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Level 3

Can Foreign Rental Income qualify as QBI for 199A purposes?

I am renting both, domestic and foreign single family homes to tenants.  The properties are held by pass-through entities and are reported on Schedule E. The activity is managed from a US-location and, based on the recently established 199A safe harbor requirements, the rental business that is aggregated from multiple single family rentals is a qualified business for 199A purposes.

 

However, one item remains unclear:  In order to be considered Qualified Business Income, foreign income must be "effectively connected with the conduct of a trade or business within the U.S.".  Does the income from foreign rental property that is managed from a US-location meet this requirement?

 

Thank you for your thoughts on this issue.

1 Reply
Level 20

Can Foreign Rental Income qualify as QBI for 199A purposes?

" Does the income from foreign rental property that is managed from a US-location meet this requirement?"

I could. But I myself would only claim it if I could prove it. Now understand that things like the book keeping for this do not count for the 250 hours "acively involved" in the management of the property. SO if you were paying a third party to manage the property on your behalf, you'd be fine if that third party provided "at least" 250 hours of their time dealing directly with the property. For example, property upkeep such as painting, repairing broken appliances, etc.