Rental Property Grouping

[Avs19]

I'm working with a real estate professional that owns 6 rental properties. We would like to make the election to treat all interests in real estate as a single rental real estate activity. He doesn't have any suspended losses and normally nets around $50K. Should we report each property separately on schedule E or combine the figures into one? If reporting each separately on it's on Sch E, do I check the box that its considered a rental real estate enterprise and group all 6?

Thanks

[sjrcpa]

I report each property separately on Schedule E.

"do I check the box that its considered a rental real estate enterprise and group all 6?" Yes 

[ljr]

keep them individually - you need to see what each property does. and if they sell one how would you do that if you combined them? 

[Avs19]

That makes sense. I'm a little hesitant to group, knowing that the election is irreversible. Outside of the passive vs non-passive label and QBI, is there any reason to group? I thought one could avoid NIIT by grouping but Proseries is still including it. Am I correct that the income is not applicable to NIIT? If so, how do I let Proseries know that?

Thanks!

[TaxGuyBill · Accepted solution]

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@Avs19 wrote:

is there any reason to group?

I thought one could avoid NIIT

how do I let Proseries know that

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If he meets the qualifications of a Real Estate Professional, grouping them will help meet the Material Participation Test.  If they are a Real Estate Professional and Materially Participate in each property, then it is treated as non-passive.

If it is non-passive, then it can avoid NIIT.  If it was passive, I think NIIT would apply.

I haven't looked at it for a really long time so maybe ProSeries added an easier method, but you can manually make the adjustment on line 4b of Form 8960 (at least that is how it used to be done; as I said, maybe ProSeries added an easier way to do it).

[Avs19]

Yep, there's a place where you can make additional adjustments. You all are great, thanks for your help!