Discussion:Real Estate Pro - Sch E loss
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Discussion Forum Index --> Tax Questions --> Real Estate Pro - Sch E loss
| 2 September 2006 | |
| The wife is a real estate pro. The husband and wife together own 6 rental properties. 5 of the rental properties only have active participation, but not material participation. The wife does 100% of the work for the 6th property. If I do not group the properties as one activity, will the 6th property stand apart and get 100% of the loss, while the other 5 will be subject to the passive loss rules? | |
| 2 September 2006 | |
| Regarding the 6th property, even if she has material participation, does she spend over 750 hours in services? If so, then believe you are correct. | |
| 2 September 2006 | |
| She spends over 750 hours in real estate activities as a real estate agent, manager of the 6th property, property acquirer, etc. Is this what you were asking? | |
| 2 September 2006 | |
| As I understand Sec. 469(c)(7) and Reg. 1.469-9 tests have to be met for a RE Pro. First, more than half of personal services in all businesses for the year performed in real property or rental real estate. Second, must be more than 750 hours in real property business and rentals in which there is material participation.
If both of those tests are met, then there must be material participation in each rental activity - unless grouped - for losses to be non-passive. Regarding the first test of more than half the time, if the person is an employee then he or she must be more than a five percent owner to pass this test. Otherwise there is no real estate pro status although the other tests might be met. Sec. 469(c)(7)(D)(ii). | |
| 2 September 2006 | |
| She satisfies both requirements to be a real estate pro, but materially participates in only the 6th property. Are you saying that she is not allowed to claim the full loss for the 6th property because she only actively participates in the other 5? Can the 6th property stand alone? | |
| 2 September 2006 | |
| If she meets requirements of a real estate pro and has material participation in the 6th property, my conclusion is the loss on the 6th property is non-passive. All I was getting at that if she were an employee of a firm and not more than a 5% owner, then it would have been impossible - at least improbable - she would qualify as a real estate pro and thus, loss on the 6th property would be passive. | |
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