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Jon Fletcher
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Passive Losses Offset Active Income

Posted Jan 22 2022, 12:42

Thoughts on Adam Neumann's real estate strategy post-WeWork? It sounds like he is using depreciation to create passive losses so that he can offset active income from his enormous golden parachute? If so, it seems like a smart strategy. This is from the RealDeal article yesterday: 

"And thanks to a special tax classification for real estate professionals, Neumann and his family may be able to shelter an extra $500,000 of his golden parachute. What’s more, he could exploit the latter loophole each year, provided that he remains a real estate professional. But that is not a shoo-in. The hurdles are not minimal to being considered a real estate professional,” said Donald Williamson, professor of accounting and taxation at American University. The tax classification would be hard to achieve for anyone moonlighting as a property owner. Its strict requirements include spending half of one’s time on business related to real property, and at least 750 hours, in a given year. 

“Most real estate professionals are agents or brokers who believe in the product, and work hard on a handful of properties they own,” said Williamson. The main barrier is that people often spend too much time doing other things."

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