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Marvin,EA
Marvin,EA, Enrolled Agent
Category: Tax
Satisfied Customers: 1662
Experience:  Enrolled to Represent Taxpayers Before The IRS
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I AM REVIEWING IRS FORM 8582 on my 2007 Income Tax Return.

Customer Question

I AM REVIEWING IRS FORM 8582 on my 2007 Income Tax Return. Concerning the losses I have on a condo rental property: I DON'T UNDERSTAND WHERE THE TAX PREPARER GOT THE "UNALLOWED LOSS" FROM A RENTAL CONDO I OWN. 0N WORKSHEET 5, IT APPEARS THE CONDO LOSS FROM 2007 (COLUMN a) WAS ADDED TO THE PREVIOUS YEARS LOSSES (COLUNM b) AND AND THEN TOTALED AS "UNALLOWED LOSS" (COLUMN c). wHAT MAKES IT AN UNALLOWED LOSS?
Submitted: 5 years ago.
Category: Tax
Expert:  Marvin,EA replied 5 years ago.
Hello and thank you for using Just Answer. For 2007 what was your adjusted gross income (AGI)? What was your total rental loss for 2007?
Customer: replied 5 years ago.

Hey Marvin'

The loss for 2007 was $18,453. The previous accumulated loss before 2007 was $32690, but it appears (to me, the untrained individual) that she just took the total loss and then put it in the "unallowed" column. My agi was over $211,000.

Why even fill-out the form (Sched E, deprec schedule, form 8582)...especially if it is contingient on adjusted gross income. Why not look at the agi first?

Expert:  Marvin,EA replied 5 years ago.

You always want to fill out the Form Sch.E and 8582 to offset gains from losses. Even if you AGI is over $150,000. You will be able to carry the losses to future years to offset any future gains from your rental homes.

Customer: replied 5 years ago.
But Marvin, you didn't answer the main part of my question. Why are the losses on the rental not allowed or not partially alowed? They used to be allowed years back when I owned a different rental. Is it based on AGI, and if so, is there a gradual reduction in the acceptable loss based on increased income, or what? I still don't understand. Also, for clarification, my wife and I file jointly.
Customer: replied 5 years ago.

Hey Marvin,

Are you still there? I still have work to do at home in my office. Can you answer my question?

Expert:  Marvin,EA replied 5 years ago.
Rental real estate is a passive activity regardless of the taxpayer's level of participation in the rental activity, unless the taxpayer is a real estate professional. However, up to $25,000 in passive losses from rental real estate can be deducted each tax year against income from nonpassive sources, such as wages or portfolio income. The $25,000 special loss allowance is reduced by 50% of the amount by which the taxpayer's modified adjusted gross income (AGI) exceeds $100,000. Thus, the allowance is reduced to zero when modified AGI reaches $150,000. The phase-out is computed and reported on Part II of Form 8582.
Customer: replied 5 years ago.

Marvin,

We are almost there on answering this for me! But the one thing is...I am a licensed realtor (and have been the last 3 or 4 years and my tax preparer knows this from the 2106 on my returns). I handle everything from A to Z on renting and managing my condo. Does the exclude me from the $150,000 limitation and allow me any deduction or not, (if so how does it work) and is there a reference I can show my tax preparer if she is mistaken?

Expert:  Marvin,EA replied 5 years ago.

If you are a real estate professional you can deduct losses from rental real estate from nonpassive income. The $25,000 active rental loss limitation does not apply to you. The following requirements must also be met:

1) More that 50% of your personal services during the tax year is performed in real property trades or businesses in which you materially participates.

2) You must spends more than 750 hours of services during the tax year in real property trades or businesses in which you materially participates.

 

Services performed as an employee in real property trades or businesses do not count unless you is at least a 5% owner.

Customer: replied 5 years ago.

Marvin I feel like a slow learner, but some of the terms you use are too general for my understanding, so I don't know if I qualify.

I worked 7 months of 2007 in the timeshare sales department of Marriott selling their timeshare property.

I was licensed the whole year and I did 100% ot the management of my 1 condo.

Does that qualify?

Please give me the reference to support your answer so I can take it to my tax lady. Thank you so much.

Dan

Expert:  Marvin,EA replied 5 years ago.
Publication 925, Passive Activities (www.irs.gov/pub/irs-pdf/p925.pdf) is where you will find the information you need to take to your accountant.
Customer: replied 5 years ago.
As per my personal situation in my last reply, in your personal (non binding opinion), do I qualify for the approxiamtely $18000 deduction for my condo losses?
Expert:  Marvin,EA replied 5 years ago.
I do not beleave you qualify for the real estate professional statue because 50% of your personal services during the tax year is not performed in real property trades or businesses. You spend over 50% as a Marriott employee selling timeshares. Services performed as an employee in real property trades or businesses do not count unless the employee is at least a 5% owner.
Marvin,EA, Enrolled Agent
Category: Tax
Satisfied Customers: 1662
Experience: Enrolled to Represent Taxpayers Before The IRS
Marvin,EA and 3 other Tax Specialists are ready to help you
Customer: replied 5 years ago.

Thanks for your work!

Dan

Expert:  Marvin,EA replied 5 years ago.
Thank you for using Just Answer.

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