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I think it is a risky position to take. I think I will lay it out for my clients and allow them to make the choice. ATX has not put the QBI form out yet, so I am anxious to see how this is going to work from an input standpoint. I don't know if there is a way to designate that an activity is qualified or not, but it seems to me that there should be a check box or something on the input forms that allow you to say it is or is not QBI. Tom Modesto, CA

Just attended an OSCPA seminar where at least 3 hours were spent on 199 A. My thinking has totally changed. The presenter convinced me that most rentals will qualify for 199 A Give me a few days to gather my thoughts, review the seminar materials and I will make a detailed post on this subject.

@cbsleeI hear you. But we all know that Congressional intent and IRS/Tax Court interpretations do not always match up. For an example, Congress vehemently argued that the ACA Shared Responsibility payment was not a tax, until the 9 clowns in black gowns said it was. I think I have an obligation to my clients to tell them that the guidance is not clear, and that there is a chance that the deduction will be challenged by IRS. For those clients who are risk averse, they may not want to roll the dice. If they choose not to take that position, and guidance comes down that makes it clear they should have, we can amend. For those clients who want to take the position, I will do so. If the return is challenged, I will defend the position at audit. It is ultimately the client who is responsible for the position taken on the return. Tom Modesto, CA

I think you have prejudged this situation. The name of the presenter and coauthor of the seminar I attended yesterday is Christopher Hesse, who is a National Tax Partner for a National Accounting Firm and who also is currently the Vice Chairman and the Chairman Elect of the AICPA Tax Executive Committee . He has had multiple meetings with the Senior Staff of the Joint Committee on Taxation who write the Blue Book which is official Statement of Congressional Intent with respect to the TCJA. He has also has had multiple meetings with senior members of the Treasury Department with respect to the TCJA. Mr. Hesse said, that it is the clear intent of Congress and the administration for Section 199 A and QBI to be interpreted liberally. I have been attending this seminar for many years and place far more value on what I learn there than any other source. However as a famous person once said," The thing about opinions is that everyone has one." I will sleep quite comfortably following Mr Hesse's advice.

Oh, you reminded me of another twist: my IC couples have at least two SE businesses per couple. One couple has hubby with CT and NY sources of income (NY is decoupling from lots of fed items) and wife with her own biz that now operates in Paris, also! And, my other out-of-CT clients that have had few issues in their other states -- well, now I have states other than just NY to research their compliance with &/or decoupling from fed law. I am really raising my fees this year!

Actually the presenter at OSCPA seminar that I attended yesterday said that he would claim QBI in scenarios like this. When I walked into the seminar I wouldn't have claimed it, however after spending 3 hours on 199 A he completely changed my mind !

From what we've seen here, for many of our clients it is not going to be that bad (fingers crossed!). Most folks are in businesses where QBI is clearly defined to apply. Most make way under the phase-out areas for the specified businesses. Most do NOT have multiple QBI-subject businesses where aggregating and netting and passive versus active have to be teased together or apart. There will be some for whom it will be nasty, absolutely. Those will likely come in later. But most of our aggravations this year will be, as with other years, clients whose records have missing items or who play (or are) stupid when asked.

ILL: If a "new" client comes in, and presents Scenario #2, then you have to deal with the lack of compensation, and it has nothing to do with QBI. The S/H has not taken a salary and should be taking something. If it is an existing client, then you should have dealt with it in the past. What other clients have this problem? If the client is refusing to take a reasonable salary, then the whole QBI issue is moot. You probably don't want them as a client. They are going to cheat elsewhere as well, and make it all your fault when they get caught. Rich

I have read a lot and gone to several seminars on the topic, and virtually all of the authors and presenters said "stay tuned" after giving their yes or no opinions. After the IRS released the reg last fall they asked for areas in need of clarification. One of the national accounting boards shared their response and whether rental activity qualifies or does not was one of the first items on the list of things that needed more explanation. At this point I'd say we still aren't 100% (or even75%) sure. The 2018 UT software is calculating the QBI for Sch E activities. Do they know something we don't?

cbslee, I agree and am now changing my position as well. Can't Wait to see what you have complied.

Wow, that case is as you said from 1943. I find it odd that this is the only challenge regarding rental property considered as a trade or business. Sorry, but I wasn't going to pay the fee to see if the law is still relevant today. FYI- a poster on the Drake Forum supplied an article written by David M. Fogel, EA, CPA, USTCP. In this article it is his opinion that rental property that is simply not held for investment purposes only, and I am assuming he is referring to a passive activity, is considered a trade or business for the purposes of QBI. I know opinions are not case law, revenue rulings or any other official document to rely on. With that said, I think we all should secure as many references, case laws; etc., to be armed for the IRS to challenge a QBI deduction taken for a single rental property owner. Just my 2cents worth, I bookmarked the link above. If you want to print the case document, it requires a $65.00 subscription fee.

Yes! This is going to be a very taxing season.

Like this one because it goes back and forth. In the end they have a reasonable opinion. Opinion Nevertheless, when the Internal Revenue Service, tax accountants and tax attorneys throw around the term “Section 162 trade or business,” what they really mean is an activity that the courts and the Internal Revenue Service in past decisions count as a real trade or business that generates legitimate Section 162 business deductions. These court and IRS decisions, by the way, all sort of work the same way. And if you happen to be interested, probably your best place to dip toes into the water is the Groetzinger v. IRS Commissioner decision. Groetzinger summarizes nicely what a Section 162 trade or business needs to look. The activity needs to be continuous and not sporadic. And the activity needs to be conducted with regularity and with a profit motive. And then here’s the really important point for real estate investors. The Section 199A regulations explicitly say that except in one special case situation, direct real estate investment doesn’t–does not–necessarily rise to the level of a trade or business.

And for line research right click but I think you have to enter credentials if you have that package.

Sure, F3 or the support tab then government instructions. In PDF format? Not sure, my memory fails me.

Bite me sounds like a good response. I've already been contacted by four clients who aren't usually this early, but are almost ready to deliver me their tax materials. Three have IC income. I was dreading getting started late, so am happy I'll be able to start next week. But, be careful what you hope for -- I'm not happy that my first ones will deal with that dreaded QBID.

As I previously mentioned, I attended an all day seminar today sponsored by the OSCPA where the presenter spent at least 3 hours on 199 A. I think most members of our profession, including me are strongly influenced by what we already know about how tax law and rental real estate intersect. The problem 199 A presents to both us and to the IRS is that TCJA does not cite or reference most of those familiar Code Sections. All of those key phrases we have etched in our brains with respect to rental real estate are actually impediments to understanding 199 A which is exactly why the guidance from the IRS has either been either unclear or yet to be written. To paraphrase the ancient chinese curse, we are living in interesting times.

This looks like a very amateurish document. The first thing I noticed is that a statement as to who the parties are is missing.Also, in some states, the signers name need to be printed under the signature. You can get all kinds of sample templates for theses letters and this site will adapt it to your state, as each state has different requirements. https://legaltemplates.net

Pretty much (assuming you want to cover your bacon - and who would want to risk bacon, after all?). Our state society update spent two hours (non-IRS cont ed) talking about what MA will and will NOT comply with. Ugh. They don't take the alimony changes. They still accept moving expenses with caveats.... it's going to be nasty. One huge take-away for us ALL is that we are NOT going to be able to just trust our software this year. Yes, they will do their best. Yes, they will ALL miss things (different things per state and per s/w package). We all need to warn clients when they first come in, so they don't yell at us when things take longer. Extensions will also be our friends. Even the shutdown; it's yet another reason for the delay in getting answers and seeing state interactions.

This is what I use as a confidentiality agreement (I copied it from one of my customers who used this). I don't require a non-compete because I have not had good experiences with them in the past. (Formatting and spacing changed when i copied it into this space, but you should get the idea of what I am using.) I make no representation of the enforce-ability of this document or its legality. Confidentiality Agreement As a member of XXXXXXXXXXXXX’s team, there may be times when you have access to client information and records, along with other information and documentation which should not be made available to the public or any other persons or entities. By signing this agreement, you agree not to disclose or divulge any information whatsoever regarding the clients of XXXXXXXXXXXXX or any other information and documentation regarding the corporation, its staff or its clients. This also pertains to any information about the day-to-day business activities of XXXXXXXXXXXXXXXXXXXXXXX. By signing this agreement, you acknowledge that breach of this confidentiality agreement will give rise to legal proceedings instituted by XXXXXXXXXXXXXXXXXXXXXXXXXX against you for damages and/or injunctive relief. This document shall not constitute a promise or guarantee of future employment. This document remains valid and in effect following the termination of employment. Signed: ________________________________ Date: ___________ Witness: ________________________________Date: ___________ Confidentiality Agreement/Rev. 9-19-06/TY

If I knew where my old HRB contracts are, I'd share those with you. Maybe someone from one of the large companies will jump in. Also, your E&O insurer might have sample contracts.

Colleagues in firms much, much larger than mine have received visits comparing Form 8879 dates with e-file dates. I did have a treasury agent show up at my front door (home office of my sole proprietorship) at 7 a.m. one year to ask questions about a very part-time employee. He scared hubby who asked to see his badge and made him wait outside in the snow until he woke me up. Totally different issue, though. Just don't want another agent showing up!

One sided here and financial institutions want PAPER. We closed on a rental property this past summer and YOU SHOULD SEE THE PAPER!

I agree with a comment above regarding needing to lean on each other for help and guidance. I'm a solo practitioner, so being able to bounce ideas off you folks and get my questions answered in a timely manner has provided tremendous value to me over the years.

As far as tax season goes, the key issue that I am concerned about is which of my clients that have different kinds of rental properties will qualify for the 20 % PTE deduction which clients won't qualify? Second, due to the partial government shutdown, Congress is showing no concern or movement toward a TCJA Technical Corrections/Tax Extenders Bill. Is Qualified Improvement Property 15 years or 39 years ?