REPs designation - do I qualify?

[John Dehn]

I am a 1099 employee for a boutique commercial real estate investment shop. I do business development, underwriting, and asset management for the company on a full-time basis and have upside opportunity if I source a deal myself and bring it all the way through the acquisition process.

I also have a couple single family rentals that I own 100% and a 2-person partnership on a third that is managed by a management company. I manage the 100% owned properties myself.

my question is, since I’m a 1099 employee working for a real estate investment shop performing all of these functions in addition to owning my own rentals, is there a likelihood that I would qualify for the real estate professional designation on my taxes? 

I’m also in the market for a real estate tax strategist to help me with items like this. I’m based out of Arizona, but open to working with a CPA virtually.

[Linda Weygant]

Quote from @John Dehn:

Quote from @Jack Faysash:

Hey John, to qualify as a real estate professional, you must provide more than one half of your total service (total hours worked in a year) in real property trades or business in which you materially participate, AND perform more than 750 hours of services during the tax year in real property business activities, which include: property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing, or brokerage services. Don’t count personal services you perform as an employee in real property trades or businesses unless you are a 5% owner of your employer. You are a 5% owner if you own (or are considered to own) more than 5% of your employer's outstanding stock, or capital or profits interest.

Assuming you aren't a 5% owner of the investment shop you work at, I don't believe you would qualify based on the information provided.

Does your opinion change if I have structured it by creating an LLC that I am the 100% owner that I provide these services through? It’s an LLC that is taxed as an S-corp so I also pay myself a W-2 and take distributions.

So the issue here isn't what you do for the boutique investment shop. The issue is what you do for your LLC/S-Corp. The investment shop is not your employer and it sounds like you don't own a percentage of it. So the focus is on where you generate your revenue, which is the LLC/S-Corp.

On the surface, it seems like the services you provide to the S-Corp associated with underwriting and asset management would qualify.  Additionally, the hours you spend "bring(ing) it all the way through the acquisition process" seem like they qualify.

The hours spent managing your personal rentals will almost all qualify, more than likely.

I recommend talking to a real estate focused CPA who has a firm grasp on these rules and discussing your scenario directly.  There are a few of us here on BiggerPockets, so set up a meeting with a few and see what they have to say.

Best of luck!