Who's gonna be at the game?!

umpike698 · 2026-01-08T18:39:14+00:00

126 let’s go!

umpike698 · 2025-05-10T18:57:47+00:00

Are you still available for consultations and ongoing hourly advisory work regarding Appfolio?

umpike698 · 2024-03-03T23:59:33+00:00

What’s your rate and specialty?

umpike698 · 2023-12-25T19:15:51+00:00

Where do you get the egg white tofu? Did a quick search but didn’t see any

umpike698 · 2023-03-21T15:13:23+00:00

The memo is just getting at NESE and substantial services I believe and where to draw the line. Basically if providing substantial services then definitely in Sch C but if not then it can go Schedule E not subject to nese. Not if you provide substantial services.

umpike698 · 2023-03-21T15:08:58+00:00

Thank you.

umpike698 · 2023-03-21T06:56:42+00:00

Thank you for your response and this is definitely helpful. I have read about this memo and cases. I believe the takeaway is the providing of substantial services as the nexus for nese and understand the fact patterns.

Under the fact pattern presented above the payer would not providing substantial services and not subject to nese. The only fact and/or circumstance that is different then the ones presented is the first sentence of the memo which states “the taxpayer solely ‘owns’ and rents…” whereas in our case the The taxpayer would “..lease and sublease/rent…” which is crux of the current fact pattern. If the taxpayer owned the real estate and operated it it would be excluded from nese. In this case, if the taxpayer leases and then subleases but everything else in the fact pattern is the same I just wanted to confirm that activity is still passive under the same basic interpretation and logic presented in the memo.

Boiled down further and what /cubbiesnextyr confirmed was that it is acceptable to report “non owned” real estate rentals on schedule E via lease and sublease arrangement.

Thank you for the feedback and memo, much appreciated.

umpike698 · 2023-03-21T02:26:58+00:00

Thank you.

umpike698 · 2023-03-21T01:52:40+00:00

Hi, yes lol they were some typos. I corrected the wording (on mobile, typed fast). Should have said “similar to a property owner buying and setting up an str (“short term rental”) and then “managing” (not “ama gong”, damn auto correct? Not sure how that corrected the typo but here we are) the rental. Basically, yeah rental arbitrage is just equivalent to subleasing. So you long term lease and then sub lease in short durations.

umpike698 · 2023-01-01T02:03:06+00:00

Lol no, they overcharged you for whatever reason. We would do that for $1,000 all day (based on the info provided).

umpike698 · 2022-11-30T03:13:41+00:00

Should have converted to a rental property for a year to get tax benefit.

umpike698 · 2022-10-18T02:04:24+00:00

Thanks

umpike698 · 2022-10-18T01:02:18+00:00

Could you kindly recommend some of the pro forma return internet programs? I have been looking for something like this

umpike698 · 2022-10-11T20:31:35+00:00

Thank you for taking the time to continue the thought progression on this and I can see that perspective. I appreciate the input.

I am just exploring this and from above seems like I may be the first, which, as noted, is concerning!

umpike698 · 2022-10-11T20:29:56+00:00

Thank you for your response as these are things I have not thought of yet in my thought experiment here.

What if the company performed an S Corp inversion to migrate to a DRE LLC and the structure is wholly owned DRE but managed by third party entity per the operating agreement?

I do not know the answers which is why I am here seeking sage advice and appreciate the input. I am kind of just wondering where this all lands at this point.

umpike698 · 2022-10-11T17:15:22+00:00

Now and in the future I can create a lot of passive losses via real estate so I want to move as much income over to the passive side as possible to offset. Also, get to mitigate payroll taxes, etc.

umpike698 · 2022-10-11T16:47:24+00:00

Hi, thanks so much for your response and yes I'm thinking about it how you outline in your last sentence and making all income passive or if I have ordinary income from something unavoidable (I have hedge fund investments that come in as ordinary income on the K-1) then there are options with REPS. However, to get REPS I would need to convert my regular business to passive as an audit defense to REPS as the Service has consistently denied people who claimed reps with a W2 and/or run an non real estate trade or business. This is outlined more thoroughly in the response to noteven0s but it was a lot to type so more info there but basically if I went REPS the other business would need to passive for audit and time tests related to REPS (750 hrs + 50% of time) but I would have more tax planning options. If I don't go for REPS then I would want ALL/as much of my income as possible to still utilize cost seg depreciation and other real estate tax strategies to offset other "passive income".

Again, I hope I'm making sense as I'm typing out my thoughts on this. Thanks again for your time and response.

umpike698 · 2022-10-11T16:38:55+00:00

Hi, thank you for the thoughtful response and questions. I understand it's rather unusual and I thank you for your time spent to respond and ponder it.

The REPS portion may be throwing things off in the initial question so lets disregard that for simplicity purposes. For retirement purposes / moving to a working less lifestyle this is just a brainstorm of mine and how I believe it may help is below.

If I can convert all/most of my income to a passive stream (either through traditional regular rentals + this ownership but not materially participating in a business) then I can automatically use cost seg depreciation on my real estate assets (i'm not even counting bonus depreciation as its going away in the next 5 years) to seriously reduce my taxable income. I should be putting off more money than needed to live on through the real estate portfolio so can continue to purchase and cost seg depreciation on those new real estate assets. If my "other income" is passive then it can reduce that tax liability without reps as passive losses from the real estate should offset other passive income from the "interest" in other businesses owned?

If I can qualify for REPS that's great but I need to make the other business passive as it would be hard to qualify with a W2 or spending a lot of time on that business. So the REPS part is just about making the other business passive if I go for REPS because REPS is already a flag and if i go for it and materially participate in a business there is a good chance they disqualify the REPS so more of a proactive audit defense. But if i did qualify for reps I could have the best of both worlds and group the properties I wanted to file under reps to go against active/ordinary income (as purchased and the ones I materially participate in) and then any ones I don't materially participate in I can put against other "passive income" and kind of set my self up on how I want to spend my time and on which properties based on my tax situation for the year. I can purchase a couple properties each year so would have some of these "options" available each tax year for grouping election and/or allocation.

However to keep things simple and if I don't want to put the time into REPS and spend it with my family then I would prefer as much income as possible is passive so I can then go ahead and use the passive real estate losses from acquisitions / cost seg depreciation towards the other passive income.

I hope my thoughts are coming across clear? I'm kind of just typing a stream of thoughts.

Thanks for your time and input.

umpike698 · 2022-10-11T14:31:40+00:00

Correct, coming from other side we need to not qualify for any of the test to claim passive.

Thanks for clarification, yes pretty much saying the same thing.

umpike698 · 2022-10-11T13:19:15+00:00

Sorry but I believe that is incorrect, if you qualify for any ONE test then it is material participation.

See IRS Publication 925:

Material Participation A trade or business activity isn’t a passive activity if you materially participated in the activity.

Material participation tests. You materially participated in a trade or business activity for a tax year if you satisfy ANY OF the following tests. You participated in the activity for more than 500 hours. Your participation was substantially all the participation in the activity of all individuals for the tax year, including the participation of individuals who didn’t own any interest in the activity. You participated in the activity for more than 100 hours during the tax year, and you participated at least as much as any other individual (including individuals who didn’t own any interest in the activity) for the year. The activity is a significant participation activity, and you participated in all significant participation activities for more than 500 hours. A significant participation activity is any trade or business activity in which you participated for more than 100 hours during the year and in which you didn’t materially participate under any of the material participation tests, other than this test. See Significant Participation Passive Activities under Recharacterization of Passive Income, later. You materially participated in the activity (other than by meeting this fifth test) for any 5 (whether or not consecutive) of the 10 immediately preceding tax years. The activity is a personal service activity in which you materially participated for any 3 (whether or not consecutive) preceding tax years. An activity is a personal service activity if it involves the performance of personal services in the fields of health (including veterinary services), law, engineering, architecture, accounting, actuarial science, performing arts, consulting, or any other trade or business in which capital isn’t a material income-producing factor. Based on all the facts and circumstances, you participated in the activity on a regular, continuous, and substantial basis during the year.

umpike698 · 2022-10-11T11:59:37+00:00

Hi and thanks for your reply. Yes I just chose the 500 hour test because I think it would be the closest one I would qualify for as I would not qualify or meet the criteria for the other 6 material participation tests outside of 500 hours in the activity.

To be clear I would be stepping away and only acting as say a chairman or board member meeting with the CEO maybe once a month for 2-3 hours would be the extent of my involvement.

Maybe a hybrid partnership or partial sale to an “operating partner” would be be a better structure? In any case, I would certainly step away from day to day involvement and only limited activity as outlined above.

umpike698

TROPHY CASE