Hello,
I have read most questions/answers about this subject in the TT Community already. However, it is still vague in my mind.
My wife and I own 2 rentals in California. We manage all aspects of running this activity from selcting tenants, doing repairs, hiring contractors, writing lease documentation, collecting rent, keeping records ,etc. This is the only income producing activity we have. In other words, we are not employed by any company and we do not receive any wages from any company.
We do not qualify for Safe Harbor election in 2022. However, according to the various articles I have dug up on this subject, we may still be able to get the QBI deduction if our rental activity rises to the level of a business as defined by IRS Section 162. One thing that is consistently stated in various articles I found is this:
"Case law has determined that to reach the standard of a Section 162 trade or business, a taxpayer must be involved in the activity “with continuity and regularity“ and the taxpayer’s primary purpose for engaging in the activity must be for income or profit".
In our case, we can we clearly meet these requirements. We are continuously and regularly involved in our rental activities and our only purpose for this activity is to produce income.
I know there is not clear test for Section 162 to verify if our rental activity rises to the level of a business as per IRS Section 162. So my question to you is this:
Do we qulaify for QBI deductions?
Thank you!
Farid
