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Richard, Tax Attorney
Category: Tax
Satisfied Customers: 53725
Experience:  29 years of experience as a tax, real estate, and business attorney.
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A doctor friend of mine said that with 4 rental units, I should

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A doctor friend of mine said that with 4 rental units, I should incorporate into my own real estate company. He said it provides certain advantages, but didn't say what they were. What are the advantages for a working person with an avocation of buying and managing rental properties?

Right now I fill out a schedule E every year. If I encorporate, will there still be a schedule E, or will it all be in a schedule C?

Good morning. What he is referring to is becoming an active real estate participant so that your tax losses are no longer passive and thus limited. How you would you report your new operations would depend upon what kind of entity you formed....if an Sub S or LLC, and you owned solely, you could treat it as a disregarded entity and file on Schedule C; or those entities could file their own return..either a 1020S or a 1065 and you would get your tax items via a K-1; if a C would be on Form 1020, but you never want to own real estate in a C Corp because you can't get the money out with getting taxed twice.



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Customer: replied 5 years ago.
I am already listed as an active participant on my Schedule K, because I am an active particiant. I do it all myself.

What is a Sub S? What is a disregarded entity? My rental units are certainly not disregarded since I work on them about 3 days/week.

I couldn't find Form 1020S on the IRS website. Form 1065 is for a partnership, and I have no partners; who would issue the K-1 anyway? Me?. I am the sole owner.
A S Corp is a corporation that has elected to S Corp status which then taxes the entity as a flow-through entity. Being you are the sole owner, you can elect not to have the entity file its own return and report the operations on Schedule C. Given your situation, there is no reason to change anything, however.
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