It is not required that you need to be a realtor or a real estate professional to relying on section 162 however if you are in this line of work then you can easily defend that such activity is your trade or business. The problems arise when you don’t work in the field then you are subject to prove “regular and continuous conduct of the activity”. The IRS has been vague on the language as to what will or will not qualify as a trade or business and to qualify each relies on the facts and circumstances on a case by case basis. So basically there is no assurance that a taxpayer’s activity will qualify as a trade or business and they are left vulnerable. Again, keep in mind that the IRS already classifies rental income as passive income. The definition of passive income is earnings created without having to be actively involved.
Section 162 is not fully clear and ambiguous as it pertains to rental activity which is why they created the safe harbor. The safe harbor was created to avoid the ambiguity in that it sets various conditions and requirements, and if met, allows the taxpayer to declare that rental activity is their trade or business. The safe harbor however must be elected with attached statement.
I am not here to educate or defend my past postings. I am a CPA and when I see incorrect information posted I feel compelled to intervene. I am, however, finding this to be a waste of my time.
