There's one more reason why your real estate activities should be inside an LLC, and why you should keep good books and records on your activities. Please see the article below.
Rental Real Estate Qualifies as a Business
A safe harbor is now available for taxpayers seeking to claim the section 199A deduction with respect to a "rental real
estate enterprise." What this means is that certain interests in rental real estate ‐ including interests in mixed‐use
property ‐ are allowed to be treated as a trade or business for purposes of the qualified business income deduction
under section 199A of the Internal Revenue Code.
Rental Real Estate Enterprise Defined
For the purposes of this safe harbor, a rental real estate enterprise is defined as an interest in real property held to
generate rental or lease income. It may consist of an interest in a single property or interests in multiple properties. The
taxpayer or a relevant pass‐through entity (RPE) relying on this revenue procedure must hold each interest directly or
through an entity disregarded as an entity separate from its owner, such as a limited liability company with a single
member.
Qualifying for the Safe Harbor
The following requirements must be met by taxpayers or RPEs to qualify for this safe harbor: Separate books and records are maintained to reflect income and expenses for each rental real estate enterprise. For rental real estate enterprises that have been in existence less than four years, 250 or more hours of rental services
are performed per year. For other rental real estate enterprises, 250 or more hours of rental services are performed in
at least three of the past five years.
The taxpayer maintains contemporaneous records, including time reports, logs, or similar documents, regarding the
following: hours of all services performed; description of all services performed; dates on which such services were
performed; and who performed the services.
The taxpayer or RPE attaches a statement to the return filed for the tax year(s) the safe harbor is relied upon.
If all the safe harbor requirements are met, an interest in rental real estate will be treated as a single trade or business
for purposes of the section 199A deduction. If an interest in real estate fails to satisfy all the requirements of the safe
harbor, it may still be treated as a trade or business for purposes of the section 199A deduction if it otherwise meets the
definition of a trade or business in the Section 199A regulations.
Help is just a phone call or email away.
For more information , please call 817‐563‐7717.
Email: don@mccartneycpa.com
