All Forum Posts by: Cooper Marcus

Did you do your mail campaign @Amy Dugan? Did it work? What did you learn?

Last year I owned no rental property and spent little time on real estate. This year I will acquire at least one rental property and meet the qualifications for both Real Estate Professional and Material Participation so that I can deduct my rental real estate losses against my wife's earned income. 

Does the "order of operations" within the year matter? 

For example, I won't be able to accrue the 750+ hours until the end of the year - does it matter if I acquire the rental property earlier in the year, prior to reaching the 750+ hour total? 

Do I have to accrue the 750+ hours after I acquire my first rental property, or can I count hours spent researching and negotiating the acquisition? 

MileIQ is working great for me so far!

I have the same questions - what system(s) did you decide to use?

Great summary! I'm wondering what kept you from taking the renovation project through to completion and then stabilizing the property with good tenants? Perhaps you made enough money (it looks like you did well!) and didn't want to deal with the remainder of the project?

Great details, thanks for the educational post!!

Thanks @Eamonn McElroy - Tony Nitti's articles and podcast appearances are what got me interested in this subject in the first place! He is a terrific resource. 

Yes, it is certainly inadvisable to fully DIY this sort of thing, you are totally correct - I'm only trying to have a well-informed opinion so that when I sit down with my tax strategist (I'm still looking for a tax strategist :) I can say "here are my goals, and here is what I believe so far about achieving them - let's make that plan better, together".

Only once that plan is well-considered by an expert (heck, maybe even two!) and well understood by me, will I put the plan into practice. 

Thanks for confirming my understanding in my previous post - I find that understanding so... strange, because the 500 hours that pass the test for materially participating in "LP + Rental" grouping is precisely the same 500 hour that pass the test for materially participating in "Rental" alone. 

In your post just above you mention "you have to meet a higher threshold..." and I've seen similar language in other postings. The "higher threshold..." part got me confused because 500 hours in managing the rental is... no higher than 500 hours in managing the rental - it is the same threshold level, and it is met with the same hours spent!

Anyways, you are right, my next step here is getting 1-on-1 with an expert - once I do, I'll be sure to share what I learn back here on the fantastic resource that is BiggerPockets!

Here is the part I don’t get - if I spend 500+ hours materially participating in the rental property I own, have I just automatically made material any further activities I group with the rental property?

Thus, if I group the limited partnership with the owned rental property, does the group “instantly” pass the material participation test (because I spent 500+ hours in total across the members of the group)?

Thanks @Eamonn McElroy - when you say "...raises the bar for the material participation requirement..." can you clarify what it raises it to? 

If, prior to grouping a syndicate interest, the bar for material participation is satisfying one of the seven tests in Temp. Regs. Sec. 1.469-5T(a), what is the bar for material participation after grouping a syndicate interest?

I asked a similar question to the original post here https://www.biggerpockets.com/forums/51/topics/716878-re-professional-can-i-deduct-losses-from-rental-and-syndicate - I should have found this thread first, but after reading it, I'm still wondering what the answer is.

Perhaps you can point out the fault with the following logic (and forgive me for incorrect terminology - I'm a bit of a beginner)

1. Let's assume the tax payer is a Real Estate Professional (due to 750+ hours actively managing rental properties they own, no other job that consumes more of their time, etc).
2. They put more than 500 hours in total into actively managing their rental properties and they elect to group the properties - this thus allows them to deduct their rental-related passive losses from ordinary income.
3. They acquire an interest in a rental property LLC - let's assume it is NOT the "3-friends buying a duplex together" scenario posted originally, and it is more like the "200-people" scenario.
4. The new LLC interest is automatically grouped with their owned rental property.
5. To maintain the deductibility of their rental real estate-related passive losses from ordinary income, the grouped real estate activities must pass the material participation test - which it "automatically" does, because in step #2 they put in more than 500 hours to actively managing some members of the group.

While I'd like my logic to be correct, I'd be somewhat surprised if it was :)

If it is correct, it seems to offer a loophole by which being a RE Pro, and spending 500+ hours managing rental property(s) you own, then allows you to deduct essentially unlimited losses from rental property LLC memberships against ordinary income.

On the other hand, if this logic is incorrect, it is also a little surprising - because it implies that RE Pros cannot ever own interests in rental property LLCs (assuming they group activities) because the moment they acquire such an interest, they loose the ability to deduct ANY of their passive losses from ordinary income.

Maybe this is why I've read that the grouping election is fraught?