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Exploiting and Avoiding Self-Rental Rules: Grouping, Exceptions, Material Participation, 199A, NIIT

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Tuesday, November 12, 2024

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This webinar will discuss the regulations under Section 469 subjecting taxpayers who materially participate in a trade or business activity to self-rental rules for property leased to the business. The panelist will review types of property and taxpayers subject to the rules, exceptions and grouping to avoid its reach, and reporting the outcome on Schedule E, Form 1065, and 1120S.

Description

Taxpayers operating businesses and owning property naturally consider leasing or renting the property to the activity when needed. Under the self-rental rule, when taxpayers rent property to a business in which they materially participate, the self-rental rules come into play. Income and losses are subject to contrary tax treatment under the self-rental rules of IRC Section 469. While losses are considered passive and can only be used to offset passive income, income from self-rentals is deemed nonpassive and generally subject to ordinary income treatment.

Additionally, if the taxpayer materially participates in an activity (five of the past 10 years), the rental income from the property continues to be nonpassive even after the business is sold. Tax practitioners must also consider whether income from self-rental qualifies for the 199A deduction and whether the income is subject to NIIT. There are exceptions to the self-rental rules. Tax professionals working with businesses need to understand who is subject to these rules and how to utilize or avoid these rules to benefit taxpayers.

Listen as Jeremias Ramos, CPA, Tax Manager at DDK PC, discusses the self-rental rules under Section 469 and provides strategies to circumvent or exploit these rules.

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Outline

  1. Section 469 passive activity rules
  2. Self-rental exceptions
  3. Property types
  4. Ownership
    1. Directly: Schedule E
    2. Indirectly: Forms 1065/1120S
  5. 199A
  6. NIIT
  7. Relative cases and examples
  8. Strategies to avoid and mitigate overall tax

Benefits

The panelist will review these and other key issues:

  • When self-rental property qualifies for the 20 percent QBI deduction
  • What are the exceptions to the self-rental rules?
  • How grouping can be used to mitigate tax on self-rentals
  • Reporting self-rental income and losses owned directly (Schedule E) and indirectly (Form 1065 and 1120S)

Faculty

Ramos, Jeremias
Jeremias Ramos, CPA
Tax Manager
DDK

Mr. Ramos has more than seven years of public accounting with a focus on tax services. His expertise lies within the...  |  Read More

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