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R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Capital Gains and Losses
Satisfied Customers: 263
Experience:  Over 20 Years experience in resolving tough tax cases
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I have rental property- but the new one was held for

Customer Question

I have rental property- but the new one was held for investment what code do I use to file it on the schedule c
Submitted: 1 month ago.
Category: Capital Gains and Losses
Expert:  taxmanrog replied 1 month ago.

Welcome to Just Answer! Thank you for giving me the opportunity to assist you! I will do my best to help!

Rental property is not reported on Schedule C. Rental properties are reported on Schedule E, page 1. The only time a rental activity would be reported on Schedule C would be if you had something like a Blockbuster Video where your trade or business was the rental of personal tangible property.

If you have any more questions, please feel free to let me know.

Thanks! Have a great week!

Roger

Customer: replied 1 month ago.
No I do not agree with you. I am aware that you can report property held for investment purposes on schedule C -PROPRETY HELD FOR INVESTMENT PURPOSES- and rent secondary purpose So I need a correct answer.
Customer: replied 1 month ago.
What types of investment can be deemed " help for investment" and goes to schedule C?
Customer: replied 1 month ago.
Are you going to answer me?
Expert:  taxmanrog replied 1 month ago.

I am not sure where you are getting your information from, but IRC §469 specifically defines rental activity as a PASSIVE activity and is reported on Schedule E.

The excerpt below is from the IRS website. IT says:

How Do I Report Rental Income and Expenses?

If you rent buildings, rooms or apartments, and provide only heat and light, and trash collection, you report your rental income and expenses on Form 1040, Schedule E, Part I. List your total income, expenses, and depreciation for each rental property. Be sure to answer the question on line 2."

The only other way that you can report a rental activity on Schedule C is if you qualify as a real estate professional for the tax year. Again according to the IRS website, if you meet both of the following requirements.

  • More than half of the personal services you perform in all trades or businesses during the tax year are performed in real property trades or businesses in which you materially participate.

  • You perform more than 750 hours of services during the tax year in real property trades or businesses in which you materially participate.

Customer: replied 1 month ago.
This property was purchased to be held for investment appreciation purpose- it was only rented later to offset some costs buthe purpose was for "held for investment"
Expert:  taxmanrog replied 1 month ago.

There are no types of investment property that can be reported on Schedule C. Investment income is by definition passive. The Schedule C is to report ordinary trade or business income only. Schedule C income is subject to self-employment tax. Rental income is not.

Expert:  taxmanrog replied 1 month ago.

The fact that it was investment property does not change the character of the rental income. Regardless of the reason for the original purchase, it was converted to rental property when you started to rent it out.

Customer: replied 1 month ago.
I WANT TO KNOW HOW DO I REPORT A PROPERTY HELD FOR INVESTMENT I IT IS NOT RENTED?
Expert:  taxmanrog replied 1 month ago.

If the property were purchased for investment only, none of the expenses could be deducted, and the real estate taxes paid would have to be capitalized to the property's basis and not deducted.

Customer: replied 1 month ago.
THEN I WANT TO PRORATE DUIRNGTHE YEAR THE 2 PURPOSES
Expert:  taxmanrog replied 1 month ago.

I am going to opt out of this as you obviously do not want to listen to the answer. I have been doing this for over 30 years and have seen dozens of properties purchased for investment and then rented out. I can give you a list of dozens and dozens of court cases that would prove that the expenses and income are reported on Schedule E. But you seem to not want to hear that. I am sorry, I don't know who you are listening to, but they are not giving you the correct answer.

Good luck with your issue!

Expert:  bkb1956 replied 1 month ago.

Different expert here - my name is ***** ***** please allow me to provide you with clarifying information.

Roger is absolutely correct in his answer to you.

If you do not meet the real estate professional criteria and you do not provide services, the property CANNOT be a Schedule C property.

https://www.irs.gov/taxtopics/tc414.html

https://www.irs.gov/publications/p527/ch03.html#en_US_2015_publink1000234064

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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