Comments on: Tax Shelter — Real Estate Investors Should Beware the Professional Investor Trap http://bawldguy.com/tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap/?utm_source=rss&utm_medium=rss&utm_campaign=tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap Real Estate Investing Through Purposeful Planning Sun, 20 May 2012 02:11:14 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Larry Gurewitz http://bawldguy.com/tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap/#comment-7906 Larry Gurewitz Mon, 07 Nov 2011 19:33:44 +0000 http://www.bawldguy.com/tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap/#comment-7906 A Person who is considered a real estate professional receives rental income as the landlord of 4 buildings. This is his only job maintaining these 4 buildings. I understand his income is considered passive income and it goes on Sch E. So does that mean even though he's a RE Pro he doesn't pay SE tax and can't set up a a qualified retirement plan. A Person who is considered a real estate professional receives rental income as the landlord of 4 buildings. This is his only job maintaining these 4 buildings. I understand his income is considered passive income and it goes on Sch E. So does that mean even though he’s a RE Pro he doesn’t pay SE tax and can’t set up a a qualified retirement plan.

]]> By: Mathew Aron http://bawldguy.com/tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap/#comment-2077 Mathew Aron Thu, 10 Mar 2011 16:46:19 +0000 http://www.bawldguy.com/tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap/#comment-2077 Thanks, Jeff. Good article. Even though I won't surpass the $25,000 depreciation limit for a very long time, I'm going to keep this information in the back of my mind. Thanks, Jeff. Good article. Even though I won’t surpass the $25,000 depreciation limit for a very long time, I’m going to keep this information in the back of my mind.

]]> By: BawldGuy http://bawldguy.com/tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap/#comment-2076 BawldGuy Fri, 26 Mar 2010 21:12:28 +0000 http://www.bawldguy.com/tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap/#comment-2076 John -- Since you haven't reached the $25,000 limit for use against ordinary income, I wouldn't for the issue for this return. I'd be clearing the decks though for the next one. Your CPA will be able to set you on a clear path. Good luck. John — Since you haven’t reached the $25,000 limit for use against ordinary income, I wouldn’t for the issue for this return. I’d be clearing the decks though for the next one. Your CPA will be able to set you on a clear path. Good luck.

]]> By: john http://bawldguy.com/tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap/#comment-2075 john Fri, 26 Mar 2010 19:32:52 +0000 http://www.bawldguy.com/tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap/#comment-2075 I will certainly find a good Real Estate CPA for next year. I haven't recorded my time over the last 7 months and I take a salary from my wife's media buying agency for "consulting" - so i could be an easy target for an IRS audit even though i have been a full time real estate guy for 7 months now. That being said, i don't think that we have over $25,000 in "losses" to deduct yet so i don't think that it will have an impact this year, correct? If that is incorrect, maybe it would be worth the time to pursure it further. I will begin logging my time this year so there will be no question as to my real estate professional status. I will certainly find a good Real Estate CPA for next year. I haven’t recorded my time over the last 7 months and I take a salary from my wife’s media buying agency for “consulting” – so i could be an easy target for an IRS audit even though i have been a full time real estate guy for 7 months now. That being said, i don’t think that we have over $25,000 in “losses” to deduct yet so i don’t think that it will have an impact this year, correct? If that is incorrect, maybe it would be worth the time to pursure it further. I will begin logging my time this year so there will be no question as to my real estate professional status.

]]> By: BawldGuy http://bawldguy.com/tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap/#comment-2074 BawldGuy Fri, 26 Mar 2010 19:17:10 +0000 http://www.bawldguy.com/tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap/#comment-2074 John -- That seems wrong to me, but check with a CPA. It's moments like these that make filing with the help of a program, not worth the time. It's been my experience that paying for the CPA with real estate know-how is well worth the money. I suspect the program's use of the phrase 'real estate professional' is misplaced if not misused. It's certainly ambiguous. Is she licensed? Does she do it for a living? It doesn't say. I'd be confused too -- in fact I am. :) John — That seems wrong to me, but check with a CPA. It’s moments like these that make filing with the help of a program, not worth the time. It’s been my experience that paying for the CPA with real estate know-how is well worth the money.

I suspect the program’s use of the phrase ‘real estate professional’ is misplaced if not misused. It’s certainly ambiguous. Is she licensed? Does she do it for a living? It doesn’t say. I’d be confused too — in fact I am. :)

]]> By: john http://bawldguy.com/tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap/#comment-2073 john Fri, 26 Mar 2010 19:05:33 +0000 http://www.bawldguy.com/tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap/#comment-2073 I am using Turbo Tax to file 2009 Federal Return. I have done nothing but acquire, renovate, and lease property for the last 7 months. My wife is a full time self-employed media buyer, but is a managing member for each property LLC. When it asks if she qualifies as a "real estate professional" I designate NO. At that point, all of our losses become passive losses and we don't get full credit. Is that right? Is the software flawed? I am using Turbo Tax to file 2009 Federal Return. I have done nothing but acquire, renovate, and lease property for the last 7 months. My wife is a full time self-employed media buyer, but is a managing member for each property LLC. When it asks if she qualifies as a “real estate professional” I designate NO. At that point, all of our losses become passive losses and we don’t get full credit. Is that right? Is the software flawed?

]]> By: BawldGuy http://bawldguy.com/tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap/#comment-2072 BawldGuy Sat, 29 Aug 2009 17:18:29 +0000 http://www.bawldguy.com/tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap/#comment-2072 thayer -- If memory serves, that particular requirement was both from the IRC itself, and verified with tax attorney. I'm not sure if it's specifically on the return. thayer — If memory serves, that particular requirement was both from the IRC itself, and verified with tax attorney. I’m not sure if it’s specifically on the return.

]]> By: thayer http://bawldguy.com/tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap/#comment-2071 thayer Sat, 29 Aug 2009 12:17:09 +0000 http://www.bawldguy.com/tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap/#comment-2071 Why do you say above that if you are married and filing a joint return that the spouse (above) is required to complete a questionaire? Is this on the return? thanks Why do you say above that if you are married and filing a joint return that the spouse (above) is required to complete a questionaire? Is this on the return?
thanks

]]> By: BawldGuy http://bawldguy.com/tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap/#comment-2070 BawldGuy Fri, 10 Apr 2009 17:25:22 +0000 http://www.bawldguy.com/tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap/#comment-2070 Carl -- Here's some info for you on the subject. Don't be confused by the apparently interchangeable words, 'investor' & 'professional', as the concept from IRS's point of view is the same. Hope this helps. 1. Does a company engaged in a real estate activity in which you own 5% or more of the company currently employ you? If the answer is yes, you are a Real Estate Professional. If the answer is no, continue with 2. 2. Do you work outside of the home? If the answer is no, then go to 4 below. If the answer is yes, go to 3 below. 3. Do you spend more hours in real estate activities on an annual basis than you do in your other business? If the answer is no, then you cannot qualify as a Real Estate Professional. If you're married and file a joint return, have your spouse complete this portion of the questionnaire. If the answer is yes, then go to 4 below. 4. Do you spend a minimum of 750 hours per year in real estate activities? If you answered yes and have no other profession, you are a Real Estate Professional. If you answered yes and passed the test of 3. above, you are a Real Estate Professional. If you answered no, you cannot be a Real Estate Professional. Carl — Here’s some info for you on the subject. Don’t be confused by the apparently interchangeable words, ‘investor’ & ‘professional’, as the concept from IRS’s point of view is the same. Hope this helps.

1. Does a company engaged in a real estate activity in which you own 5% or more of the company currently employ you?

If the answer is yes, you are a Real Estate Professional.

If the answer is no, continue with 2.

2. Do you work outside of the home?

If the answer is no, then go to 4 below.

If the answer is yes, go to 3 below.

3. Do you spend more hours in real estate activities on an annual basis than you do in your other business?

If the answer is no, then you cannot qualify as a Real Estate Professional.

If you’re married and file a joint return, have your spouse complete this portion of the questionnaire.

If the answer is yes, then go to 4 below.

4. Do you spend a minimum of 750 hours per year in real estate activities?

If you answered yes and have no other profession, you are a Real Estate Professional.

If you answered yes and passed the test of 3. above, you are a Real Estate Professional.

If you answered no, you cannot be a Real Estate Professional.

]]> By: Carl Heller http://bawldguy.com/tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap/#comment-2069 Carl Heller Fri, 10 Apr 2009 16:26:17 +0000 http://www.bawldguy.com/tax-shelter-real-estate-investors-should-beware-the-professional-investor-trap/#comment-2069 As a retiree, what is the requirement for hours worked in managing my resort rental condo to qualify as a real estate professional. As a retiree, what is the requirement for hours worked in managing my resort rental condo to qualify as a real estate professional.

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