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Rental LLC 199A

Forum|Forum|2 years ago
March 5, 2024
3 replies
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I recently took on a new client with husband/wife LLC partnerships. They own 5 residential rental properties, all under different LLCs. 5 1065's. The prior accountant took the 199A deduction for each on the 1040. The 199A safe harbor rules essentially states that one would need to perform 250 or more hours of rental services to qualify. They do not spend 250 or more hours on any of the properties. Did the prior accountant make a mistake by taking the 199A or am I missing something?

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Best answer by qbteachmt

This helps. So, even though there are five separate LLC's, that in my opinion constitute a trade or business, can be aggregated to qualify for the deduction?

"can be aggregated to qualify for the deduction?"

Are you clicking the links that are being provided in the replies, to help you learn what applies directly? The references are important and useful. Even IRS resources can be useful.

George4Tacks

Level 15

Read the requirements more carefully. 250 is JUST a safe harbor. Who does all the work to operate and maintain these rentals?

Answers are easy. Questions are hard!

A

Avs19Author

Level 6

My client does all the work but did not put in 250 hours on any of the properties

sjrcpa

Level 15

So he doesn't meet the harbor. So what.

There are other ways to be a trade or business.

The more I know the more I don’t know.

sjrcpa

Level 15

Use of the safe harbor is optional.

The more I know the more I don’t know.

BobKamman

Level 15

Regulations within Section 199A allow the aggregation of multiple trades and businesses. This lets you treat an aggregated group as a single business or trade when considering your Section 199A deduction.

See discussion at

https://numbersquad.com/how-to-handle-multiple-rental-activities-and-the-199a-deductible/

qbteachmt

Level 15

"allow the aggregation of multiple trades and businesses."

In other words, if they provided evidence of 250 hours or more, you would not also need to gather all the info to prove they qualify. Safe Harbor = slam dunk qualification. Or, do more work to show it still qualifies.

Don't yell at us; we're volunteers

A

Avs19Author

Level 6

This helps. So, even though there are five separate LLC's, that in my opinion constitute a trade or business, can be aggregated to qualify for the deduction?

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