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MyVirtualCPA, Accountant
Category: Canada Tax
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I am a registered real estae professional in Canada and own

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I am a registered real estae professional in Canada and own a vacation property in the U.S. which I rent out. I matierially participate in the rental acitivities by advertising the property, preparing rental contracts, collecting rents, coordinating cleaning and repairs etc. Is my income considered passive income and should I be filing form 6198? If not how are losses carried over?
Submitted: 1 year ago.
Category: Canada Tax
Expert:  MyVirtualCPA replied 1 year ago.
Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

Form 6198 is necessary when you have basis in your property, but a portion of that basis is not 'at risk' - this generally occurs when you have nonrecourse financing for your property. CLICK HERE to read more.

Losses are carried over on form 8582, "Passive Activity Loss Limitations" from year to year. You can CLICK HERE to read more about this topic.

If you prepare your own taxes using software, the software should automatically generate these forms.

If you are a non-citizen or non-resident, keep in mind you need to elect to treat this activity as effectively connected with a US trade or business. CLICK HERE to read more.

Please let me know if you need anything additional. Thank you for using JustAnswer.com and have a great day.

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Customer: replied 1 year ago.

Please refer to the instruction on Form 8582. I would meet the criteria for a real estate professional who materially participated in the rental activity. The instructions would then indicate that the rental icnome is not from a passive activity and form 8582 would not be required. If form 8582 is not required then is there some other form I should use to carry over the loss?

Expert:  MyVirtualCPA replied 1 year ago.
Real estate professional is a whole different story.

Since you are a real estate professional, your loss is a net operating loss and you would carry that forward by using IRS form 1045. If you have an NOL you have to take it back two years, and then carry it forward 20. If you don't want to amend previous returns, you can elect to forego the carryback.

IRS guidance on how to treat NOLs can be found, HERE.

This is an NOL because this is not passive. I hope this helps. Thanks for your inquiry and I apologize for the brief delay in getting back with you. Have a great day and thank you for using JustAnswer.com

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site**

MyVirtualCPA, Accountant
Category: Canada Tax
Satisfied Customers: 14417
Experience: Helping people find jobs
MyVirtualCPA and other Canada Tax Specialists are ready to help you
Expert:  MyVirtualCPA replied 1 year ago.
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