Active Participant

[SN2007]

Hi,

I own two rentals.  One has property manager and the other I fully manage.  The one managed by property manager, I make decisions regarding the rent amount, selection of tenant, buying of appliances and etc.  When doing my taxes, the form 8960 will mark the income as negative as whole and not half of it.  Am I considered an active participant for both properties?  If I'm considered active for one and not the other,  how should the negative amount in form 8960 be handled so part of the negative amount is used and not the whole amount?

Thanks

Sherry

[WendyN2]

Active versus passive participation dictates how much of your overall expenses/loss you can recognize for a given year. It does not cut the actual rental income in half. Given that you make the decisions for both ("management-driven" decisions) then you would be considered for tax purposes to be an active participant for both.

Active Participation

This level of participation allows a special passive loss rule for rental activities. You may be able to deduct up to $25,000 in passive losses from your rental real estate each year against non-passive income.

Here is a link to some very helpful and useful information with respect to "active participation" rules for your type of situation...

IRS and Active Participation Rules