IRS Takes Close Look At Real Estate Professionals
Are you a real estate professional? If you have a W-2 job elsewhere the IRS does not think so. The difference in income (and loss) classifications between passive losses and material participating losses can be huge for the bottom line.
And it looks like the IRS has set their sites on these investors. According to Diane Kennedy’s article at the Realty Times, audits on real estate professionals are rising as the IRS is enforcing this distinction.
To meet the IRS requirements, you need two things: spend the majority of your working time spent performing qualified real estate activities (regardless of what you do), and rack up at least 750 hours. Qualified activities include “develop, redevelop, construct, reconstruct, acquire, convert, rent, operate, manage, lease or sell” real estate.
Practically speaking you won’t make the cut if you work elsewhere and report full-time W-2 income. And there’s a third hurdle: material participation. In a twist that can only make sense in the IRS world, real estate activities are one of two things: passive, or materially participating passive. If you have a passive loss, it can only be used against passive income. Period.
Read the rest of Diane’s article at Realty Times
Very funny comparison. However you don't need to pay property tax on Barbies 3 Story Dream House. With the unemployment ...
My wife has actually decided to study for and get her real eatate licence just so we dont ever have ...
I like your analogy in this article. The real estate economy really is like a patient who you cannot ...
Real Estate is hyper-local. Every market is different. Phoenix has already hit bottom and is starting to recover. We have ...
Great to hear that the big boys
are predicting recovery sooner than
most think.
Thanks for the value! 
I agree--good analogy. You have to crawl before you can walk. Right now, at least in Austin, many people would ...
I live in the Philippines and I am glad we are not on the lists... 
I have a few Litograghs of Presidents homes , made by Richard V. Sebring. yr. 1990 Do they have any ...
Pingback by Millridge Real Estate Blog » Blog Archive » Raleigh and Wake Forest Professionals Beware - The IRS will be watching you closely on 21 July 2008:
[...] make the cut if you work elsewhere and report full-time W-2 income. And there’s a third hurdle: material participation. In a twist that can only make sense in the IRS world, real estate activities are one of two [...]
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