All Forum Posts by: John M.

Are there any other pros or cons to being a Real Estate Professional? I'm pretty sure I qualify this year, but don't see how it's such an advantage. Maybe I totally missing something here, but any of my real estate properties that generate a loss for the year are balanced out by income from other properties. I've never had an overall loss from my combined rental activities. Don't know why anyone would do this other than to make money.

On second thought, I guess that if you were deducting losses against ordinary income that would be an advantage -- IF the losses were only the result the RE depreciation and therefore only a loss on paper (since in reality, properties don't become worthless after 27.5 years - or whatever the depreciation period is - in fact they appreciate). Any clarification you can provide would be welcome.

JMac

What are the pros and cons of being considered a "Real Estate Professional" by the IRS. The main thing, as far as I can tell, is that the losses you can calim are not limited. Anything else? Searching for this topic turns up so much unrelated clutter that I can't find much good info.

Like a bank, the IRS doesn't want acquire the property and will generally release it early unless there is substantial equity. Not sure what their threshold is, but repairing and marketing the property is going to cost the IRS a good bit more than it would cost an investor (due to the red tape inherent in any government activity). I believe there would have to be at least 25k or possibly much more equity for them to redeem.

File form OBD-225 - Application for Release of Right of Redemption in Respect to Federal Tax Leins. It will cost $50, but could knock a month or three off the redemption period. Don't do any work before the 120 period is over or the property is released -- unless you're feeling particularly charitable towards the IRS.