Which is it best: grouping 6 rentals as a "real estate enterprise" or choosing Safe Harbor for each property individually?

[charjean47]

I have 6 rentals.  Regarding Safe Harbor, should I choose:  I elect to use a safe harbor for this property on it's own (IRS Notice 2019-07)

or

I elect to combine this property with other properties as a part of a "real estate enterprise" (Revenue Procedure 2019-38)?

Is there an advantage to choose individually or to group the 6 rentals?  Our rentals are investments and not a business.  Thanks 

[AmyC]

Separate! People like the idea of lumping all the property together to make their taxes easier at tax time. If you decide to sell one property, you have a nightmare on your hands because you have lost its individual expenses, losses, carryforwards.

The IRS tips recommends you list each property separately in Tips on Rental Real Estate Income, Deductions and Recordkeeping.

[charjean47]

We don't put in 250 hours in any of the individual properties.  We do put in 250 hours on all of the properties as a group.  I put 6 rentals because my husband gave one of the properties to his son beginning 01/01/2021.  I am filing on all 7 this year, 2020 and want the put the 7 in Safe Harbor.  Thanks

[charjean47]

So here's the real kicker.  My husband gave the one property to his son in 2021.  The other property in the group will be given to his son to claim when he passes.   So on the 2020 we would put 7 in the group and later when my husband passes, there will be 6 in the group.  My husband has held on the one rental in case the income is needed for medical expenses. I don't want a nightmare as you state and wonder if I should leave the one property out of the group that was given to the son to manage as of 2021.  I then wonder if we should only put 5 in the group because of the future plans.  I would like to put the 7 in the group this year and 6 in the group on 2021 taxes.  It's complicated.  Thanks for your time.  I would like any suggestions you may have.