Is rental real estate a trade or business for IRC 199A?

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Message Board Is rental real estate a trade or business for IRC 199A?

This topic contains 3 replies, has 3 voices, and was last updated by Lynn Freer 6 days, 11 hours ago.

  • Author
  • #125192
    Paul Lamas

    At a recent Spidell update seminar, the 199A instructor said that a single family rental owned by an individual and managed by a real estate manager was not a trade or business.

    Gary McBride in his tax update class says all rental real estate is a trade or business (except in the case of NNN net lease rentals). He cites a number of tax court cases where the tax court has held real estate gross rentals to rise to the level of a trade or business, even when the taxpayer had only one rental property.

    Which is correct?

  • #125193
    William Dewberry

    I believe the difference here is that this taxpayer is not in the trade or business since it is managed by another; if it were self managed it would be a trade or business.

  • #125238
    Paul Lamas

    The property manager is an agent of the taxpayer so the agent’s actions are considered the actions of the taxpayer. So the taxpayer is in the trade or business.

  • #125364
    Lynn Freer

    What the speaker meant to say was that some people don’t know if having a manager makes them not qualified. The truth is that nobody knows for sure whether rental real estate qualifies. Does one property make it a trade or business or 100 rentals. All we can do is wait for further guidance.