Qualifying as a Real Estate Professional - 750 hours/year

[Kris Clig]

MY QUESTIONS ARE: 

(Note - Background information can be found at the bottom if needed. And thank you in advance for any advice you can offer. I really appreciate it.) 

1. Does the time it took me to sell my first property, in order to get the funds needed (via a 1031 exchange) to buy my 4 new properties count, towards the 750 hour requirement to be considered a Real Estate Professional for tax purposes?  

2. I understand the time I have spent managing and or operating my properties will only count towards the 750 hours IF, my Property Managers have spent less time than me managing and or operating my properties.  Since I have hire Property Managers from the very beginning it is my plan is to show that most or all of my 750 hours came from "acquiring" the properties, and not from managing and or operating them. But in the rare times that I did spend more time managing and or operating my properties than my Property Managers how do I prove that? Should I ask my Property Managers to provide me a letter stating the approximate time they spent managing and or operating my properties? I assume so.  

3. I am considering setting up one or more LLCs for my rental properties. Will the time it takes me to set up these LLCs count towards my 750 hours? Will these hours fall under the classification of "acquiring" or "operating"? I assume operating?  

4. Is there an ideal way to present proof of my 750 hours to the IRS? Is a detailed excel spreadsheet ideal? At first I did not think I would take 750 hours to buy these 4 properties so I did not keep a minute by minute time log. I am now going back trying to recreate a time log using old phone records, emails, texts, etc.  Is this necessary? And if so, can I include the time it takes me to create this time log towards my 750 hours? I assume not.  Does the IRS have a set standard timetable, that I am unaware of, of how much time they think it takes to acquire a single rental property, thus making it unnecessary for me to recreate a time log? 

5. How easy is it to make and submit a formal aggregation election in order to group all 4 of my properties as "one activity"?  This way I only have to do 750 hours worth of work total, instead of 750 hours or work per property. 

6. What is the down side to merging all of my properties into one activity? With everything I've read there doesn't really seem to be a down side. 

7. It took my 6+ months non stop to buy these 4 properties. Is that enough time to be considered by the IRS as "regular, continuous and on substantial basis" for this tax year? I assume so. But if not, than would you recommend I try and buy a 5th property towards the end of this year (if I can pull the funds together) in order to meet this requirement? 

BACKGROUND INFO: I Just sold my one and only rental property via a 1031 exchange and with that I ended up buying 4 more rental properties in better cash flowing areas. I did all of this, this year and it took me no less than 750 hours.  I am a stay at home mom with a very small side job where I work less than 100 hours per year.  The income made from these rental properties will be my main source of income.  I am NOT a realtor, broker, or professional property manager. The four properties I've bought are in three different states, I've hired local property managers to manage the properties. My husband makes more than the $150K/yr threshold so we have not been able to write off losses on our last rental property for the past 3 years because I was not considered a Real Estate Professional.  I would like to be considered a "Real Estate Professional" for this tax year ONLY since I have invested more than the 750 hours required.  I understand that in future years I will probably not be able to be considered a "real estate professional" unless I continue to buy more properties and or take over the management of my properties. Which at this point I do not plan on doing.