Which "business name" to enter for rentals?

[ukrkoz]

Hi

We have 4 rental properties. in 2020, 3 of them were operated through a property management company that sent us 1099 forms.

Reviewing rental entries in TT, here comes question:

Name and employer ID number for this rental.

Do I enter my name or property management company name and use their number off 1099?

Also, as all rentals are owned by us, should they be treated as a part of combined business and then names for each and one of those rentals should be marked as combined?

Screenshot below:

https://drive.google.com/file/d/1HRGvmfEua9nBqJcyHQoJFiDzR8yusV0Y/view?usp=sharing

[ColeenD3]

No, this is your property, not the management companies. The question on the screen is asking if you wish to aggregate the business.

Please see this answer from Tagteam for further information.

aggregation of business

[Carl]

Based on the fact you are being asked for a "business name", it appears that you are incorrectly reporting rental income in the business income (SCH C) section of the program. That's wrong. All rental income and expenses is reported in the Rental & Royalty Income (SCH E) section of the program.

If you are self-employed (and I think you are not) then all business income/expenses is reported on SCH C. The SCH C is for "EARNED" income. While rental income is a form of business income, it is not earned income. It's passive income.

Earned Income - Money you are paid for "doing something" usually on a recurring basis. This money gets reported on SCH C. SCH C income is subject to normal taxes *and* the additional 15.3% self-employment tax.

Passive Income - This is rental or royalty income (and there are other types). For this money, all you do is "sit there" and collect it each payment period. You don't go out and actually "do" anything to earn it. This income is reported on SCH E. Rental income is passive income. While it is subject to "normal" taxes, it is *not* subject to the additional 15.3% self-employment tax.

Since you didn't indicate what version (online or CD) or flavor of TurboTax you are using, it's rather time consuming to cover all the ways of getting to the rental income/expenses section. But regardless of what version and flavor you're using, if you work through the program start to finish the way it's designed and intended to be used, you will eventually come to it.

[ukrkoz]

Thank you.

No, rental income is entered properly, in Rentals section. I checked about 10 times by now.

Anything else I need to correct to avoid this situation?

https://drive.google.com/file/d/1JACQEUeqUgwtKFYkyP4dSMRVEx3aIbPq/view?usp=sharing

It's

Turbotax Premier/download/version 2020.48.20.71/Windows OS.

[ukrkoz]

Does it have anything to do with QBI?

Is this QBI?

In general, if rental or royalty is based in the US and carried on with regularity, continuity, and a profit motive, then income from this activity is considered QBI.

Our rentals are based in the US, we run them for profit and had them, some of them, for 5 years. What am I missing? I figure, if it is marked as QBI then sure, TT will ask for business name, as it does 2 pages down the road from that question?

[ukrkoz]

Ok, so here's this:

Outside of that specific situation, here are some guidelines for what types of rental or royalty activities are considered a trade or business. If you are renting property that requires very infrequent interaction with the tenants and maintenance to the property, the courts have generally found this type of activity is not a "trade or business". On the other hand, if you rent out property that requires frequent tenant interactions or maintenance services, this type of activity is generally classified as a "trade or business." (See examples later of activities that would or would not typically be treated as trades or businesses.)

At least one of our rentals, being on the same property we own, falls into that category, as we interact with them daily, pretty much and, property is maintained regularly. Another rental was less intensive interactions, yet, quite a few of them plus regular maintenance done by me/us.

[Carl]

It's not a trade or business, because you do not provide recurring services that are exclusive to and directly benificial to the tenant. Examples would include things like preparing meals, house cleaning services, or other services provided or the tenants on a constant (usually recurring) basis.

Normal maintenance (such as fixing things reported broken, and weekly yard care) don't count for that, because these are things are done weather or not a tenant is in the property.  Oh, I am also assuming that all rentals are long term rentals, and not short term rentals such as one deals with on VRBO or AirB&B. The latter are without question, a SCH C rental.

So if only one of your rentals is short term, then only that rental is a SCH C business. The other rentals, if long term are SCH E, unless you provide services to all of those tenants that are directly benificial to those tenants.

[Anonymous_]

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@Carl wrote:

So if only one of your rentals is short term, then only that rental is a SCH C business.

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The mere fact that the rentals are short-term does not mean they constitute a "Schedule C business" and should be reported on Schedule C.

Only dealers in real estate who rent that real estate and owners of real estate who provide substantial services to renters report rental income on Schedule C. 

The fact that an owner rents on a short-term basis is relevant for the purposes of passive activity losses (Section 469).

[Carl]

The mere fact that the rentals are short-term does not mean they constitute a "Schedule C business" and should be reported on Schedule C.

...and I'm not insinuating otherwise. But that does not mean for this specific situation, it could not be SCH C. I don't have all the facts to make any such determination, as such facts are not provided.

[ukrkoz]

That's fine.

Basically, I am right - remove designation of QBI and TT will not be ASKING FOR BUSINESS NAME.

cORRECT?

i ACTUALLY DID SO BEFORE i POSTED HERE AND THAT HAD ZERO INFLUENCE ON THE FINAL RESULT..

Oops, sorry, darn caps always getting in my way.

I am only doing my best to make bulletproof filing.

[Anonymous_]

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@Carl wrote:

The mere fact that the rentals are short-term does not mean they constitute a "Schedule C business" and should be reported on Schedule C.

...and I'm not insinuating otherwise. But that does not mean for this specific situation, it could not be SCH C. I don't have all the facts to make any such determination, as such facts are not provided.

---

You stated, "I am also assuming that all rentals are long term rentals, and not short term rentals such as one deals with on VRBO or AirB&B. The latter are without question, a SCH C rental."

Thus, you did not insinuate otherwise, you actually wrote that short-term rentals on sites such as VRBO and AirBnB are, "without question", Schedule C rentals. That statement is, of course, inaccurate.

[ukrkoz]

Well, I guess, I have it figured then.

Thank you both.