I talked with some new tax law seminar teachers yesterday.

I asked about the 20% credit for landlords. General opinion was that as the law is written, landlords will get the deduction. Although they all agreed that a new definition of "business" will have to be made that includes landlords. We will wait for clarification.

Landlords can now take Sec 179 depreciation on personal property bought for rentals. lawn mowers, refrigerators, washers, dryers, etc.

Commercial buildings can now expense things like roofs, electrical systems, security systems, furnace, A/C, etc.

Per the tax webinar with John Hyre bonus depreciation is allowed for pass through companies which includes sole proprietors. If the IRS recognizes you as a business then LL's are included.

As I said, we need clarification on the definition of "Business".

One part of the 20% credit talks about the greater of 50% of wages paid OR 25% of wages plus 2.5% of assets.

David MI if nothing else i've learned this about this new president-- he's not doing this to enrich himself-- who would give up their regular life for president like he has?

David MI if nothing else i've learned this about this new president-- he's not doing this to enrich himself-- who would give up their regular life for president like he has?

In John Hyre's webinar he made it very, very clear that rental properties ARE a business, except in very rare and unusual circumstances (i.e. a tenant that lives there for 15 years and handles all the maintenance themselves). It's just a business that is reported on a schedule E instead of a schedule C.

He agrees that we'll be able to take advantage of the 20% deduction ("a gift"). And while you can't depreciate the entire cost of the house immediately, you can depreciate any improvements on the LAND: driveway, landscaping, fence, deck, etc.

That was my take on it too Robin.

The IRS used to require that you spend 1200 hrs/year to be considered a business as opposed to a hobby. That was reduced to 750 hr/yr but that may have changed too.

The time spent is less important the fact that you must actively participate with the intent of producing of income. You do not have to make a profit as long as you have a profit motive.

I still think we have a "clear as mud" situation here. Like Marv said, the real question is about whether or not your rentals are a "business" to the IRS or not.

Some people are just going "Yes, of course it is a business! John Hyre told me so!" while others are going "Well, the IRS has requirements for a business -- such as the number of hours put in per year."

I just feel like some people are making huge assumptions/leaps based on a webinar that they listened to recently -- but where is the actual IRS guidelines or rules to back it up? Again, in the past, you couldn't just decide "I'm a business, I just happen to use a Schedule E instead of C." You had to meet the IRS requirements to qualify as a business. Now people seem to be throwing that out the window because they WANT to qualify -- not because the IRS necessarily says that they WOULD qualify.

Again, those saying "of course we're a business!" may be correct. But I don't think that is CLEAR yet.

- John...

Found this: "Owning rental property qualifies as a business if you do it to earn a profit and work at it regularly, systematically, and continuously. (Alvary v. United States, 302 F.2d 790 (2d Cir. 1962).)"

JOHN:

My answer came directly from the IRS website defining a business or a trade. See their full definition below:

Nhsailmaker, in order to maximize publicity, he needed to run as long as possible. He did not expect to win, but wanted to squeeze as much juice as possible.

A new book "It's Even Worse Than You Think What The Trump Administration is Doing To America" is due to be released tomorrow.

1) The definition of "Trade or business" does vary for different portions of the Code. It also varies for different types of businesses, say rentals vs. loans vs. stock trading. The courts can make up a brand new definition for Code Section 199A. Possible, not probable, and not what they normally do. They normally borrow from the more widely litigated areas of the law, such as "is a rental a T/B for purposes of Section 162 or 280A?"

2) IRS website is not law. In the cited instance, it is also not relevant. The pasted language is related to UBIT - very different wording in that statute (see "unrelated") than just T/B making the language very, very unlikely to apply to what we are discussing.

3.) There's a good bit of case law on this in different contexts and it all points in the same direction: It takes very little activity to have a T/B where rentals are concerned.

See:

Anderson, T. C. Memo. 1982-576

Curphey, 73 T.C. 766

Gilford, 201 F.2d 735

GRIER et al. v. UNITED STATES (1954), didn't have the full citation handy

Murtaugh, T.C. Memo. 1997-319 (1997)

ALVARY, 302 F.2d 790

IRS Letter Ruling 9840026

Revenue Ruling 73-522 (but different wording for that statute, which is why I think xxx lease issue is still grey, add that RR's are not "law")

I'll bet there are another 4 or 5 out there, all in the same vein.

Bottom line: Unless the courts break with their normal approach and make up a brand new definition for what is a T/B in a rental context, odds are very high that the existing & generous definition will be used.

Marv,

On this issue we will be waiting a while. And odds are very, very high that what I say is so. I'm the first to caveat myself when things are uncertain. There's uncertainty here....but not a lot in my educated opinion.

In the meantime? Use what information we do have, take the position most favorable to you within reason (and what "reason" we presently have points towards it being very easy to qualify rentals as a T/B), and wait for the Tax Court (and not the IRS) to rule otherwise (which I doubt they will do).

PS: Revenue Rulings are not law. They are indicative of what the IRS thinks is law. That's way lower on the food chain than Tax Court rulings - as it should be. When I like what a RR says, I use it. When I do not, I look for (or wait for) contrary rulings from the courts and dismiss the RR as "the mistaken opinion of the IRS".