IRS Notice- Rental Real Estate

TD (REG-107892-18) contains final regulations concerning the deduction for qualified business income under section 199A of the Internal Revenue Code (Code). The regulations will affect individuals, partnerships, S corporations, trusts, and estates engaged in domestic trades or businesses. The regulations also contain an anti-avoidance rule under section 643 of the Code to treat multiple trusts as a single trust in certain cases, which will affect trusts, their grantors, and beneficiaries. This document also requests additional comments on certain aspects of the deduction.

Notice 2019-07 SECTION 1. PURPOSE

This notice contains a proposed revenue procedure that provides for a safe harbor under which a rental real estate enterprise will be treated as a trade or business solely for purposes of section 199A of the Internal Revenue Code (Code) and §§ 1.199A-1 through 1.199A-6 of the Income Tax Regulations (Regulations) (26 CFR Part 1), which are being published contemporaneously with this notice. To qualify for treatment as a trade or business under this safe harbor, the rental real estate enterprise must satisfy the requirements of the proposed revenue procedure. If an enterprise fails to satisfy these requirements, the rental real estate enterprise may still be treated as a trade or business for purposes of section 199A if the enterprise otherwise meets the definition of trade or business in § 1.199A-1(b)(14).

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John Stancil

When one has rental real estate, the sale of that property can have significant tax ramifications. Some of these are good, while others can create significant tax liabilities.

First, the good news. If there were losses that could not be deducted due to the passive activity rules, these losses may be deducted on Schedule E in the year of sale, assuming the property is sold in a taxable transaction.

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John Dundon

Justin Fundalinski of Jim Saulnier & Associates, who I met while volunteering time for the betterment of the Financial Planning Association, asked me a procedural question about a fascinating situation he encountered regarding depreciation and disposition of residential rental real estate, causing pause. Tax questions that cause me to pause are the spice of life.

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