Long Term Rental Properties- Schedule C or Schedule E????

[Jim C.]

I'm in process of switching accountants, and my old accountant had always put all my long term rentals under Schedule "C" when filing. However, my new accountant is telling me that all the long term rentals should have been filed under Schedule "E" and that he wants to go back and amend last 3 years of tax returns. I asked my previous accountant about it, and she said that since my sole business is rental properties, that it HAS to be filed as a Schedule "C" since its being run as a business. Thoughts?

[Eamonn McElroy]

@Jim C.

Traditional, long-term rental real estate should be reported on Sch E.  The exception is if you're running what essentially amounts to a hotel or motel, running a parking lot, or running a storage facility/warehouse.

Real estate is also generally "per se" passive and subject to the passive activity loss rules unless you are an RE pro.

Your returns should be amended for the tax years with open statute of limitations.  Sounds like you're on the right path with a CPA who understands real estate taxation now.  Best of luck.