New Sec 199A Rental Real Estate clarification of Comment on page 1 of Analysis - Spidell

New Sec 199A Rental Real Estate clarification of Comment on page 1 of Analysis

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Message Board New Sec 199A Rental Real Estate clarification of Comment on page 1 of Analysis

This topic contains 1 reply, has 2 voices, and was last updated by Sandy Weiner 8 months, 3 weeks ago.

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  • #139890
    Janet Lee Krochman
    Participant

    Have a client with an LLC (husband./wife owners) that contains numerous residential rentals and 1 commercial rental. Safe harbor says you can’t have commercial and residential properties combined, Comment on page 1 says you have to evaluate Sec 162 business status by property but in this case, ALL of the properties are in one entity. The owner also has a S Corp that rents the commercial building (self-rental rule?) however the fact that the properties are contained within one entity-does that cause an issue with the entire LLC being a Sec 162 business eligible for the 199A deduction? Taxpayer’s taxable income (for 2017) was over the top of the MFJ threshold of $415,000. 2018 taxable income is expected to be also. Looked at whether aggregating would make a difference (ie aggregate all of the residential rentals) and then use the self-rental rule on the commercial property but the fact that all of the properties are contained within one LLC entity-does that throw that out? Taxpayer does track each property separately in QuickBooks (via classes) and does meet the 250 hour requirement. Also looked at moving the commercial property out of LLC but concern about tax consequence to distribution of appreciated asset out of a partnership, not to mention the issue of the “cracking” rules set up by IRS. Just not sure how the ordering of all of these new rules and the inter-mingling of them is going to allow the net LLC income to be eligible for 199A deduction.

  • #139908
    Sandy Weiner
    Participant

    You can meet the trade or business requirement without meeting the safe harbor.

    Consider attending our 199A webinar on either February 5 as part of our Quarterly Tax Update series or on February 15. It has all the updated info.