Tax: Schedule E

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fareastwarriors
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Joined: Tue Feb 14, 2012 11:31 am

Tax: Schedule E

Post by fareastwarriors »

Hi. 4 or 5 years ago, my brother had an accountant do his taxes. The accountant put the his 3-unit rental property on Schedule E as 3 separate properties, each with an unique address (so on Schedule E, A, B, and C on line 1a are filled out). While each unit does have its own address, it is still just one building/property. Everything from taxes, insurance, and depreciation was prorated by 1/3.

One year later, I took over doing his taxes after learning he was paying hundreds of dollars for a simple return and continued this accountant's method .

I'm wondering now after 3 or 4 years, should I combine the units back under one property/one address instead or just leave it? Does it matter?
jebmke
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Re: Tax: Schedule E

Post by jebmke »

Just thinking out loud. I'd be tempted to keep it as three. If he ever decides to sell them off separately (e.g. as condos), the assets will be accounted for separately.
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depressed
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Re: Tax: Schedule E

Post by depressed »

Will keeping them separate make it harder to qualify the income for the QBI deduction?
Topic Author
fareastwarriors
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Re: Tax: Schedule E

Post by fareastwarriors »

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Last edited by fareastwarriors on Tue Apr 09, 2019 2:49 pm, edited 1 time in total.
Topic Author
fareastwarriors
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Joined: Tue Feb 14, 2012 11:31 am

Re: Tax: Schedule E

Post by fareastwarriors »

jebmke wrote: Mon Apr 08, 2019 5:17 pm Just thinking out loud. I'd be tempted to keep it as three. If he ever decides to sell them off separately (e.g. as condos), the assets will be accounted for separately.
Hmm. If he does sell, he would probably sell the whole property at once. Don't think he or I ever thought converting the units into condo style.
Topic Author
fareastwarriors
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Re: Tax: Schedule E

Post by fareastwarriors »

Additional thoughts?
Thanks.
hale2
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Re: Tax: Schedule E

Post by hale2 »

Keep the properties separate. This will make it much easier to account for depreciation for replacement items that are only for one of the units.
Greenman72
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Re: Tax: Schedule E

Post by Greenman72 »

From the Schedule E Instructions:

"If you qualify as a real estate professional, rental real estate activities in
which you materially participated are
not passive activities. For purposes of
determining whether you materially participated in your rental real estate activities, each interest in rental real estate is a
separate activity unless you elect to treat
all your interests in rental real estate as
one activity. To make this election, attach a statement to your original tax return that declares you are a qualifying
taxpayer for the year and you are making the election under section 469(c)(7)
(A). The election applies for the year
made and all later years in which you
are a real estate professional. You can
revoke the election only if your facts
and circumstances materially change."

In practice, for a person who owns a few rent houses, I don't think there's really any difference. It's purely a matter of personal preference. Keeping them apart would make the recordkeeping and tax return more difficult, but it would clearly show the profitability of each house.
Topic Author
fareastwarriors
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Re: Tax: Schedule E

Post by fareastwarriors »

Okay, I will keep it separate and continue as is. Thanks for everyone's input.
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