3 Comments April 26th, 2009

How do you know if you can claim Real Estate Professional?

Jenga asked:


I don’t want to get audited by the IRS but I hear that Real Estate Professional – non passive activity is a big issue – can you tell me what the IRS will question and look for if I claim Real Estate Professional, do they require anything when you are audited? Please advise. Any help will be great!

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3 Responses to “How do you know if you can claim Real Estate Professional?”

  1. kate Says:
    April 29th, 2009 at 12:59 pm

    You took the courses , passed the certification tests and have the license from the state .

    >

  2. Mathew Says:
    May 1st, 2009 at 10:11 pm

    They will want to see that you are licensed by the state in which you are practicing and that you are actively involved with what ever activity you have claimed to be non-passive. What decisions do you make and at what frequency.

  3. Wayne Z Says:
    May 4th, 2009 at 10:18 pm

    I believe that there are two limits that you must meet to be considered a “Real Estate Professional”.

    1) You must spend at least 750 hours per year in real estate activities; and,
    2) You must spend at least as much time in real estate activities as you do in any other income producing activity. If you already have a full-time job, this one is next to impossible to meet.

    Someone I know is being audited by the IRS for just this reason. His CPA in California either ignored or forgot about the passive loss limitation rule and he claimed a substantial loss over the past few years. My aquintance is a doctor so he is well over $150k income limit for claiming any losses. He will have to get out his checkbook. As you see, this is something the IRS does check on.