Final Regs for 199A

[nwtaxlady]

https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-other-guidance-on-new-qualified-business-income-deduction-safe-harbor-enables-many-rental-real-estate-owners-to-claim-deduction

and Safe Harbor for rentals. https://www.irs.gov/pub/irs-drop/n-19-07.pdf

[TAXNJ]

https://www.irs.gov/newsroom/treasur...laim-deduction

and Safe Harbor for rentals. https://www.irs.gov/pub/irs-drop/n-19-07.pdf

This should help prior reply posters who had questions or made comments about rental property eligible for QBI.

[ATSMAN]

Now it requires a signed statement under penalties of perjury regarding compliance under the safe harbor rules to be attached to any return claiming the Sec 199A credit!

[TomJ]

Thoughts on what we should add to our Rental Property Tax Organizer to draw from clients whether their rental activity qualifies for QBI / QBL (income / loss)? I'm thinking something like:

1) Did you spend more than 250 hours this year on the management / care of your rental properties?
2) If yes to #1, did you document it (what work, who did it, when, how long did it take)?
3) If yes to #1 & #2, are you willing to sign a statement attached to your tax return attesting to #1 & #2?
4) If no to #1, does your rental activity rise to the level of a trade or business (i.e. regularly and continuously involved and profit seeking)?

If yes to 1-3 or no to 1 and yes to 4, then you have QBI / QBL, right? I'm simplifying somewhat, but it feels like I have to in order to extract the information from clients or at least get the conversation started.

[ATSMAN]

Thoughts on what we should add to our Rental Property Tax Organizer to draw from clients whether their rental activity qualifies for QBI / QBL (income / loss)? I'm thinking something like:

1) Did you spend more than 250 hours this year on the management / care of your rental properties?
2) If yes to #1, did you document it (what work, who did it, when, how long did it take)?
3) If yes to #1 & #2, are you willing to sign a statement attached to your tax return attesting to #1 & #2?
4) If no to #1, does your rental activity rise to the level of a trade or business (i.e. regularly and continuously involved and profit seeking)?

If yes to 1-3 or no to 1 and yes to 4, then you have QBI / QBL, right? I'm simplifying somewhat, but it feels like I have to in order to extract the information from clients or at least get the conversation started.

The documentation requirement starts 1/1/2019 so for the 2018 tax year we are ok! By next year I am sure TB will add that language to its rental organizer. I believe for 2018 tax returns all that is required is the certification. Still trying to understand the implications and waiting for comments from other tax professionals and organizations.

[Uncle Sam]

How about another column for Form 8867?

[TaxGuyBill]

Thoughts on what we should add to our Rental Property Tax Organizer to draw from clients whether their rental activity qualifies for QBI / QBL (income / loss)? I'm thinking something like:

1) Did you spend more than 250 hours this year on the management / care of your rental properties?
2) If yes to #1, did you document it (what work, who did it, when, how long did it take)?
3) If yes to #1 & #2, are you willing to sign a statement attached to your tax return attesting to #1 & #2?
4) If no to #1, does your rental activity rise to the level of a trade or business (i.e. regularly and continuously involved and profit seeking)?

If yes to 1-3 or no to 1 and yes to 4, then you have QBI / QBL, right? I'm simplifying somewhat, but it feels like I have to in order to extract the information from clients or at least get the conversation started.

Other things to consider:

1) You also need to figure out if all properties are "similar" (residential, commercial, land) for purposes of the 250 hours.
2) You would need to convey that the 250 hours includes other people that work on the property, such are Independent Contractors (repairmen?).
3) You need to determine if you WANT to 'group' the properties for QBI. If they have losses and they also have other businesses, you may not want them to be part of QBI.
4) If you DO want to group them, you need to make the election.

[mastertaxguy]

We need to be more careful about those things for which we ask.

[Dude]

Nothing really unexpected EXCEPT it is still not clear is a landlord still subject to the pass 1099 through entity requirements (or lack thereof) if they make this election?

[TaxGuyBill]

Nothing really unexpected EXCEPT it is still not clear is a landlord still subject to the pass 1099 through entity requirements (or lack thereof) if they make this election?

Are you asking it 1099-MISCs need to be issued? That has always been clear.

A "Trade or Business" is required to issue 1099s (when applicable). If you claim QBI, either via the Safe Harbor or not, you are stating it *IS* a "Trade or Business". That means if you claim QBI, you need to issue 1099s when applicable.

[Dude]

Pass through entities were exempted from the 1099 reporting requirements. This latest release uses the language "pass through entity" but does not mention the 1099. I agree with you though: once you claim QBID you are declaring the rental a business and not a pass through.

[WICPA]

My understanding is if you have a loss on 199A activity, the loss carries forward to the next year to offset 199A income in that year. So if a rental property has a loss does the taxpayer claim they did not spend the 250 hours on the property so it does not qualify as 199A and hence no carry forward? Sounds like a planning/ abuse issue.

[Jiggers]

I wonder if there is a "Cliffs Notes" on the 247 page Regulations?

[New York Enrolled Agent]

I think the following from the regulations is much more surprising than any rental issue. Not many saw this coming.

(vi) Other deductions. Generally, deductions attributable to a trade or business are taken into account for purposes of computing QBI to the extent that the requirements of section 199A and this section are otherwise satisfied. For purposes of section 199A only, deductions such as the deductible portion of the tax on self employment income under section 164(f), the self-employed health insurance deduction under section 162(l), and the deduction for contributions to qualified retirement plans under section 404 are considered attributable to a trade or business to the extent that the individual’s gross income from the trade or business is taken into account in calculating the allowable deduction, on a proportionate basis to the gross income received from the trade or business.

[TaxGuyBill]

Pass through entities were exempted from the 1099 reporting requirements. This latest release uses the language "pass through entity" but does not mention the 1099. I agree with you though: once you claim QBID you are declaring the rental a business and not a pass through.

I suspect you are mixing things up some terminology. "Pass through entities" are things like Partnerships and S-corporations that "pass through" the income to the Individuals. They have never been exempted from filing 1099s.

I suspect that you may be thinking of landlords of 'investment' rental properties. Although they tried to pass a law to require that in 2012-ish, that was repealed, so landlords of 'investment' rental properties have always been exempt from filing 1099s.

Is that what you mean?