20% QBI passthrough deduction

[Tony Lin]

With the new IRS clarification out for for 20% deduction on QBI for pass through entities, I noticed there is a 250 hours requirement in order to qualify for the safe harbor clause. Can anyone further clarify for the multifamily syndication case as well as the SFR rental case?

1) In multifamily syndications where the apartment LLC hire a property management company to manage the property and hire outside contractors to make repairs/improvements on the property, is this enough to qualify for the 250 hours of RE involvement? Or do the syndication asset managers themselves need to be working on this full time to qualify?

2) Similarly for individually owned (let's say sole proprietorship) rental homes. Would hiring an outside agency to handle leasing/rent collection qualify for the 250 hours of RE involvement? 

[Ashish Acharya]

Originally posted by @Tony Lin:

With the new IRS clarification out for for 20% deduction on QBI for pass through entities, I noticed there is a 250 hours requirement in order to qualify for the safe harbor clause. Can anyone further clarify for the multifamily syndication case as well as the SFR rental case?

1) In multifamily syndications where the apartment LLC hire a property management company to manage the property and hire outside contractors to make repairs/improvements on the property, is this enough to qualify for the 250 hours of RE involvement? Or do the syndication asset managers themselves need to be working on this full time to qualify?

2) Similarly for individually owned (let's say sole proprietorship) rental homes. Would hiring an outside agency to handle leasing/rent collection qualify for the 250 hours of RE involvement? 

250 hours is just a safe harbor. If the multifamily/ SFH rentals portfolio is run like a trade or business, it will qualify for the deduction regardless of the hours.

And yes, the hours of PM or other agents qualify towards 250 hours.

 Rental services may be performed by owners, employees, and independent contractors and include: (1) advertising to rent or lease the real estate; (2) negotiating and executing leases; (3) verifying information contained in prospective tenant applications; (4) collection of rent; (5) daily operation, maintenance, and repair of the property; (6) management of the real estate; (7) purchase of materials; and (8) supervision of employees and independent contractors.

Various administrative duties such as time spent arranging financing; procuring property; reviewing financial statements or reports on operations; planning, managing, or constructing long-term capital improvements; and traveling to and from the real estate cannot be included in the 250 hours of service.