Schumann v. IRS: Reg. 1.469-2(f)(6) – The Nuanced Relationship Between Passive Losses & Self Rental Gains

Back to my friends that I previously wrote about who misunderstood passive activity and material participation. They are a married couple filing jointly and own a very successful business together structured as an S-corporation as well as a portfolio of rental real estate properties.  They actually consider themselves privileged to have their their tax woes shared…

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How to Report An Incorrectly Issued K1

I’ve been working a very complicated file since my last post involving income in 11 states and countless K-1s, Partner’s Share of Income, Deductions, Credits, etc. Interestingly enough one of my trusted lieutenants noticed that one of the K-1s from one of the partnerships incorrectly reported a gain on the sale of a partnership asset as a…

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Tax Implication of Publicly Traded Partnerships: Why Purveyors or the US Tax Code Snarl at Investment Brokers

My friend Roger Botterbusch recently put together a most excellent presentation on the tax implications of owning Publicly Traded Partnerships (PTPs), also commonly referred to as Master Limited Partnerships (MLPs). As a result I developed a new profound distaste for investment brokers pedaling these things for their ‘prospective’ fat returns whilst simultaneously poo-pooing the heavy, heavy…

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How to Report a Foreclosure to the IRS

A foreclosure on rental property technically involves the sale of the property back to the lender. Form 1099-A Acquisition or Abandonment of Secured Property reports that the lender has repossessed or foreclosed on the property. Box 2 is the amount of the outstanding mortgage debt, and box 4 is the fair market value of the property. If the value of the…

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Amortization of Intangible Costs

Also commonly referred to as 197 Intangibles, the following costs must be amortized (deducted as an expense) over 15 years (180 months) starting with the later of (a) the month the intangibles were acquired or (b) the month the trade or business or activity engaged in for the production of income begins: Goodwill; Going concern…

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Passive Activities and the Real Estate Professional – IRC 469(c)(7) and Reg. 1.469-9

A qualifying real estate professional may deduct rental real estate losses for each rental in which he/she materially participates provided 3 tests are passed: More than one half of the taxpayer’s personal services must be in real property business.  ‘Real property’ trade or business activity includes: development, construction, acquisition, conversion, rental, management, leasing, and brokerage. …

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