| Summary |
RENTAL REAL ESTATE (T/G 401) covers all of the basics of Schedule E (Form 1040) with respect to income, expenses, and depreciation of rental residential and nonresidential real estate owned by individuals and professionals; emphasizes loss limitations, owner participation rules, Section 1031 exchanges, and installment sales. Also covered:
- Tracing/allocating carryover losses
- Shared equity & out-of-state rentals
- Sharecropping & farmland rentals
- Exchanges via "equity balancing"
- Installment sale "contract price"
- Awareness of depreciation recapture
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| Table of Contents |
Rental Real Estate
Book: 401
Table of Content:
1. IMPORTANT BASICS 1-1
Ownership & Title 1-2
Recordation of Ownership 1-3
Specificity Among Co-Owners 1-5
Typical Rental Uses 1-6
The “Second Tax” Distinction 1-7
Classed as “Passive Activity” 1-9
Real Estate Professional 1-11
The $25,000 Offset Exception 1-12
Suspended Losses 1-14
Entire Interest Dispositions 1-15
Using Carryovers Strategically 1-16
2. DEPRECIATION ALLOWANCE 2-1
Historically Confrontational 2-2
Section167: Old Law 2-3
Section 168: New Law 2-5
Land: Nondepreciable, But-- 2-7
Establishing “Land Fraction” 2-8
Segregating Improvements 2-10
When “Placed in Service” 2-12
“Allowed or Allowable” Explained 2-13
Setting Up Your Schedules 2-14
Form 4562: Of Limited Use 2-15
Repairs vs. Improvements 2-17
“Adjusted Basis” Explained 2-19
3. SCHEDULE E (FORM 1040) 3-1
Overview of Page 1 3-2
Headnote Re Form 4835 3-5
Line 1: Description(s) 3-6
Line2: Personal Use? 3-7
The 14 Day or 10% Rule 3-8
Depreciation Separately Entered 3-9
Footnote 1: Form 6198 3-11
Footnote 2: Form 8582 3-12
The “Totals” Column 3-13
4. INCOME & EXPENSES 4-1
Variants of Income 4-2
Separate Income Ledger 4-4
Separate Checking Account 4-6
Overview of Expense Categories 4-7
Codifying Your Expense Checks 4-9
Five Self-Evident Categories 4-10
Auto and Travel 4-11
Commissions and Fees 4-13
Wages and Salaries 4-14
Taxes and Licenses 4-15
Repairs: Caution Required 4-17
5. LOSS LIMITATIONS 5-1
When Does “Loss” Occur? 5-2
Why “Property by Property”? 5-3
At-Risk From 6198 5-5
Introduction to Form 8582 5-6
Exception 1 to Form 8582 5-9
Exception 2 to Form 8582 5-10
Statutory “Exception 3” 5-11
The $25,000 Allowance 5-11
Computing the Aggregate Loss 5-14
The Pe-’94 Rules Remain 5-16
Allocating the Allowable Loss 5-17
Treatment of the Carryovers 5-18
Disposition Accounting 5-19
6. VACATION HOME RENTALS 6-1
The “Trigger” Question 6-2
Overview of Section 280A 6-3
General Disallowance, With Exceptions 6-5
De Minimis Rental Use 6-7
Determining Fair Rental Days 6-8
Fair Rental Expense Allocations 6-9
Subsection (e) Actual Wording 6-10
Now for “Catch-22” 6-11
Qualified Rental Periods 6-12
Renting Rooms in Your Home 6-13
7. SHARED EQUITY RENTALS 7-1
Owner-Occupant: Tenant 7-2
Ownership: Tenants-in-Common 7-4
Rental to Family Members 7-6
Must Own “Appurtenant Land” 7-7
Written Agreement Required 7-8
Basic Contents of SEFA 7-9
A Parent-Child Example 7-11
“Must Make” Separate Payments 7-12
Owner Differences: Schedules A & E 7-13
8. FARMLAND RENTALS 8-1
Rent in Noncash Form 8-2
“Typical” Sharecropping Arrangement 8-3
Introduction to Form 4835 8-4
Three Leadoff Questions 8-7
Gross Farm Rents Defined 8-8
Nonproduction-Type Rents 8-10
Many Expenses Allowed 8-11
New Vistas in Depreciation 8-13
If Net Rental Loss 8-15
9. OUT-OF-STATE RENTALS 9-1
Auto and Travel 9-2
Local Management Contract 9-3
IRS Form 1099-MISC 9-4
Employing a Resident Manager 9-5
Local Consultants on Tap 9-7
Another Expense: Security Safe 9-8
Co-Ownership Accounting 9-10
What About Foreign Rentals 9-12
Foreign Tax Treaties 9-13
State-of-Residence Adjustments 9-15
10. SECTION 1031 EXCHANGES 10-1
Must Be “Like-Kind” 10-2
Section 1031 Overview 10-3
The Core Statute 10-5
Money & Nonlike Property 10-5
Equity Balance: Step 1 10-7
Taxability of “Boot” 10-8
Adjusted Basis: Step 2 10-9
Time Restrictions 10-12
Multiple Parties in Escrow 10-13
Basis Transfer: Step 5 10-14
Comprehensive Example 10-16
Must Use Form 8824 10-20
Realty Reportings: 1099-S 10-21
Where on Form 1040? 10-23
11. INSTALLMENT SALES 11-1
Installment Prerequisites 11-2
Code Section 453 11-3
Introduction to Form 6252 11-5
Computation of Gross Profit 11-7
Mortgages and Other Debts 11-8
“Contract Price” Explained 11-9
Gross Profit “Ratio” 11-10
Taxable Part of Installments 11-11
Keeping Track of Payments 11-13
Premature Dispositions 11-15
12. OTHER DISPOSITIONS 12-1
Death Tax Consequences 12-2
Related Party Dispositions 12-3
Section 1231 Dispositions 12-4
Importance of Form 4797 12-5
Form 4797: Parts I and II 12-7
Form 4797: Part III 12-9
Illustrative Recapture Example 12-11
“Bite the Bullet” Time 12-13
First Disposition: All cash 12-14
“Strategy 4”: Problem Properties 12-15
Out-of-State Exchanges 12-16
Charitable or Public Gifting 12-17
“Strategy 7”: Next-to-Last 12-18
Your “Final” Exchange 12-18 |
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