We have previously considered the “trade or business” requirement for the Section 199a deduction. The government recently issued guidance to clarify when rental real estate activities can qualify for the deduction. While the guidance is needed, it adopts a record keeping requirement that effectively prevents most rental real estate activities from ever qualifying for the… Continue reading Documenting the Sec. 199a Rental Real Estate Safe Harbor
Category: Real Estate
About Real Estate & Income Taxes
There are several significant income aspects of real estate. This includes real estate as investments and as businesses. It also includes real estate sales, exchanges, and other transfers. We help clients work through these tough issues.
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Bad Debt Deduction for Real Estate Lender for Non-Real Estate Loan
If a taxpayer regularly makes real estate loans from their personal accounts, they would be entitled to a bad debt deduction for loans that are not repaid. But what if they venture beyond real estate loans and make a single non-real estate loan? If the non-real estate loan goes bad, can they deduct the bad… Continue reading Bad Debt Deduction for Real Estate Lender for Non-Real Estate Loan
How to Allocate Tax Basis for Real Estate
If you sell real estate, you pay tax on the gain. Gain is the product of the sales price less tax basis. Tax basis in turn is the amount invested in the property. But how do you calculate and then prove tax basis for buildings located on the property when you sell some but keep… Continue reading How to Allocate Tax Basis for Real Estate
The Trade or Business Requirement for the Sec. 199A Deduction
The new Sec. 199A deduction that provides a 20 percent benefit for flow through entities has been in the news as of late. The Yaryan v. Commissioner, T.C. Memo. 2018-129, case provides an opportunity to consider one aspect of this new Sec. 199A deduction. Specifically, the Treasury released regulations that adopt a “trade or business” standard… Continue reading The Trade or Business Requirement for the Sec. 199A Deduction
Real Estate Professionals Are Subject to Material Participation Rules
Most individuals who invest in real estate to generate rental income hate the passive activity loss rules. These rules often prevent real estate investors from benefiting from the otherwise generous deductions that are associated with real estate. In G…
Parking Garages: Parking Lot Depreciation Life
In recent Chief Counsel Memo #20125201F, the IRS concludes that open-air parking garages are considered buildings rather than land improvements for tax purposes. The IRS attorneys go on to say that the taxpayer’s conclusion to the contrary warrants the assessment of a negligence penalty. That is a pretty harsh result given that the tax law… Continue reading Parking Garages: Parking Lot Depreciation Life
Real Estate Purchase Price Reduction
The term “income” is broad. It includes just about any money or gain that a person receives. There are exceptions, however. Take the purchase price reduction. Assume Party A sells property to Party B for $100. Party A will likely have a gain on the sale. The gain is income and may trigger income tax.… Continue reading Real Estate Purchase Price Reduction
Tax Basis Planning for Inherited Property
The gain from the sale property is subject to income tax. Gain is generally the sales price minus tax basis, and tax basis is generally the cost or investment into the property. When a person owns property at death and the property passes to the heirs, the heirs get a tax basis equal to the… Continue reading Tax Basis Planning for Inherited Property