RE Loss limits Questions
Questions:For investment property, you are obligated to claim the 27.5 year depreciation, on the other hand, once your AGI exceeds 150,000 then you can't claim any loss, so1) Is the 150000 limit applied to the depreciation loss? I got conflicted info2) What are acceptable proofs to IRS that you work at least 750 hours per year (about 14 hours a week) on their real estate activities while you have a full- time job?==================================================================================来源: montavista 于 07-06-12 13:07:45 [档案] [博客] [旧帖] [转至博客] [给我悄悄话] 回答: Question to miet42/montavista or any 大霞 由 tellwont 于 2007-06-12 12:47:16 1. Definition of loss:Rental income - misc. expense - depreciation < 0If your AGI is over 150K, you can't deduct the loss from other income, unless you qualify as real estate investor, that leads to your 2nd question.However, the recorded loss is not lost even you can't deduct it. It will be carried over year after year until one day your loss turns into profit.To your 2nd question, below is the IRS article:Exhibit 2.4: Real Estate ProfessionalsLAW: Under IRC § 469(c)(7) & Reg. 1.469-9, if the taxpayer spends the majority of his time in real property businesses, meeting the 1/2 personal services and 750-hour tests, rental real estate losses are no longer per se passive. If the taxpayer materially participates in each rental real estate activity, losses are fully deductible. If not, even though the taxpayer is a real estate professional, losses are passive and deductible only up to $25,000 (if MAGI is less than $100,000). The IRC § 469(c)(7) does not trigger carryover losses from prior years._____ Verify that one spouse alone meets BOTH of the following tests. FIRST TEST: Are more than half of personal services in all businesses (T/B) for the year performed in real property T/B and rental real estate? --Real property T/B = real property development, construction, acquisition, conversion, rental operation, management, leasing or brokerage. Time spent as an employee in real property activities counts only if the taxpayer is more than a 5 percent owner.SECOND TEST: Does taxpayer spend more than 750 hours in real property businesses and rentals in which he materially participates?_____ If answer is NO to either of above two tests, IRC § 469(c)(7) does not apply, and losses are generally limited to $25,000. _____ If answer is YES to both tests, apply material participation tests to each rental real estate activity to determine whether each activity is passive or non-passive. While not seen often, the taxpayer may have made a one-time election to group all rentals as a single activity. Thus material participation is determined based on the grouped rentals. See IRC § 469(c)(7)(A) and Reg. § 1.469-9(g). CONCLUSION:Per IRC § 469(c)(7), the following rental real estate activities have been determined to be non-passive and current (but not carryover) losses are fully deductible: ______________ Current losses are entered on Schedule E, but not on FORM 8582. Taxpayer is a real estate professional, but did not materially participate in the following real estate activities: _____________ He does, however, actively participate, making management decisions. Losses are entered on FORM 8582 line 1a. Taxpayer does not actively participate in the following rental real estate activities: ______________. Limited partners and Taxpayers who own less than 10 percent cannot rise to the active participation standard. Losses are entered on FORM 8582, line 3b (2b for years before 2002). Time does not count for purposes of the 750 hour test and the half personal services test – unless the taxpayer materially participates in the activity. One spouse ALONE must meet the 750 hour test. _____ Who performs the services, husband or wife? Hours by husband? Hours by wife? _____ Approximately how many hours did you spend working on your rentals in the year under exam? Ask the taxpayer for supporting documentation (appointment books, diaries, calendars, logs, etc.) You may want to give taxpayer a log to be completed for each rental – and for each year under exam. Material participation is a year by year determination. Rentals are generally not time intensive. _____ If non-working spouse claims to be the real estate professional, ask what other commitments he/she may have. Is the spouse a student? Is the spouse providing full-time care to young children?