Real Estate Professional Status for Spose

Investor · New Lenox, IL · Member since 2017 · 18 posts · 3 votes

Hello, I have a W2 job and my wife is currently a stay at home mom that does help out with my rental portfolio, but not up to the 750 hour minimum . I was thinking about getting her more involved in the business and claiming her as a real estate professional. Currently the properties are in LLCs owned by my business partner and I. We have 3 commercial properties with 95 tenants and have our own in house property management business that is also owned by my business partner and I. I asked my accountant and he said I can not do it unless her name is on the Properties. Is this correct? He does not specialize in real estate and did not see to know much about the REPS, So I would like to get a second opinion.

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Michael PlaksPro Member

Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes

Quote from @Sean Graham:

Quote from @Michael Plaks:

It is not correct, she does not need to own the properties. But it could be hard for her to accumulate the required 750+ hours when you have a management company that does the majority of the work.

It sounds like the PM company is in house so she can participate in the PM. It’s not a 3rd party. So why do you say it might make it harder for her to qualify?

I was reading too fast, did not notice it was in-house. No problem then.

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Michael PlaksPro Member
Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
1y
It is not correct, she does not need to own the properties. But it could be hard for her to accumulate the required 750+ hours when you have a management company that does the majority of the work.
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- Sean GrahamBusiness Member
  Investor , CPA · Detroit, MI · Member since 2016 · 583 posts · 248 votes
  1y
  Quote from @Michael Plaks:
  
  It is not correct, she does not need to own the properties. But it could be hard for her to accumulate the required 750+ hours when you have a management company that does the majority of the work.
  It sounds like the PM company is in house so she can participate in the PM. It’s not a 3rd party. So why do you say it might make it harder for her to qualify?
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- Michael PlaksPro Member
  Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
  1y
  Quote from @Sean Graham:
  
  Quote from @Michael Plaks:
  
  It is not correct, she does not need to own the properties. But it could be hard for her to accumulate the required 750+ hours when you have a management company that does the majority of the work.
  It sounds like the PM company is in house so she can participate in the PM. It’s not a 3rd party. So why do you say it might make it harder for her to qualify?
  
  I was reading too fast, did not notice it was in-house. No problem then.
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Joseph LabitPro Member
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Investor · New Lenox, IL · Member since 2017 · 18 posts · 3 votes
1y
Thank you all for the help. And yes the property management company is inhouse, So I will might even make her part owner of the management company to make it a little more legitimate. Will be a lot harder to make her owner of the properties since we have bank loans on those.
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Stephen Nelson
Accountant , CPA, MBA in Finance, MS in Taxation · Redmond, WA · Member since 2025 · 172 posts · 135 votes
1y
I like the "spouse as a real estate professional" tactic. But can I throw out another brainstorm here? The Section 469(c)(7) rule is someone spends more than 750 hours and more than 50 percent of work time in real estate trades or businesses that person materially participates in. Do that then, and you two (husband and wife) only need to materially participate in the real estate rentals to use the losses to shelter income.
So the harebrained idea here: Maybe wife gets her real estate professional status from some other real estate trade or business? Real estate agent for example? Or maybe she sets up her own property management company to help you guys but also other folks? I once saw an accountant intentionally become a five percent owner in a little construction company a to get REPS.
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