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Shawn P Adamo
Shawn P Adamo, CPA, Professor, CFP. CGMA, Business Consultant, Professor, PFS I have decades of experience answering these questions.
Category: Finance
Satisfied Customers: 2884
Experience:  CPA, Professor, CFP. CGMA, Business Consultant, Professor, PFS I have decades of experience answering these questions.
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I want to see if I need to make an election to group my properties

Customer Question

I want to see if I need to make an election to group my properties together under section 469 for FAFSA on my taxes to exclude them? I found this research: he small business exclusion was established by section 8019(c) of the Higher Education Reconciliation Act of 2005 (HERA 2005) as part of the Deficit Reduction Act of 2005 (P.L. 109-171, February 8, 2006). The specific amendment is as follows:
(c) TREATMENT OF FAMILY OWNERSHIP OF SMALL BUSINESSES. -- Section 480(f)(2) (20 U.S.C. 1087vv(f)(2)) is amended --
in subparagraph (A), by striking "or";
in subparagraph (B), by striking the period at the end and inserting "; or"; and
by adding at the end the following new subparagraph:
"(C) a small business with not more than 100 full-time or full-time equivalent employees (or any part of such a small business) that is owned and controlled by the family.".
After this amendment is applied to section 480(f)(2) of the Higher Education Act of 1965, the legislative language becomes:
With respect to determinations of need under this title, other than for subpart 4 of part A, the term "assets" shall not include the net value of --
the family's principal place of residence; or
a family farm on which the family resides.
a small business with not more than 100 full-time or full-time equivalent employees (or any part of such a small business) that is owned and controlled by the family.
and
If the family owns multiple rental properties and materially participates in the management of the properties, they are more likely to be considered business assets.
Submitted: 10 months ago.
Category: Finance
Expert:  Shawn P Adamo replied 10 months ago.
What exactly is your question?
Customer: replied 10 months ago.

I am in the property management biz with my own small company and manage my own properties. I wanted to know if there is an advantage for FAFSA to using the 469 election to group the properties as one activity so the long term rental doesn't need the 500 hours of material participation to be excluded. And wanted to know the cons of for taxes purposes of making such an election. On a finacial tax advisor page on fafsa I found the above

If the family owns multiple rental properties and materially participates in the management of the properties, they are more likely to be considered business assets.