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May 31st, 2009 Categories: Real Estate News
Real Estate Agents Win IRS Battle Over Status
Rental income is called passive income for tax purposes, there is nothing passive about collecting rent. It also has to do with passive losses. The passive loss guidelines that were put into place were because at one time it became more profitable for some groups to buy property just for the losses. That caused weird things to the supply and demand. Back during the last banking debacle ( you thought this was the first time) we had lot of unoccupied commercial properties because their value was a tax loss. Well we all know what happens when construction stops. So the IRS came up with the passive loss rule, that said if real estate was not your primary income or a certain amount of hours per year were in the real estate business, then the losses had to spread out.
Well the IRS has been challenging real estate agents status as “Real Estate Professionals” stating that only a real estate broker could claim that. The IRS’s position was that an agent was an idependent contractor of the broker and therefore not active. Which is hog wash if that is there primary business. Well it has been established in court that a real estate agent can claim themself as a “Real Estate Professional” in the eyes of the IRS.
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Wahoo indeed! I was having problems with the IRS since they implemented this rule back in 2008 (I was a target of an audit).
Cheers to us all! =)
Lots of interesting information and I’m waiting for more, and to write.