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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
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Experience:  10 years experience
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My question here is pretty simple... My tax accountant says

Customer Question

My question here is pretty simple... My tax accountant says that I am not allowed to use 'passive' losses from my real estate because my MAGI from my paycheck income is too high. I made about $140k and he says that this regular paycheck job (3o to 40 hours / week) is THE reason why I cannot use my losses.My contention is that I SHOULD be able to use them, because aside from working 30 to 40 hours in my paycheck job....I spend at least 15 hours / week managing real estate stuff. And I have 6 units in Cleveland and I manage everyone of them.... Anywho, I read this and thought this is my justification to my accountant that I should be able to use these losses..."To be a real estate professional, a taxpayer must provide more than one-half of his or her total personal services in real property trades or businesses in which he or she materially participates and perform more than 750 hours of services during the tax year in real property trades or businesses. Ideally, taxpayers should prepare contemporaneous time logs that detail the services rendered."As I stated, if you break down 750 hrs / year...it comes to about ~14 hours / week... Now if I do this....why is he telling me I cant deduct? I'm hoping you could help me out and give me your 2 cents... if you wouldn't mind...
JA: The Accountant will know how to help. Is there anything else important you think the Accountant should know?
Customer: My question here is pretty simple... My tax accountant says that I am not allowed to use 'passive' losses from my real estate because my MAGI from my paycheck income is too high. I made about $140k and he says that this regular paycheck job (3o to 40 hours / week) is THE reason why I cannot use my losses.My contention is that I SHOULD be able to use them, because aside from working 30 to 40 hours in my paycheck job....I spend at least 15 hours / week managing real estate stuff. And I have 6 units in Cleveland and I manage everyone of them.... Anywho, I read this and thought this is my justification to my accountant that I should be able to use these losses..."To be a real estate professional, a taxpayer must provide more than one-half of his or her total personal services in real property trades or businesses in which he or she materially participates and perform more than 750 hours of services during the tax year in real property trades or businesses. Ideally, taxpayers should prepare contemporaneous time logs that detail the services rendered."As I stated, if you break down 750 hrs / year...it comes to about ~14 hours / week... Now if I do this....why is he telling me I cant deduct? I'm hoping you could help me out and give me your 2 cents... if you wouldn't mind...
Submitted: 1 month ago.
Category: Tax
Expert:  emc011075 replied 1 month ago.

Hi. My name is ***** ***** I will be happy to help you.

If you are making 140K in Cleveland, you are not working 30 - 40 hours a week, more likely 40 - 50 hours a week. To be a RE professional you need to devote more than 50% of your time to managing the properties. Unless you are RE agent and RE investor, or managing those properties is your main source of income, you will not convince the IRS that you are RE professional. Your accountant is correct. You cannot take the losses.

Customer: replied 1 month ago.
What are you talking about? I tell you i work 30-40 and you tell me 'no' I'm working 40-50? Because of what you think the market pays in Cleveland....? What kind of quack are you...? You should not give people advice on this website...terrible advice.

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