real estate 750 hours

[rps1111]

According to IRS A real estate AGENT  HAS TO PROVE  HE/SHE DID HAS  750 HOURS OR 500 INDIVIDUAL HOURS to determine whether a rental is a passive or non  passive income.  Does any one out there KNOW about it?  IS Proconnect issuing  new imformation un issue.  IRS is limiting deduction to $25,000 loss per year.  CAN YOU BELIEVE THAT.

[abctax55]

G I G O maybe?

[sjrcpa]

Are you referring to real estate professional status?

What's your cite for "According to IRS "?

[abctax55]

And one doesn't have to be an agent to be a RE professional.... nor does just being an agent make one a RE professional.  

[TaxGuyBill]

Does the taxpayer qualify as a Real Estate Professional who Materially Participates in the rental?

If yes, your client should be able to prove it, and the IRS will allow all losses.

If the taxpayer does not qualify, the loss will be limited to $25,000 (or less, depending on MAGI and Active Participation).

[BobKamman]

This is like saying "according to the police, going 30mph in a school zone is illegal."  The police are just there to enforce the law that was passed by elected representatives.  Congress enacted, and the President signed Internal Revenue Code Section 469.  That's where the 750-hour requirement came from.  Don't blame IRS, they are just enforcing it.  Or do you think laws are meant to be broken?

[Accountant-Man]

It was over 15 years ago, but I was helping another CPA with his client's claim for Real Estate Professional(REP) status.

The taxpayer had over 20 rental properties, spent nearly every day working on them and driving back and forth, many over 100 miles away. He gave us a meticulous spreadsheet with days and miles, for every day, including Xmas and NY's. (!) Really?! Much, much more than 750 hours in a calendar year.

Many, many hours. He even had a full time job besides the rentals. 

The agent threw out many of those so-called working days, but still had much more than 750 hours; however, there is also the more than 50% test, too. With a full time job besides, the 50% tax would have been problematic.

Fortunately, he only worked 4 days a week for part of the year, and then he was work-disabled for another part of the year(only disabled enough to not be required nor allowed to work at the job), so that brought the total hours worked down and the REP hours up above the >50% test.

The agent flunked him anyway, and that's the last I heard about it.

ps I loved IRC Section 469. Made a career out of it. I could have written a manual about it and taught about it. (Oh, wait, I did!)

[sjrcpa]

@rps1111 IRC Section 469 was enacted in 1986. It is no longer new.

[BobKamman]

@sjrcpa  The tradition of documenting significant events started with the Sumerians in Mesopotamia around 2900 BC (or possibly, slightly earlier in Egypt but this is a more controversial theory). It has been only 37 years since Section 469 was enacted, or less than 8/10 of 1 percent of recorded history. That’s new enough for me. 

[rps1111]

• PLEASE CHECK IRS FOR RENTALS:
•  
• PASSIVE ACTIVITY LIMITS REALTORS.  
•  
• HAVE YOU LOOK AT SCH E FORM FOR 1040 LATELY.
•  
• IRS   OBM NUMBER  1545-0074 SCH E INSTRUCTIONS.
•  
• CHANGED IN YEAR 2018 DUE TAXPAY CERTAINTY AND DISASTER TAX RELIEVE OF ACT OF 2018.  FORM CHANGE IN 2019.
•  
• IN EFECT THERE IS A LIMIT OF $25,000, SO UNLESS INDIVIDUALS WORK FOR 750 HOURS PER YEAR OR 500 HOURS PER YEAR.
•  
• IF you CHECK HOURS PER YEAR, HOURS ACTIVITIES INDIVIDUALS USE TIME (EATING, SLEEPING, ETC.) THERE IS NO WAY A WORKING PERSON CAN MAKE THE REQURIED 750/500 HOURS REQUIRED.
•  
• TO BE ABLE TO USE DEDUCTED ON SCH E RENTAL YOU TO BE ABLE DEDUCTIONS, YOUR HOURS HAVE TO BE ACCOUNTED SHOWING FOR TIMES WORKINGS ON YOUR RENTALS AND DOCUMENT THEM.
•  
• LIMITS ARE $25,000 PER YEAR EVEN THOUGH PERSON HAS MANY RENTALS HE/SHE OWNS TENDS,
•  
• THIS IS FOR ALL CORPORATIONS LLC, PARTNERSHIPS ETC.  
•  
•  THIS WILL BE MORE PAPERWORK FOR ACCOUNTANTS
• . 
• NO WONDER ACCOUNTANT ARE LEAVING THE ACCOUNTING
• PROFESSION. 
•  
• ALSO, CHECK SCH E LINE 43.  IT IS THE LAST LINE ON PAGE 2.
•  
• WHAT DO YOU THINK OF NEW LAWS?
•  
• THIS IS PASSIVE INCOME.
•  
• THIS IS ENOUGH FOR TO DAY.

[BobKamman]

I looked at the Schedule E instructions for 2012.  The same language was probably there 20 years ago also, but you should have noticed it in the last decade:

Activities That Are Not Passive
Activities

Activities of real estate professionals.
If you were a real estate professional for
2012, any rental real estate activity in
which you materially participated is not
a passive activity. You were a real estate
professional for the year only if you met
both of the following conditions.
• More than half of the personal
services you performed in trades or businesses during the year were performed
in real property trades or businesses in
which you materially participated.
• You performed more than 750
hours of services during the year in real
property trades or businesses in which
you materially participated.
If you are married filing jointly, either you or your spouse must meet both
of the above conditions without taking
into account services performed by the
other spouse.

https://www.irs.gov/pub/irs-prior/i1040se--2012.pdf 

[sjrcpa]

Schedule E Line 43 is for real estate professionals, which I asked about earlier and you did not answer.

[Accountant-Man]

The Caps Lock button under the Tab button should be working for you.

Unlock it, please!

FYI, 4 hours a day for 4 days a week for 50 weeks a year equals 800 hours a year. That's not so hard.

[rps1111]

IRS source of information is:  Pub 657 and ATG, IRS Training Guide for Passive Activity,  is  Loss &  Techniques Guide Passive Activity Loss.   This is the way the question asked during an audit concerning rental real estate.