IRS GUIDANCE ON RENTAL PROPERTIES

IRS guidance on rental properties. The IRS has released Notice 2019-07, which established a safe harbor under which a rental real estate enterprise would be considered a trade or business for eligibility of the 199A deduction. IRS guidance on rental properties. To qualify for treatment as a trade or business under this safe harbor, the rental real estate enterprise must satisfy the requirements of the proposed revenue procedure. If an enterprise fails to satisfy these requirements, the rental real estate enterprise may still qualify to be treated as a trade or business for purposes of section 199A if the enterprise otherwise meets the definition of trade or business to Section 1.199A-1(b)(14). IRS guidance on rental properties.

Section 3 of this revenue procedure provides a safe harbor under which a rental real estate enterprise will be treated as a trade or business for purposes of section 199A of the Internal Revenue Code and Section 1.199A-1 through 1.199A-6 of the Income Tax Regulations. The safe harbor provided by this revenue procedure applies solely for purposes of Section 199A. If an enterprise fails to satisfy the requirements of this safe harbor, the rental real estate enterprise ma still be treated as a trade or business for purposes of section 199A if the enterprise otherwise meets the definition of trade or business in 1.199A-1(b)(14).

Section 199A was enacted on December 22,2017 as part of the act entitled “An Act to provide for reconciliation pursuant to titles 2 and 5 of the concurrent resolution on the budget for fiscal year 2018”. Pub. L 115-97, and was amended on March 23, 2018, retroactively to January 1, 2018, by the Consolidated Appropriations act, 2018, Pub. L No 115-141. Congress enacted section 199A to provide a deduction to non-corporate taxpayers of up to 20 percent of the taxpayer’s qualified  business income from each of the taxpayer’s qualified trade or businesses, including those operated through a partnership, S corporation, or sole proprietorship, as well as a deduction of up to 20 percent of aggregate real estate investment trust (REIT) dividends and qualified publicly traded partnership income.

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