Do RE professionals need for material participation& PAL spend 751 hours each year Combined for separate properties (not grouped together) or 751 for EACH property?

[larisa322]

Are there different requirements for material participation for Real estate Professionals than for any other business owners? Does material participation for Real estate professionals require to spend more than 750 hours each year combined for all of your separate properties (not grouped together) or 750 hours for EACH property?  TurboTax-2017 says in one place that as a Real estate professional you are materially participating if you spend need to spend more than 750 hours each year on EACH property. But then in another place TurboTax-2017 says: "You materially participated in the operation of this business activity during the year, if you meet ANY of the following tests: 1. You participated in the activity for more than 500 hours during the tax year. 2. You are the only person who substantially participates in the activity, including individuals who do not have an ownership in the activity. 3. You participated in the activity more than 100 hours during the year and no one else participates more than you do, including individuals who do not have an ownership in the activity... "

[TaxGuyBill · Accepted solution]

There are TWO separate things:  (1) Material Participation, and (2) a Real Estate Professional.

If you do NOT make an election to "group" the rentals, the Material Participation is EACH property.  If you make an election to "group" the properties, the Material Participation is based on all properties in the "group".  If you have unallowed prior losses, I would NOT recommend making an election to "group" properties unless you sit down with a tax professional.

Once you figure out if you Materially Participated in the properties, then you determine if you have 750 hours COMBINED in all of the ones that you DID Materially Participate.

https://www.irs.gov/publications/p925#en_US_2017_publink1000104592

[larisa322]

TaxGuyBill, Thank you for your response. That is what I thought as well that 750 hours combined for all properties together, even if they are not grouped together. And for material participation, you only need 101 hours per property. But my concern was why TurboTax program says the opposite that as a Real estate professional you are materially participating if you spend need to spend more than 750 hours each year on EACH property. Is there a mistake in a program?

[TaxGuyBill]

There is A LOT of misinformation and errors in TurboTax.  I am almost positive I had reported that one that you are referring to to the Moderators several years ago.  Unfortunately, they ignore most of the errors that we report.

[larisa322]

I see, and I thought Turbotax program is perfect :( . Thank you so much for clarifying it for me! I really appreciate it.