Residential Rental-Trade, Business or Investment?

[AZ-Tax]

Would a residential rental (Sch E) titled in the name of the individual taxpayer, be subject to filing a 1099-misc to say laborers, plumbers, roofers etc. that received $600 or more from the Landlord?

What if the residential rental (Sch E) was titled in the name of the LLC for which the individual taxpayer was the sole member?

From what I read, the 1099-misc filing requirement may not be needed if its considered an investment.

[Kram BergGold]

Schedule E

At this time, deductions connected to the reporting of rents on Schedule E are not subject to 1099 reporting.

[mactoolsix]

Just to add a bit more:

It is important to note that some rental owners will still have to file 1099-MISCs. Passive investors, which make up the bulk of rental property owners, are exempt from these rules, but a few owners are considered to be in the trade or business of renting out property. Some examples include "real estate professionals" who have elected to be treated as being in the business of real estate. Owners of properties rented out for less than a week at a time, and some other properties involving significant services provided by the owner, are also treated as business activities rather than rentals. Accordingly, these people will have to continue to file forms 1099-MISC.


Mike

[ChEAr$]

Now it all makes sense.

Individuals who rent out a dwelling and report on schedule e, are not in a trade or business, so they can answer
the question on schedule e concerning Did you make any payments.... etc. truthfully, "no".

[AZ-Tax]

Is Schedule C the determination?

[QUOTE=mactoolsix;158734]Some examples include "real estate professionals" who have elected to be treated as being in the business of real estate. Owners of properties rented out for less than a week at a time, and some other properties involving significant services provided by the owner, are also treated as business activities rather than rentals. Accordingly, these people will have to continue to file forms 1099-MISC.Mike[/QUOTES

So an individual/taxpayer who is renting out their residential property and files as a "real estate professional", for which I don't believe a Realtor license is mandatory, would have to issue 1090-Misc if the taxpayer files a Schedule C with their rental?

[appelman]

I think it is very much up in the air.

See, for example, this discussion:

http://www.forbes.com/sites/irswatch/2013/03/06/should-landlords-be-filing-1099s-for-service-providers/

[taxea]

to file a Sch C for rental/s a real estate license is required. I own a rental and I issue 1099's. I have never understood why the IRS does not consider it a business. It requires an EIN by the banks.

[AZ-Tax]

Most residential rentals are LLC's

Most of my clients residential rentals are titled in the LLC (for protection) with the taxpayer being the single member. I even have a rental in a husband and wife Partnership (I acquired 5 yrs ago). Both LLC's and P'Ship have EIN's and file Schedule E. Seem to me the P'Ship at the least should issued 1099-misc.

[Gretel]

[QUOTE=AZ-Tax;158752]

Some examples include "real estate professionals" who have elected to be treated as being in the business of real estate. Owners of properties rented out for less than a week at a time, and some other properties involving significant services provided by the owner, are also treated as business activities rather than rentals. Accordingly, these people will have to continue to file forms 1099-MISC.Mike[/QUOTES

So an individual/taxpayer who is renting out their residential property and files as a "real estate professional", for which I don't believe a Realtor license is mandatory, would have to issue 1090-Misc if the taxpayer files a Schedule C with their rental?

A real estate professional does not file a Schedule C. All this designation does is that losses are deductible if material participation test is met. They are not considered passive any longer. I agree that a real estate professional should file 1099's for all his LLC's.

I still need to find a clear definition of which rental property owners are considered to be in business. Since this is a Federal requirement it cannot possibly hinch on the LLC formation. LLC's are legal structures on the state level and have no bearing for the IRS IF SMLLC.

[taxea]

http://www.irs.gov/publications/p527/ch03.html

answers question on when to use which form

In order to claim yourself a RE Pro there are IRS rules. My comment about requiring a license is State law for all the states I am aware of. You cannot claim to be an RE Pro unless you are licensed as such

[mactoolsix]

[QUOTE=Gretel;158858]

A real estate professional does not file a Schedule C. All this designation does is that losses are deductible if material participation test is met. They are not considered passive any longer. I agree that a real estate professional should file 1099's for all his LLC's.

I still need to find a clear definition of which rental property owners are considered to be in business. Since this is a Federal requirement it cannot possibly hinch on the LLC formation. LLC's are legal structures on the state level and have no bearing for the IRS IF SMLLC.

Gretel - my original post does not state that a R/E professional files a Sch C. (That was added by A-Z.) The fact that one is claiming R/E Professional designation, changes the classification from "not a trade or business" (passive) to a trade or business, and thus they are required to file 1099's. Some R/E professionals file using Sch C. some don't, however that has no bearing on the 1099 filing requirement.

Mike

[Rae]

From 1099misc instruction booklet:

"You are engaged in a trade or business if you operate for gain or profit."