Real Estate Professional Status?

[Landon Hale]

I am looking for some clarity on the REP status. My main source of income is a full time W-2 job with a custom home building company (S-Corp). I am part owner of this company. I also have multiple investments as an LP in multi-family properties and I have 5 single family long term residential rental properties. The multi-family properties generate large paper losses most of which are suspended. I'm wondering if my participation in the home building company would meet the criteria for me to be classified as a REP, and if so would I be able to use some of the multi-family losses against all income? This is all new to me and I know it can get fairly complicated, so I'm just trying to see if this is an avenue worth exploring for me. Any feedback/advise is appreciated.

Thanks!

[Michael Plaks]

Quote from @Landon Hale:

Quote from @Michael Plaks:

Quote from @Landon Hale:

I am looking for some clarity on the REP status. My main source of income is a full time W-2 job with a custom home building company (S-Corp). I am part owner of this company.

How much of the company do you own, and what exactly do you do for the company?

My understanding is you have to own at least 5% which I do. I run everything on the sales end and then some. So I office out of our model home daily. I meet prospects, draw plans, price custom homes, do the contracts, meet customers and sub contractors on site. 

Correct, 5% ownership is required, which is why I asked you. It is very likely (to be certain, I would have to interview you more thoroughly) that you do qualify for REPS just based off of your main work.

You are also correct that you're required to show material participation in your rentals and in your LP. With the rentals, it should be easy of you self-manage them. If you can show 500 hands-on hours with your 5 SFHs, then you probably can piggy-back your LP on them. Otherwise, it is very difficult or even impossible.

Details matter here, and knowledge matters here. The best thing of course is to consult an experienced tax pro and review your entire situation in depth.