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Section 199A

  • 1.  Section 199A

    Posted 08-16-2019 12:45
    Hi Everyone,

    Here are the facts;

    1. 8 LLCs, each with it's own residential rental property titled to that LLC.
    2. 3 managing members.
    3. Managing members have their own businesses not in any way connected to the rental properties.
    4. I doubt the sum of the time by each member on one LLC would qualify for the safe harbor provision of 250 or more hours.
    5. However, if you add all the time by all three members for all 8 LLCs they would meet the hours requirement.

    Questions;

    1. Do I have to aggregate all 8 LLC on the tax return or is it sufficient to designate each LLC as having met the safe harbor provisions?
    2. Do the aggregation rules even apply in this case?
    3. Is it OK for me to add all the time from each of the members to come up with the hours requirement.  The members are unrelated.
    3. Bottom line is can I apply the safe harbor provisions for real estate so these taxpayer can get the Sec. 199A deduction?

    Thank you all and feel free to call me.

    Paul

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    Paul D. Tusa CPA
    TUSA & ASSOCIATES, CPA, PC
    N Bellmore NY
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  • 2.  RE: Section 199A

    Silver Most Valuable Member
    Posted 08-19-2019 10:19
    ​The problem with the safe harbor is the ownership requirement. The Notice states " the individual or RPE relying on this revenue procedure must hold the interest directly or through an entity disregarded as an entity."  Since the LLC owns the interest you may not group the entities. It is interesting to consider whether the entities are 162 trades or businesses and aggregation may be considered under those rules.

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    Robert Barnett
    CPA, ESQ.
    Capell Barnett Matalon & Schoenfeld LLP
    JERICHO NY
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