mcb39 Posted March 22, 2008 Report Share Posted March 22, 2008 Does the ownership and management of 6 Rental units qualify a person as a Real Estate Professional and is she then allowed to treat the income as non-passive? She has no other active income; though her husband has a Taxidermy business and she does the bookwork and helps him. I know that she would be governed by hours spent. It makes a great deal of difference on this return as to whether they qualify for EIC or not. They are already losing their Child Tax Credits and Tuition Credits as they have no other tax Liability other than the husband's SE income. I have been ethically grappling with this one all day and have read everything I can find on the Subject. I would rather not file it if it would generate a disallowance; On the other hand, I don't want to deprive them of the refund if they are really entitled to it. Thanks for any input. Quote Link to comment Share on other sites More sharing options...
joanmcq Posted March 23, 2008 Report Share Posted March 23, 2008 Each rental unit would have to satisfy the material participation rules unless they elect to combine the activities, which could have unexpected consequences in the future, and she would have to spend at least 750 hours in RE trades or businesses at a minimum. I've owned 6 rental properties, and some had several units. Trust me, she doesn't spend 750 hours a year unless these were large apartment complexes or something. Why would they not qualify for the addtional child tax credit? And why do you feel sorry for someone who's tax liability is zero, and owns 6 rental properties? Quote Link to comment Share on other sites More sharing options...
taxtrio Posted March 23, 2008 Report Share Posted March 23, 2008 If she has a Real Estate License, then it would be schedule C, earned income. Quote Link to comment Share on other sites More sharing options...
mcb39 Posted March 24, 2008 Author Report Share Posted March 24, 2008 Each rental unit would have to satisfy the material participation rules unless they elect to combine the activities, which could have unexpected consequences in the future, and she would have to spend at least 750 hours in RE trades or businesses at a minimum. I've owned 6 rental properties, and some had several units. Trust me, she doesn't spend 750 hours a year unless these were large apartment complexes or something. Why would they not qualify for the addtional child tax credit? And why do you feel sorry for someone who's tax liability is zero, and owns 6 rental properties? It isn't a case of feeling sorry for anyone, it is a case of preparing the return properly. OK, I will remove the election. I did not say they have NO tax liability. In fact, they have estimates paid in that will pay the liability from the Taxidermy. I am just wondering if there is a way that the Rental Income can be non-passive so as to allow EIC to kick in. They do not have a Rental loss, but more profit than on the Taxidermy. This is most of the money that they live on. Is it passive income or is it a rental business as opposed to a RE business which would be a Sch C and SE. I'm not so sure about the lack of hours spent as this woman can wire an entire house; draw up a blueprint and many other repair and maintenance jobs that you would normally expect a man to do. I am not trying to bilk the government. I am trying to prepare a CORRECT Income Tax Return. Quote Link to comment Share on other sites More sharing options...
joanmcq Posted March 24, 2008 Report Share Posted March 24, 2008 I wasnt referring to her sex in the 750 hours. Its the amount of time you have to spend taking care of rentals. If she's rehabbing them, they are not available for rent (at least not usually...we did rebuild a foundation with a family in the house...), although those hours would probably count towards those spent in 'real property trades or businesses'. Another factor to consider is how many hours she spends in the taxidermy business. Another qualification is that the RE hours must be 750 as well as greater than 50% of all hours spent providing personal services. Quote Link to comment Share on other sites More sharing options...
mcb39 Posted March 24, 2008 Author Report Share Posted March 24, 2008 I will get Pub 527 for a detailed discussion of the requirements for a real estate professional. That is basically what I wanted to know. I know about the hours, I know about the greater than 50% of time spent in the activity. I was not referring to her sex in regard to the 700 hours. Nobody has answered my original question and I know that this subject has been discussed in the past. Just cannot find the thread and have no more time to look. Her time in the taxidermy is minimal. His time in the rental is minimal. She would like to wrap these rental units into a LLC and I will welcome any input as to how to go about putting ________ ________ LLC on the top of the Schedule E. Thanks for all who read the posts even if you had nothing to input. Quote Link to comment Share on other sites More sharing options...
Bart Posted March 24, 2008 Report Share Posted March 24, 2008 I will get Pub 527 for a detailed discussion of the requirements for a real estate professional. That is basically what I wanted to know. I know about the hours, I know about the greater than 50% of time spent in the activity. I was not referring to her sex in regard to the 700 hours. Nobody has answered my original question and I know that this subject has been discussed in the past. Just cannot find the thread and have no more time to look. Her time in the taxidermy is minimal. His time in the rental is minimal. She would like to wrap these rental units into a LLC and I will welcome any input as to how to go about putting ________ ________ LLC on the top of the Schedule E. Thanks for all who read the posts even if you had nothing to input. I think your original post already answered your question. It all depends on the hours. Quote Link to comment Share on other sites More sharing options...
mdmcfarland Posted March 25, 2008 Report Share Posted March 25, 2008 I will get Pub 527 for a detailed discussion of the requirements for a real estate professional. That is basically what I wanted to know. I know about the hours, I know about the greater than 50% of time spent in the activity. I was not referring to her sex in regard to the 700 hours. Nobody has answered my original question and I know that this subject has been discussed in the past. Just cannot find the thread and have no more time to look. Her time in the taxidermy is minimal. His time in the rental is minimal. She would like to wrap these rental units into a LLC and I will welcome any input as to how to go about putting ________ ________ LLC on the top of the Schedule E. Thanks for all who read the posts even if you had nothing to input. If she puts the rental units into an LLC, the LLC prepares a return and she would receive a K-1 wouldn't she? Quote Link to comment Share on other sites More sharing options...
mcb39 Posted March 25, 2008 Author Report Share Posted March 25, 2008 If she puts the rental units into an LLC, the LLC prepares a return and she would receive a K-1 wouldn't she? Not if it is a sole proprietor LLC. Quote Link to comment Share on other sites More sharing options...
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