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Dang it!! I've really been trying to keep up,...

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    #1

    Dang it!! I've really been trying to keep up,...

    ...like, I read and read and read, I read just about everything I get my hands on, and now you tell me the IRS has interpreted "broker" to mean "have a broker's license, and use it to earn money when other people sell houses," *only*. Inotherwords, "agents" aren't working in real estate...

    If you've read the other thread on this subject, you'll know where I'm coming from.

    I am chagrined, disappointed, perplexed, and might soon also be embarrassed, because I totally missed it when [if!!!] the IRS announced that they - as a matter of policy - consider real estate *agents* [qua non-brokers, ie, without a broker's license] to be *not* engaged in a "real estate activity" for the participation in real estate trade or businesses test in the real estate professional definition in section 469.

    Did the IRS announce this? When? Where? Why didn't you guys and gals tell me about it...? :-)

    Here's a clip job from a CPA's website that would seem to *also* be unaware of IRS's position:

    [Quote] A real estate professional is someone who spends at least 750 hours a year and more than 50% of their time working as a real estate *agent*, broker, property manager or developer. [Unquote] (emphasis added)

    Can anyone point me to an announcement - or anything with any semblance of "authority" - wherein IRS explains - or at least discloses - their position on this? I know the IRC pretty much verbatim, and I've read the regs (which just point back to the IRC, as if Treasury didn't intend to answer the burning question, and avoided it directly!!!), and the publications (which use just the statutory language, nothing more and are no help), and the IRS worksheet for auditing this issue is no help either.

    Where is IRS's position disclosed? Has it been announced to the reading public?

    I am ready to believe that the IRS has never published anything on this, and is trying to beat taxpayers over the head with an unpublished - and very possibly losing!!! - position.

    Do you sense my attempt to express outrage? It's either outrate or embarrassment...

    Does anyone know where to go to read this, in IRS's own words?
    Last edited by les grans; 11-12-2007, 09:26 AM.
    Tags: None
    #2
    Just remember. In the other post, the IRS person who put forth the "broker" requirement was an auditor.

    That in no way means they are correct. That may be their mistaken opinion. If pressed to show the IRS code to back that statement up, they might fall short.

    Sometimes auditors are very good and truly know the law. And sometimes they shoot from the hip and have no idea what they're talking about.

    Just because an auditor says so, doesn't make it so.
    You have the right to remain silent. Anything you say will be misquoted, then used against you.

    Comment

      #3
      The auditor was wrong. Real Estate Agents can qualify as Real Estate Professionals.

      Comment

        #4
        Originally posted by Bees Knees View Post
        The auditor was wrong. Real Estate Agents can qualify as Real Estate Professionals.
        Sounds right. An agent must be licensed. Most RE brokers become licensed agents before getting their broker's license.

        Comment

          #5
          Originally posted by Joe Btfsplk View Post
          Sounds right. An agent must be licensed. Most RE brokers become licensed agents before getting their broker's license.
          License is irrelevant, unless you are breaking the law by not being licensed. You can sell people real estate on the moon and qualify as a real estate professional under the code. All you have to do is broker a transaction, meaning you are the go between for two individuals in a real estate transaction.

          Comment

            #6
            Selling real estate

            Originally posted by Bees Knees View Post
            License is irrelevant, unless you are breaking the law by not being licensed. You can sell people real estate on the moon and qualify as a real estate professional under the code. All you have to do is broker a transaction, meaning you are the go between for two individuals in a real estate transaction.
            Great idea! I'm offering lake view lots on the moon at a very reasonable price. Any takers?

            Comment

              #7
              Nothing to stand on?

              So, my guess is that if there were something published *either way* we probably would have found it by now, eh?
              And I'm more interested in the ocean front lots on the moon. Can I just put an option on ten or twenty of them...?

              Comment

                #8
                Sounds like facts and circumstances win out

                I posted the comment about the auditor on the other link. I have one client who wants to be an RE Pro and one who doesn't. The 750 hour test is a benefit to them both.

                The agent who wants RE Pro status is a full time agent with extensive rental proerty.

                The one who doesn't is a part time agent who is reahabbing and flipping houses and buying undeveloped land on which he may build a spec home for rental and/or sale.

                For what it's worth I also asked him (the auditor) at what level he would reclassify short term capital gain on the sale of rehabbed homes to self-employment income. He said over three in a single year would casue him to reclass the income but at 2 or less a year over time he would view it as capital gain. He of course said that all things would be considered. The amount of time, other sources of income etc.

                As has been noted here this was just a friendly conversation, not part of an examination. And it's merely the opinion of one auditor, not a reg or other authority.

                Myself I figured that the housing bubble was ready to pop when I began to see people forming LLC's and announcing that they were in the residential rehab and flip business. As usual all other opinions on this board are valuable insights into the manner that other professionals view the issues.
                In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.
                Alexis de Tocqueville

                Comment

                  #9
                  Dear Less Grand,

                  Originally posted by les grans View Post
                  ...where I'm coming from...I am chagrined, disappointed, perplexed...embarrassed...Do you sense my attempt to express outrage?
                  I feel your pain!

                  FOB (Friend of Bill)

                  Comment

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