Rev Procedure 2019-38 Rentals & Sec 199A

[Terry D EA]

We all tossed this around last season and if you were like me, I processed returns for rental clients claiming the sec 199A because they met  all of the conditions and it was unclear as to whether this activity would qualify as a trade or business. I relied on a lot of discussion and other codes sections to support my position should one of my client's get questioned. Now, the IRS has released revenue procedure 2019-38 clarifying that rental activities do qualify as a trade or business for the purposes of section 199A. Attached is the pdf of the procedure. I know some folks don't like opening attachments. I can post the entire document if anyone needs me to.

Rev 2019-38.pdf

[Lee B]

For the most part, all this does is make the previously proposed regs permanent.

So I don't think it provides much more clarity.

I did notice one change that will very useful to some clients.

The proposed safe harbor did not allow  commercial and residential rentals to be combined when a client tried to meet the 250 hour safe harbor threshold.

This has been changed to allow clients to combine commercial and residential rentals together.

[Max W]

It can be read here.  Have fun!

https://www.irs.gov/pub/irs-drop/rp-19-38.pdf