How can I see if I already aggregated my rental properties. I know the questions were asked by Turbo Tax. I cannot see what I selected and need to see what they are.

[mmiksell]

This is for the 2020 taxes that I have not yet submitted so cannot see which forms are included.

[Carl]

Be aware that regulations section 1.469-9(g)(3) requires the taxpayer to file the aggregation election with his or her original income tax return for the year the election is made. The regulation states that once the taxpayer makes such an election, it applies for that year and for all future years during which he or she qualifies as a real estate professional.

Now as far as I know, the TurboTax program does not generate any such statement, and such statement can not be e-filed with an e-filed return. So if you did not write up such a statement and include it with your mailed return (not e-filed) then the IRS would not consider your rental properties to be aggregated into a single activity.

https://www.irs.gov/pub/irs-drop/rp-11-34.pdf

[M-MTax]

I'll bet this user is referring to the QBI deduction and not the REP election.

[tagteam]

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@Carl wrote:

Now as far as I know, the TurboTax program does not generate any such statement.......

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That is correct; the election is not supported by TurboTax.

Real Estate Professionals: The election for real estate professionals to aggregate their activities under IRC469(c) (7) is not supported

See https://digitalasset.intuit.com/DOCUMENT/A6QrdFCgW/010421-2020-unsupported-calcs-L1FQfTTgn.pdf

[mmiksell]

Thank you everyone for these responses.  If I am reading through the links properly it sounds like I can still do my taxes through turbo tax, print and then send with a statement is that correct?  We bought our 2nd investment property in 2020 so if I am understanding the rules properly my intention is to aggregate fit 2020.  We have already acquired two more properties in 2021 and now meet all qualifications for real estate professional so my intent in 2021 is to add those two properties to the grouping and then file as real estate professional.  Please confirm if I am able to add the election form to my paper filing from turbo tax fit 2020 and if turbo tax will be usable for my 2021 tax situation.  FYI I am a TX resident and have until 6/15 to file so this is not an amendment situation.

[Carl]

it sounds like I can still do my taxes through turbo tax, print and then send with a statement is that correct?

Yes, you can do that. Then the election remains permanent for every year after, provided you continue to meet the requirements each year after.

I'm not clear on exactly how to hand things in a future year, if for some reason let's say you don't meet the requirements in 2023. I'm also not clear that if say for example, you don't qualify in 2023, but do qualify in 2024. Do you have to make the election again with a new statement? I'm not sure.

[tagteam]

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@mmiksell wrote:

We have already acquired two more properties in 2021 and now meet all qualifications for real estate professional......

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Ensure that you qualify for real estate professional status; merely adding new properties, without more, does not meet the official criteria.

See https://www.irs.gov/publications/p925#en_US_2020_publink1000104591

Note that you can also generate a blank form in TurboTax on which you can make the election.

[tagteam]

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@Carl wrote:

Yes, you can do that. Then the election remains permanent for every year after, provided you continue to meet the requirements each year after.

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The election to group remains until revoked by the taxpayer. However, the revocation must be based upon a material change in the taxpayer's facts and circumstances.

Note that "....a break in the taxpayer's status as a qualifying taxpayer is not, of itself, a material change in the taxpayer's facts and circumstances...." per Reg. Section 1.469-9(g)(2).

[Rick19744]

I think we need to get some clarification from @mmiksell on exactly the goal here.

Based on the facts in your reply, you indicate "We have already acquired two more properties in 2021 and now meet all qualifications for real estate professional....."

The purpose of the aggregation provision is for real estate professionals to aggregate all rental activities in order to meet the material participation rule.  I am not clear from your facts if you are a real estate professional for 2020?

If you are not a real estate professional for 2020, there is no reason to make the election for 2020.

If you are a real estate professional and make the election, Reg 1.469-9(g)(1) states "..In years in which the taxpayer is not a qualifying taxpayer [real estate professional], the election will not have effect and the taxpayer's activities will be those determined under §1.469-4."

Hopefully the above provides some guidance on whether or not 2020 is the appropriate year to make the election.

[mmiksell]

@Rick19744 @Carl 

I do not qualify for real estate professional in 2020 because the 750 hours have not been met.  In 2021 I will meet all the qualifications, material participation, 51% of time and 750 hours.   I do realize that aggregating the 2 properties I have in 2020 will not allow the income to be considered active as I am not a qualified real estate professional however it was my understanding that I needed to group my properties this tax year and therefore need to include the election letter so that the passive losses can be combined and part of the grouping for use in future years that I meet the real estate professional qualifications.  2021 will be met.  Should I not include the election letter this year?  If I don’t include what will that mean for the passive losses that occurred prior to the election?

[Rick19744]

Grouping this year has no impact; read my previous response.

Additionally, I would not group prematurely as what if something occurred in 2021 and you didn't want to have that election in place?  If you make the election in 2020, as noted previously, it is not easy to revoke the election.  Just make the election in the appropriate year (2021 based on current facts) to make sure it is appropriate and what you want.

You can still have active participation without being a real estate professional.  See the attached to make sure you qualify and the phase-out based on income level:

https://www.irs.gov/publications/p925#en_US_2020_publink1000104573

[Carl]

Should I not include the election letter this year?

No, you should not include the letter for the 2020 tax year, as it will have no impact what-so-ever on the 2020 tax return.

[tagteam]

@mmiksell 

You might want to take into account one considerable downside to grouping (aggregation), which is reproduced below and set forth at the link below (scroll down to "Understanding the Regs. Sec. 1.469-9 Aggregation Election").

https://www.thetaxadviser.com/issues/2017/mar/navigating-real-estate-professional-rules.html

If a qualifying real estate professional makes the election to aggregate all rental activities for purposes of measuring material participation, the combined rental real estate activity is treated as a single activity for all purposes of Sec. 469, including the disposition rules of Sec. 469(g). Ordinarily, Sec. 469(g) allows a taxpayer to deduct any suspended passive losses attributable to an activity when substantially all of the activity is sold in a fully taxable transaction. When a qualifying real estate professional elects to aggregate all rental activities, however, because the combined rental activity is treated as one activity for purposes of Sec. 469(g), passive losses attributable to a disposed activity are not freed up until substantially all of the combined rental activity is sold.