Pros and cons of 469(c)(7)(A) election

[Kevin Noesner]

It's that time of year again when I'm trying to figure out if I should aggregate all my rental properties into a single activity with the 469(c)(7)(A) election.  I'm aware that it removes the $25k deduction cap, so then what's the downside? 

[Logan Allec]

Hi @Kevin Noesner, the major drawback is that existing passive losses will be suspended.  You don't release them in the year the election is made.  Also, I may be reading too much into your words here, but I'm not sure what you mean by "it's that time of year again."  469(c)(7)(A) is an irrevocable election so once made it is binding on all future tax years apart from a significant change in circumstances.  It's not an annual election that you "figure out" every year like electing to use mileage vs. actual for automobile expenses or electing to not take bonus depreciation.  That being said, I do attach the originally-filed election to my clients' returns each year so 1) there's no confusion at the IRS and 2) if my client ever leaves me their next CPA will see the election in the prior year return so there's no confusion on their part about whether or not the election was ever made.