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Real Estate 199A Aggregation and 469 Grouping Rules: Notice 2019-38, Real Estate and Safe Harbor Election

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

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Conducted on Wednesday, June 26, 2024

Recorded event now available

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This course will discuss strategies for real estate professionals, agents, and investors. The release of final Section 199A regulations provided guidelines for the 20 percent QBI deduction and Notice 2019-38 provided a safe harbor that qualifies rental real estate to be treated as a trade or business. The panel will explain 199A and the final regulations, depreciation, grouping under Section 469, aggregating properties under 199A, deductible expenses, and planning techniques for real estate owners.

Description

Practitioners have long dealt with grouping elections under Section 469 to meet the material participation rules and avoid passive loss limitations. However, this "grouping" election is irrelevant to the "aggregation" of properties under 199A. In other words, properties may be "grouped" one way to avoid passive loss limitations and "aggregated" another way to maximize the 20 percent deduction under 199A. Whether or not making the election to aggregate, losses from QBI entities are allocated pro-rata to profitable entities, effectively lowering total income for the 20 percent deduction. Meeting the criteria for the aggregation election is complicated, but the payoff can be tremendous.

In addition to the complexities of QBI, there are 163(j) interest limitations and new depreciation rules brought about by the Tax Act. Additionally, determining the specific criteria for qualifying real estate as a trade or business under Section 162 remains uncertain. Real estate may be the practice area most significantly impacted by tax reform, but it is also an area with significant planning opportunities.

Listen as our panel of experts explains the complexities of the new 199A safe harbor, its interplay with the grouping election under Section 469, the higher depreciation limits, changes to meals and entertainment, and the effects of these changes on real estate enterprises.

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Outline

  1. 199A and the safe harbor
  2. Aggregation and 199A
  3. Grouping under Section 469
  4. 163(j) interest limitation
  5. Depreciation
  6. Deductible expenses
  7. Best practices for real estate enterprises

Benefits

The panel will review these critical issues:

  • Meeting the trade or business safe harbor
  • Aggregating real estate properties under 199A
  • Grouping properties to materially participate
  • Maximizing the higher depreciation thresholds
  • Maximizing the 20 percent QBI deduction

Faculty

Lovett, Brian
Brian T. Lovett, CPA, JD
Partner
Withum Smith+Brown

Mr. Lovett has extensive experience serving the tax needs of both public companies and closely-held businesses,...  |  Read More

Palovick, Sara
Sara A. Palovick, CPA
Tax Partner
Withum Smith+Brown

Ms. Palovick specializates in real estate, and focuses most of her time in the areas of partnership and individual...  |  Read More

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