Discussion:Argument over 1099s for landlords--repeal, etc....

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Discussion Forum Index --> Tax Questions --> Argument over 1099s for landlords--repeal, etc....

Neil Mink (talk|edits) said:

1 December 2011
I have a colleague who says that individuals with rental properties do not have to issue 1099s for its rental expenses over $600 because the law was repealed back in April. I maintain that the tax code has always required 1099s to be issued for rental property expense payments. Check out Sec. 6041(h)(1): Solely for purposes of subsection (a) and except as provided in paragraph (2), a person receiving rental income from real estate shall be considered to be engaged in a trade or business of renting property. To me this means if you have a rental property and pay an individual more than $600 you should issue a 1099--there was no reason to even make a new law to require this. Am I missing something?

MarkSC (talk|edits) said:

1 December 2011
I believe that Code section 6041(h) is what was repealed earlier this year.

MarkSC (talk|edits) said:

1 December 2011
Yes, just confirmed.

Seaside CPA (talk|edits) said:

1 December 2011
I agree, this was repealed retroactively on April 14, 2011.

Tex50 (talk|edits) said:

2 December 2011
You could check out IRC 1402 which specifically exempts rentals from SE tax. There would be no reason for 1402(a)(1), if rentals were not considered a trade or business. And of course you are reporting expenses I imagine which are deductible under IRC 162 which defines deductions available for trade or business. Or you can go with IRC 469(c)(1)(A) which defines rentals as trade or business; just not materially participating. So any rental is presently declared a trade or business and such would be currently be subject to 1099 reporting without 6041(h).

DaveFogel (talk|edits) said:

2 December 2011
Neil Mink, I agree with you.

Before the Small Business Jobs Act of 2010 (H.R. 5297, P.L. 111-240), an individual who operated a rental activity that they considered as a business was required to file an information return if they paid a plumber, painter, repairman, etc. $600 or more during the year. See Sec. 6041(a).

The Small Business Jobs Act of 2010 added section 6041(h) to the Code, which would have defined anyone receiving rental income from real estate to be considered to be engaged in a trade or business of renting property. This new provision would have changed the situation for owners of rental properties who didn’t consider their rental activity as a business. Section 3 of the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 (P.L. 112-9) repealed this provision as if it was never enacted.

Nevertheless, an individual who operates a rental activity that they consider as a business is still required to file an information return if they pay a plumber, painter, repairman, etc. $600 or more during the year.

Szptax (talk|edits) said:

2 December 2011
Good to know - I was a bit confused about the post, thinking I misunderstood the 1099 requirements and the April repeal. The above reads as if some believe that no Sch E's would be required to file a 1099. My understanding is a rental SMLLC would need to file the 1099s but Jane Doe with a single rental as an investment would not. Both file sch E. Thus, due the the repeal, Jane does not need to apply for and get an ein for her rental.

Dennis (talk|edits) said:

2 December 2011
I can't see how choice of entity affects the trade or business argument. Particularly in the case of an SMLLC all you are talking about is liability protection which hardly has anything to do with intent. Admittedly there is the suggestion of a line (or a bridge too far?) but I have no idea where it is.

Ckenefick (talk|edits) said:

2 December 2011
Right, nobody knows since there's not a bright-line. It's a facts and circumstances analysis, which isn't an easy one. The GAO report, which led to the new 1099 reporting requirements (which were repealed), admitted that it was unclear. Not only is the 1099 issue unclear, but the whole "is a rental a business" issue is unclear on other fronts, like deducting home office expenses if one owns a bunch of rentals or taking the Qualified Real Property Business Indebtedness Exclusion on a forgiven rental property debt.

Maybe one could look to the real estate professional rules, but then again, maybe not. You get one result without aggregating rentals and another result if you do aggregate.

DaveFogel (talk|edits) said:

2 December 2011
I don't think it's unclear at all. Numerous court cases have held that an individual who rents even a single property to a tenant is engaged in the trade or business of renting property. See, e.g., Hazard v. Commissioner, 7 T.C. 372 (1946, Acq. 1946-2 C.B. 3); Post v. Commissioner, 26 T.C. 1055 (1956, Acq. 1958-2 C.B. 7); Gilford v. Commissioner, 201 F.2d 735 (2d Cir. 1953); Schwarcz v. Commissioner, 24 T.C. 733 (1955, Acq. 1956-1 C.B. 5); Elek v. Commissioner, 30 T.C. 731 (1958, Acq., 1958-2 C.B. 5 ); Fegan v. Commissioner, 71 T.C. 791 (1979), aff’d. 81-1 USTC (CCH) ¶9436 (10th Cir. 1981); Pinchot v. Commissioner, 113 F.2d 718 (2d Cir. 1940).

As to whether a taxpayer may claim the Qualified Real Property Business Indebtedness (QRPBI) exclusion on the discharge of rental property debt, I discussed this at length in my article "Tax Aspects of Rental Property Foreclosures and 'Short Sales'".

Ckenefick (talk|edits) said:

2 December 2011
If it's so clear based on existing guidance, then why did Congress see fit to add an actual Code Section mandating the issuance of 1099's by rental property owners???

And why was everyone up in arms about it??? If pre-existing law absolutely required 1099's for rental property owners, then adding a code section mandating the issuance of 1099's would have had impact, emotional or otherwise, since the new code section would not be telling us anything new.

The GAO report makes it pretty clear that it's unclear.

Rental real estate is different than stocks, bonds or what a plumber, salesman, accountant or attorney does. In recognition of this difference, we have the "per se" passive activity rules, where Congress is basically telling us that rental real estate isn't a real business.

Szptax (talk|edits) said:

2 December 2011
Ok, so who are you saying sends 1099s for rental properties?

Ckenefick (talk|edits) said:

2 December 2011
At this point, we're technically back to the "old rules" - facts and circumstances. But I think we now have a very strong argument that no landlord has to issue them.

Seaside CPA (talk|edits) said:

2 December 2011
I see it as this (not authoritative, of course): a bed and breakfast, providing personal services, reporting on Schedule C is a trade/business. They should issue the 1099's, and can be subject to s/e tax. Likewise for other similar rentals. Someone with a rental property, with no personal service, reporting on schedule E would not be required to issue 1099's. Just my opinion.

DaveFogel (talk|edits) said:

2 December 2011
"If it's so clear based on existing guidance, then why did Congress see fit to add an actual Code Section mandating the issuance of 1099's by rental property owners???"

As I said above, IRC §6041(h) was added by Congress to treat anyone receiving rental income from real estate — whether they considered that activity a business or not — as income from a business. This provision had no effect on taxpayers who previously considered their rental activity as a business because IRC §6041(a) already required them to file 1099s for compensation of $600 or more paid to plumbers, painters, repairmen, etc.

"And why was everyone up in arms about it???"

Because it added an additional burden to file information returns for those taxpayers who didn’t consider their rental activity to be a business. For example, the taxpayer who rented real estate to a relative at less than fair rental value would have been required to file 1099s for compensation of $600 or more paid to a plumber, painter, repairman, etc. The taxpayer whose rental loss was limited by Sec. 280A because of too much personal use would have been required to file 1099s for such compensation payments.

"Rental real estate is different than stocks, bonds or what a plumber, salesman, accountant or attorney does. In recognition of this difference, we have the "per se" passive activity rules, where Congress is basically telling us that rental real estate isn't a real business."

I disagree. Congress isn’t telling us that rental real estate isn’t a business. The definition of a passive activity, as stated in Sec. 469(c)(1), is a business in which the taxpayer doesn’t materially participate. In Sec. 469(c)(2), Congress merely wanted to create a per se rule that automatically classified any rental activity as a passive activity. But such a classification still meant that the rental activity was a business.

Ckenefick (talk|edits) said:

2 December 2011
whether they considered that activity a business or not

Because it added an additional burden to file information returns for those taxpayers who didn’t consider their rental activity to be a business

...but you just said that it's always been clear, based on case law, that if you own 1 rental you're a business taxpayer.

Congress isn’t telling us that rental real estate isn’t a business.

If Congress believes renting a property is a business just like any other business, all deductions would be immediately allowed in full, no matter what, for the guy that owns 1 rental.

Dennis (talk|edits) said:

2 December 2011
I tend to think we're more in the "dog that didn't bark" area. There are many situations where a landlord's reliance on casual employment rises to a level that ought to be considered wages. Strict interpretation of the trade or business argument would suggest a lot more compliance enforcement than we have seen over the years

DaveFogel (talk|edits) said:

2 December 2011
"...but you just said that it's always been clear, based on case law, that if you own 1 rental you're a business taxpayer."

I gave two examples above where the taxpayers didn't consider their rentals to be a business. But an arm's length rental for market value rent, no personal use, held out to the public for rental all year, is generally treated as a business.

"If Congress believes renting a property is a business just like any other business, all deductions would be immediately allowed in full, no matter what, for the guy that owns 1 rental."

C'mon, Chris. Be practical. You know as well as I do that whether renting property is, or is not, a business depends on the facts and circumstances, and that there is no absolute rule that applies. You even said this in one of your messages above.

If you go and read the Committee Reports for the passive loss rules that were enacted by the Tax Reform Act of 1986, you will see quite clearly that Congress created the per se rule to treat a rental activity as a passive activity ("A passive activity is defined to include any rental activity, whether or not the taxpayer materially participates."). But Congress did NOT mention rental activities in the section of the Committee Reports entitled "Passive activities that are not a trade or business." That omission proves that by creating the per se rental rule, Congress was NOT saying that a rental activity is not a business.

Ckenefick (talk|edits) said:

3 December 2011
You know as well as I do that whether renting property is, or is not, a business depends on the facts and circumstances, and that there is no absolute rule that applies.

Yes, and the GAO report concluding the same thing...that there are no hard and fast rules, so people don't know if their rental activity constitutes a business or not for which 1099 reporting is required.

This is my whole point - It is absurd to think that a small landlord needs to read a bunch of court cases to determine if he's in a trade or business or not, just so he can figure out if he needs to issue 1099's. It's stupid, confusing and unclear, just as the GAO report indicated.

Also, if Congress feels that my one rental is really a business, then why can't I simply deduct my losses each year with no questions asked? Because Congress doesn't want to give me the loss because Congress doesn't like leverage. Congress has always hated leverage. The 469 rules are just a convenient way to deny me the deduction - nothing more, nothing less.

Hammock (talk|edits) said:

3 December 2011
Let me ask to see if we all agree on one idea: for a RE professional, Forms 1099 reporting is required.

For others - the debate begins.

This I a fairly significant issue for us as preparers - the new Sched E and 8525 will require us to report on behalf of the TP whether they are required to issue 1099's, and whether they complied. Thus we will need to be certain of the requirements in order to properly prepare under Circ 230.

For a whole new headache, look at the new Sched E. I'll post a new thread for everyone's comments.

Ckenefick (talk|edits) said:

3 December 2011
Let me ask to see if we all agree on one idea: for a RE professional, Forms 1099 reporting is required.

Not sure I agree. Let's say we have a guy that is a self-employed realtor putting 2,000 hours in per year. And he owns one residential rental. So he'd have to issue 1099's for this one rental...when maybe somebody else, who is not a real estate professional, would not have to issue a 1099 for his single rental property? This is just one example.

Illini (talk|edits) said:

3 December 2011
Ckenefick has the sanest post IMO. The rest of you are dancing on the head of a pin. So at least, you're angels! I think our government is way out of control with regard to tax law. It's pretty sick when one can argue for or against a position with equal weight.

RoyDaleOne (talk|edits) said:

3 December 2011
For a rental activity consider that the hobby loss rules apply first, and if the activity is not a trade or business, it maybe an investment activity now you have to considered the investment income rules. I think to argue that a rental activity is not a trade or business requires lot more thought then some of the posts are seemly implying. Please check references before you try to refute my comments about the hobby loss and investment activity.

Ckenefick (talk|edits) said:

3 December 2011
The long and short is that it takes quite of bit of effort to determine if a rental is a trade or business. Again, the GAO report recognized that there is no quick and dirty way to make this determination. Hence the GAO's recommendation to create a simple statute mandating the issuance of 1099's by rental property owners.

Take the employee vs. IC issue - A 20-factor test! But here's the difference, no matter what the result is (IC or employee) we know pretty easily that something must be filed - either a W2 or a 1099.

But here, with the rental property/1099 issue, we can't even get that far without a ton of case reading and investigation...for something so mundane as filing a damn information report.

Harry Boscoe (talk|edits) said:

3 December 2011
"...there is no quick and dirty way to make this determination."

Chris, you have tip-toed so carefully through this topic that you almost allowed me to accept that "there is no quick and dirty..." might be the right answer.

Clearly this is an **unacceptable** situation. We professionals slave and work our fingers to the bone while Capitol Hill and the Treasury just "kick the can" down the street (or whatever the metaphor is for doing nothing today about something while bemoaning its importance).

You know, of course, what I'm talking about: the nefarious, long-standing and rarely brought into the light day *conspiracy* between Congress and Treasury that neither of them will ever be required to define the phrase "trade or business." Never, ever.

Imagine in how many instances we professionals have been forced into the "facts and circumstance" limbo by their blatant flagrant and continuous refusal to **do their job** and define the terms that they use, in this case "trade or business". If I were sound-bite-minded, I would say that their performance is a close cousin to what Congress has been doing in its recent "efforts" to solve the budget/deficit problem that looms over this country and threatens the world as we know it. But I'm not so-minded.

But back to important things: you see how facilely the GAO or whoever connived to amend Section 6041 to force landlords to issue 1099s without defining "trade or business" - now *they* - the GAO - are in the thick of the conspiracy, too...

There's refrigpbrerator but it's not going to last long. Better get your own.

Ckenefick (talk|edits) said:

4 December 2011
Very good. And let me add this to the conspiracy - All of those who e-file - YOU ARE HELPING THE GOVERNMENT. ALL THIS E-FILING MEANS LESS RESOURCES DEVOTED TO PROCESSING RETURNS. AND MORE RESOURCES DEVOTED TO AUDITING YOUR CLIENTS. WAKE UP AND SMELL THE PBR.

Death&Taxes (talk|edits) said:

4 December 2011
Cross-reference Discussion: A whole new headache - comments on the newSched E

I might note here that the City of Philadelphia makes a neat distinction when it comes to trade or business for a rental property. A person living in a multi-unit property with three or fewer rental units is not required to have a business license and pay business tax. All others are considered as a business and must attain a business license and pay business tax.....even someone owning one condo or house. Very simple rule, huh?

Szptax (talk|edits) said:

4 December 2011
If I have a client with an LLC for rental I think they have self identified themselves as a business for purposes of filing a 1099. Even if its a SMLLC with one rental.

Spell Czech (talk|edits) said:

4 December 2011
Sarcasm Alert

SZP: Are you saying that your SMLLC client is about to prepare and file a 1099 that might be **not required by law**???? OMG!!! Call a lawyer!!

WEISSEA (talk|edits) said:

4 December 2011
IRS website dated 5-24-11 which modifies their Form 1099-MISC instructions:

Section 3 of Public Law 112-9 repealed section 6041(h) of the Internal Revenue Code, which would have required the reporting on Form 1099-MISC of rental property expense payments made after December 31, 2010.

Therefore, in the 2011 Instructions for Form 1099-MISC, please disregard:

Treatment of rental property expense payments under What's New on page 1, The second paragraph under Trade or business reporting only on page 1, and Rental property expense payments on page 3.

DaveFogel (talk|edits) said:

4 December 2011
Chris, you keep referring to the GAO report. Would you please post a link in this discussion to this report and reference the page number that you're referring to so that we can all read it? Thanks.

RoyDaleOne (talk|edits) said:

4 December 2011
From the Regulations...


(1) TRADE OR BUSINESS. A trade or business is any trade or business determined by treating the types of activities in section 1.469-4(b)(1) as if they involved the conduct of a trade or business, and any interest in rental real estate, including any interest in rental real estate that gives rise to deductions under section 212.


What say you?

WEISSEA (talk|edits) said:

4 December 2011
See JOINT COMMITTEE ON TAXATION JCX-47-10 9-16-10 page 27 for a good explanation of the bill before it got repealed. So we are back to this:

"Additionally, the requirement that businesses report certain payments is not applicable to persons engaged in a passive investment activity. Thus, a taxpayer whose rental real estate activity is a trade or business is subject to this reporting requirement, but a taxpayer whose rental real estate activity is not considered a trade or business is not subject to such requirement."

Spell Czech (talk|edits) said:

5 December 2011
"What say you?" asks RDO.

I'm not sure to whom that question is addressed but if it were addressed to me I would say that the quote comes from the passive activity regulations, and that the quote follows this:

"The following definitions apply for purposes of this section:" [emphasis added]

and that it thus applies only within Section 469. Not 1402 and not 6041.

Spell Czech (talk|edits) said:

5 December 2011
And if I were really pressed, I would suggest insist that this quoted regulation **proves** that at least some rentals are not trade or businesses [notwithstanding the lack of a definition of "trade or business"...] when it refers to an "interest in rental real estate that gives rise to deductions under section 212" because if a rental property were "trade or business," then its deductions would be under section 162 and not under section 212. Touchdown! QED! and Check!

Spell Czech (talk|edits) said:

5 December 2011
That's an awesome quote from the Joint Committee, WEISSEA. It touches every base in this discussion. Home run.

RoyDaleOne (talk|edits) said:

5 December 2011
Do you think that the regulations are saying that a rental activity that uses Section 212 for its rental deductions is also considered a trade or business.

Spell Czech (talk|edits) said:

5 December 2011
Yes, but *only* for the passive activity rules of Section 469.

"...it thus applies only within Section 469. Not 1402 and not 6041."

Szptax (talk|edits) said:

5 December 2011
I think that by setting yourself up an a SMLLC "Limited Liability Company" there is an argument that you are setting yourself up as a business. Although I can also see the argument for establishing an LLC exclusively for the Limited Liability. Yes, I think it fact and circumstances.

I have a Real Estate agent client with a SMLLC and several rentals - I think he should file 1099s.

I have several with maybe 2-4 rentals who are SMLLCs. Should they file or not? How do I differentiate the MMLLC (filing a 1065) for 2 rentals. Are they a business or not? Its a partnership exclusively for Real Estate. Is there a threshold number of rentals at which they should file?

Some filed last year, some didn't have anyone they paid in excess of $600. Do they file this year or not? What if they file because they figure why not, better safe than sorry. Is it implied that they are now considering themselves a business?

Death&Taxes (talk|edits) said:

5 December 2011
Question: If I own a rental property, or two, whether or not a T or B, would it be illegal to insist on giving a 1099-MISC to those who provide services? Would it be illegal to institute backup withholding if they don't provide ID numbers?

Just curious, mind you, but I see too many people in this little town working sub tabla while I pay taxes on every dollar.

Szptax (talk|edits) said:

5 December 2011
T or B - its not that early, so maybe its just Monday.. T=? B=business?

Death&Taxes (talk|edits) said:

5 December 2011
Trade or business?

Harry Boscoe (talk|edits) said:

5 December 2011
IRS has announced that we may disregard the 2010 changes in the law relating to "landlords and 1099s" (that made it into their Schedule E and other instructions) since those changes have been removed from the law, void ab initio, in April of this year. Click here to read their announcement at the source. And credit WEISSEA (see post above) for tracking this down.

MarkSC (talk|edits) said:

5 December 2011
The IRS applies a fairly simple test to determine if an activity is a trade or business, namely, whether the activity is required to be reported on Schedule C. As I read the rules (or at least IRS's enforcement of them) rental property is considered a trade or business only if significant personal services are provided--for example a hotel with maid service--or rentals of personal property. See the instructions to Schedule E. Any rental property reporting on Schedule E is not required to issue 1099s. Rental properties on Schedule C (because significant personal services are provided) are required to issue 1099s.

Harry Boscoe (talk|edits) said:

5 December 2011
"The IRS applies a fairly simple test to determine if an activity is a trade or business, namely, whether the activity is required to be reported on Schedule C."

That sounds totally *circular* to me.

Ckenefick (talk|edits) said:

5 December 2011
Rewrite:

"The IRS applies a fairly simple, yet totally circular, test to determine if an activity is a trade or business, namely, whether the activity is required to be reported on Schedule C."

Harry Boscoe (talk|edits) said:

5 December 2011
"...would it be illegal to insist on giving a 1099-MISC to those who provide services?" There's a really huge ruling or letter or explanation or whatever *by the IRS* about this very question, which belabors every nuance of the issue and then .. I can't remember what the answer was.

The topic was, as I remember, if it's kosher to send a deadbeat a 1099 when you can't collect what he owes you. The Yellow Box of Search would probably find a reference to it in 27 nanoseconds. If I knew how to use it...

Death&Taxes (talk|edits) said:

5 December 2011
Try this one, Harry. Discussion: Form 1099-C issued by tax practitioners

"The IRS applies a fairly simple, yet totally circular, test to determine if an activity is a trade or business, namely, whether the activity is required to be reported on Schedule C." Priceless!!!!!! And is a farm a trade or business, or can no one type "F"?

The Service does not want a bright line definition of 'Trade or Business.' Imagine Doug Shulman testifying that IRS does not need additional funds for 2012-2013 because 'Trade or Business' has been codified. Imagine if their definition paralled that of the Philadelphia Business and School Income tax (2 separate taxes)

For the School Income tax we have "RENTALS. All rentals received from the ownership of real or personal property, irrespective of situs, unless such rentals are deemed to have been received in the conduct of a business for purposes of the Philadelphia tax on net profits."

And under the City's Business Tax regulations, we find: "Doing business shall not include rental income generated from real property which is the principal residence of the owner and consists of three or less residential units."

Put something like this in the IRC and we might lop off 25,000 revenue agents.

MarkSC (talk|edits) said:

5 December 2011
I don't see what's circular about it. The way the IRS interprets the rules, a rental property belongs on Schedule C if (a) the rental is of personal property or (b) the rental is coupled with significant personal services. It's true that the actual law is more nuanced and is a facts and circumstances test, but the IRS has simplified that to the above formula. I am 100% confident that anyone following that formula will avoid penalties for failing to issue 1099s. That formula has been in the Schedule E instructions for years.

DaveFogel (talk|edits) said:

5 December 2011
For those of you who don't believe that a single rental property is a business, I wonder what your position would be if the $25,000 allowance that you get under IRC §469(i) created a net operating loss. Are you saying that this is a nonbusiness loss, so the taxpayer isn't entitled to carry it back or carry it forward?

Ckenefick (talk|edits) said:

5 December 2011
No, we'd say "Why is there a special $25k allowance in the first place?"

Death&Taxes (talk|edits) said:

5 December 2011
Ask and the 100th session of Congress shall answer. "Congress believed that a limited measure of relief, however, was appropriate in the case of certain moderate-income investors in rental real estate, who otherwise might experience cash flow difficulties with respect to investments that in many cases were designed to provide financial security, rather than to shelter a substantial amount of other income." (General Explanation of TRA 1986, p 214)

Amazing! At 100K of MAGI that 25K provides at maximum 7K of tax cash flow a year or $583 a month. I wonder if said act was passed today whether the 25K allowance would be given only to those with income above 250K.

Anyway, in writing this act, Congress punted the trade or business issue on rental activity again: "Such activities predominantly involve the production of income from capital. For this reason, rental income generally was not subject to the self-employment tax, whether or not the activity constituted a trade or business (Sec. 1402(a)(1). Rental activities generally require less ongoing management activity, in proportion to capital invested, than business activities involving the production or sale of goods and services."

Spell Czech (talk|edits) said:

5 December 2011
Dave, it looks to me like IRS has capitulated already in this "is-a-rental-loss-a-business-loss-or-not-for-NOL-purposes" issue.

See Page 6 of the Form 1045 instructions which say the following:

Do not include on line 6 any

  • business deductions*. These are

deductions that are connected with a trade or business. They include: · State income tax on business profits, · Educator expenses, · Moving expenses, · The deduction for the deductible part of self-employment tax, · Domestic production activities deduction, · Rental losses, · Loss on the sale or exchange of business real estate or depreciable property, andonandonandon...

[emphasis added, and I apologize in advance for the formatting snafu.]

RoyDaleOne (talk|edits) said:

5 December 2011
"In the case of the $25,000 offset for passive losses from rental real estate activities in which an individual actively participates, a situation could arise in which losses would be allowable for the year under the passive loss rules, but the taxpayer has insufficient non-passive income against which to apply them. In such a case, the otherwise allowable rental real estate losses are treated as NOLs arising in that year (and no longer passive losses) and may be carried forward and back in accordance with the rules applicable to NOLs. S. Rep. 313, 99th Cong., 2d Sess. 722-723 (1986)."

DaveFogel (talk|edits) said:

5 December 2011
Thank you, D&T, Spell Czech and RoyDaleOne. I knew the answer to my question, but so many have posted comments in this discussion saying that a single rental isn't a business, so I wanted to take the discussion one step further and ask them how they would treat a passive loss that created an NOL.

Tex50 (talk|edits) said:

6 December 2011
I feel the only reason Congress created 6041(h) in the first place was to "clarify" that rentals were already considered in their definition of a trade/business and subject to same 1099 reporting. The reasons it was repealed were many. Other items in the bill and public uproar over the additional reporting caused Congress to fold. However law and regulations still support even one rental to be considered as a trade or business. Again maybe someone can help me as to why Sec. 1402(a)(1) exists because if rentals are not a trade or business; they would not even be subject to 1402(a) and have no reason to be excluded from SE tax.

Harry Boscoe (talk|edits) said:

6 December 2011
Tex50, you should click here and read this other thread to dispel *any* notion that it's as simple as you'ld like to make it.

Dennis (talk|edits) said:

6 December 2011
We seem to be getting away from the basic question here. RE rental is without question a trade or business. It is also a trade or business specifically distinguished from other trades or businesses. What does that say about 1099's?...♫

The points to address are:

1) Any requirement for landlord filing of 1099's has been part of the law for a long time.

2) 100% of Schedule C audits ask for 1099's. 0% of Schedule E audits ask for 1099's.

3) None of you have ever filed payroll reports for a landlord with multiple properties and one handyman.

RoyDaleOne (talk|edits) said:

6 December 2011
"0% of Schedule E audits ask for 1099's." thank you Dennis for this comment, because I think this will change now that the idea has been planted in the IRS's head.

Dennis (talk|edits) said:

6 December 2011
I don't think it outrageous to assume the IRS had no input into the language of §6041(h)or that the institution of that section did not indicate their belief in lack of authority. I further don't think it outrageous to assume that repeal of the section indicates that Congress does not want this authority to exist.

Death&Taxes (talk|edits) said:

6 December 2011
What are property managers doing? In the past the only person receiving 1099s from them was the owner of the property, but I can imagine the owner raising a stink should he be audited and run into an Examiner who feels the manager should have issued 1099s to the plumber or the one who maintained the property.

Kevinh5 (talk|edits) said:

6 December 2011
The property management companies have been issuing 1099s to the plumbers and lawn guys if they consider that the worker is paid by them on behalf of the owner. If they maintain separate checkbooks per property owner, then they haven't been issuing the 1099s.

Spell Czech (talk|edits) said:

7 December 2011
If if if ... Some lawyer is drooling over writing this contract and selling it dozens of times.

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