BiggerPockets

Agent Lays the SmackDown on the IRS

Wednesday, May 20

Many of you have heard about how the IRS has been targeting Real Estate Agents, and challenging the status of a "real estate professional" for an Agent.

To give you a brief background without getting into the details - a "Real Estate Professional" is someone who "materially participates" in their real estate activity. As a result, they are able to deduct real estate losses from other income that is not related to real estate.

The IRS had been challenging the "real estate professional" status for agents - stating that Brokers qualify, but Agents do not. And they were winning...

The great news is that a Real Estate Agent just won in tax court! Read the case for yourself!

The IRS tried to argue that the taxpayer needs to be a “Broker” not a just an “Agent” to meet the 750 hour per year material participation test. The Tax Court said: “The Court concludes that Congress is presumed to have defined the term “brokerage” in its common or ordinary meaning. The Court also stated that for purposes of section 469, the “business” of a real estate broker includes, but is not limited to: (1) Selling, exchanging, purchasing, renting, or leasing real property” and therefore, an “agent” is the same as a “broker” for purposes of this test.”

Yippy!

Comments

1. 

   Joshua Dorkin Reply
   about 3 years ago

   That's a very important legal decision, Niman. Thanks for sharing it. I wasn't even aware that this was going on.

2. 

   Niman S. Reply
   about 3 years ago

   Thanks Josh! It is really important, and I'm surprised I haven't seen more info about it. I kinda had to dig around to find this document. Maybe it's still pretty new :)

3. 

   Jim Francis Reply
   almost 3 years ago

   Great info! Thanks for letting us all know about it.

4. 

   Niman S. Reply
   almost 3 years ago

   Happy to share Jim! Thanks for stopping by!

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