Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev | Next
Author: SirTas Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121316  
Subject: Re: Any Downside to being a real estate professi Date: 5/10/2008 4:23 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Bill--

Your post shows me how much I don't know (but need to know) about this.

Generally, rental activities are passive activities automatically. For real estate professional electing to be treated as such, rental activities are not automatially passive, but the classification then reverts to the generaly tests for material participation.

When you do that, each rental property is a separate activity UNLESS you make a separate election to aggregate (classify) all your rental properties as a single activity, which would be nonpassive. And you probably do need to make the election, otherwise you don't get material participation at the 500 hour level.


I think I'm OK on the first paragraph (reading something like "generally applicable tests for material participation" as the last part of it).

In the second paragraph, you mention making an election. I suppose this election is really just the single question on the back of a Schedule E. (Yes?) And that "election" is something that can change from year to year ...

I thought that one of the big differences that that election/question makes is that any losses needn't be capped at 25k.

Then comes:

You don't report it any differently on the Schedule E until you get down to the net loss number, really. You wouldn't do Form 8582 except for deferred losses (PALs)from prior years. That's another issue, if you have those. Those can be carried over against future passive income, INCLUDING a gain from a property treated as a passive activity.

By contrast, aggregating your properties as a single activity, you never dispose of the activity, until you've sold the last property.
But if they weren't passive, and you don't have PALs, I don't see the problem there either.


Are you now talking about that question on the back of Schedule E? As for adding up the pluses and minuses from all the properties, this is ALWAYS done, isn't it? (When you speak of aggregating, do you mean adding the pluses and minuses together?) What's Form 8582? What are PALs?

DW is a real estate professional (and passes the material participation test), so I suppose we have no such things as PALs (which is probably one reason why I don't know about them).

But then I don't think I get the last part, about having PAL carryovers that could be used to offset gains from the sale of a rental property.

TIA for any help.

--SirTas
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev | Next

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Post of the Day:
Berkshire Hathaway

IBM: Is Buffett Wrong, or Brilliant?
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement