EIC was denied because ct rented a lot?

[crichardson552]

Have talked to IRS and they said the rental of the lot was investment income and 

EIC was denied. Intuit has the EIC included in the return. Refund was taken off

[Just-Lisa-Now-]

Where did the lot rental get included?  On Sch E?

[crichardson552]

Schedule e

[Just-Lisa-Now-]

I feel like I saw someone in the Facebook ProSeries group a few weeks ago that had a similar situation, the software wasn't counting rental income as investment income and IRS disallowed their EIC.

I don't think Ive had any clients with rental income that also qualify for EIC....I'll be sure to be on the lookout ofr that now though.

[Ernie]

Is this a problem that should be reported to development?

[Just-Lisa-Now-]

That's what Im wondering too....

[Just-Lisa-Now-]

I cant even think of a client I might have that would fall into this situation for me to go look at their return, without having to make a bunch of "what if" changes to it.

[Just-Lisa-Now-]

OK, I found one    Gave 6000 in W2 and 3900 on Sch E, single family home...no EIC computed.
BUT if I switch the Sch E to be LAND, not a single family home, then EIC does compute.
(self rental property type also allows EIC)

I guess the question is...is that correct?

[abctax55 · Accepted solution]

Do you have it tagged as land? Land rentals get treated differently, for some reason.  Lacerte gives the ability to select the type of rental, and I remember some diagnostics when "land" is selected.

[TaxGuyBill]

Even then, it should be disqualified investment income.

§32 disqualifies (1) "rents or royalties not derived in the ordinary course of a trade or business", AND (2) passive activity income.

Rental of land is non-passive, so it would avoid that.  But it would still likely be "rents or royalties not derived in the ordinary course of a trade or business".

[abctax55]

I vaguely remember a thread on this several years ago.

[Just-Lisa-Now-]

But if the rental qualifies for QBI as a trade or business, would EIC still consider it investment income?

[abctax55]

Arggggggghhhhh   -  don't go there 🙂
I wouldn't think it would matter; a rental deemed a ToB for 199A doesn't trigger SE tax.
BUT - who the hell knows right now?????

[Just-Lisa-Now-]

LOL

[TaxGuyBill]

Hypothetically, if it qualified as a Trade or Business it would not be investment income.

However, I don't see how rental of LAND can have 'regular and continuous' activity to rise to the level of a Trade or Business.

[abctax55]

From three years ago, FWIW.

https://accountants-community.intuit.com/questions/1356896-land-rent-and-eic

[TaxLady8]

I am researching if land rent is part of investment income because of eic as well. I cannot get this link to go anywhere. Do you have any recollection what it was about. I know that is asking a lot to remember that long ago.