest in real estate or plan to, but the only way a doctor can be a REP is to retire or semi-retire. We actually have 2 clients who are REPS - and one is my husband. Strangely, he ever even set out to be one, at least, not for tax purposes, it’s just what he does since retiring. Obviously, we have a bit of a disagreement in that area, but I just sign the tax return. Others do the bookkeeping. and taxes and that’s the way I like it.

[StarTrekDoc]

Yes.. im full time physician. My wife is part time. She legitimately spends a lot of time in managing, operating, rehabbing, leasing, acquiring new properties. Creating a llc entity, notarizing forms and submitting to the clerk of courts can take all day. We have 5 commercial buildings and 2 SFHs... sold 2 homes this year. She is the property manager for the rental home and two of these commercial MOB properties as these pure NNN properties. At her current monthly log rate.. she will have more than 1000 hrs for the year and be more than 50% of her time in RE.

Just info for all else who reads this post that i think it’s doable to legitimately be REPS.

Joanne how many clients do you have that are REPS? And if you do have clients... what did you see that worked in regard to irs audits.? Appreciate the responses! St

It's a lot easier when you have a spouse who's SAH.
.... and several properties that you manage along with an expanded profile. That's usually enough to pass the smell test during a paper audit. If you have 1 property and no writedowns----yet claim the 750+ hours...harder to really get that.

[Larry Ragman]

Obviously, we have a bit of a disagreement in that area, but I just sign the tax return. Others do the bookkeeping. and taxes and that’s the way I like it.

Oh, the irony (edit: oops, I lost my emoji - all smiles)

[jfoxcpacfp]

Oh, the irony (edit: oops, I lost my emoji - all smiles)

lol, indeed. I've brought him a long way since we met, but finally decided it's not worth a divorce over disagreement with the way "I" interpret the regs. He will always believe CPAs are a necessary evil and he knows more about taxes than I ever will. To be honest, Nicole does his books and she's going to straighten out "his" interpretation, but there were several years I had to refuse to sign the return to make my point We don't call him the Bobfather for nothing.

[Larry Ragman]

lol, indeed. I've brought him a long way since we met, but finally decided it's not worth a divorce over disagreement with the way "I" interpret the regs. He will always believe CPAs are a necessary evil and he knows more about taxes than I ever will. To be honest, Nicole does his books and she's going to straighten out "his" interpretation, but there were several years I had to refuse to sign the return to make my point We don't call him the Bobfather for nothing.

I do understand. My wife will actually sign what I give her for taxes prep after a cursory review. But as a result, I find that I take more conservative positions rather than more aggressive because I don't want her to be upset if the IRS questions a deduction. That still happens, but I am usually on much more solid ground than I would be otherwise. (Just another way in which she is usually right.)

[jfoxcpacfp]

I do understand. My wife will actually sign what I give her for taxes prep after a cursory review. But as a result, I find that I take more conservative positions rather than more aggressive because I don't want her to be upset if the IRS questions a deduction. That still happens, but I am usually on much more solid ground than I would be otherwise. (Just another way in which she is usually right.)

Wise man. Trust is an underrated asset but you have to earn it rather than expect it.