trade or business safe harbor, rental property, RE enterprise

[tax1111]

One requirement of safe harbor provided in Revenue Procedure 2019-38 is that
**For rental real estate enterprises that have been in existence less than four years, 250 or more hours of rental services are performed per year....

TP has several rental properties and he spent more than 250 qualified hours in 2021 on those properties. If he treat those properties as a real estate enterprise and meets all other safe harbor requirement, his rental business can qualify as QBI
Does he need to make an election to treat the properties as RE enterprise with the safe harbor statement ?
Is there any trap such as the suspended loss for one property in the RE enterprise can not be released when the property is sold until all the properties are sold, etc?

[Lee B]

"Separate books and records are maintained to reflect income and expenses for each rental real estate enterprise.

For rental real estate enterprises that have been in existence less than four years, 250 or more hours of rental services are performed per year. For other rental real estate enterprises, 250 or more hours of rental services are performed in at least three of the past five years.

The taxpayer maintains contemporaneous records, including time reports, logs, or similar documents, regarding the following: hours of all services performed; description of all services performed; dates on which such services were performed; and who performed the services.

The taxpayer or RPE attaches a statement to the return filed for the tax year(s) the safe harbor is relied upon,"

 

I have two clients that could potentially qualify for this safe harbor.

However they are both recordkeeping challenged. They don't keep separate "Books and Records" for each property.

They also don't keep contemporaneous records of their hours.

I have had  both of these clients for way over 20 years, but they both have reached the age where they aren't going change how they do things.

[Sara EA]

You are correct that if the properties are treated as one enterprise, actual and suspended losses on one stay suspended until all are sold.  That's one reason I never make this election. 

[BulldogTom]

I don't know why anyone would make the election for rental properties that throw a loss.   You have to take into account losses from the time you make the election and use them up before you get the benefit of the deduction.   Plus what Sara just said above.   There are situations that make sense to make this election, but for most small rental property landlords, there is more risk than benefit in my opinion.

Tom
Longview, TX